The amendment to the Act on offshore wind farms, which is being worked on by the Ministry of Climate and Environment, aims to streamline the investment process in this sector. One of the key elements of the proposed changes is the introduction of the possibility to set different maximum prices in auction bids for different groups of offshore projects.
The aim of this regulation is to increase the cost-effectiveness of the support system for offshore wind farms, especially in the context of Phase II of development, in which generators will compete for a differential contract with a maximum price in auctions scheduled for 2025, 2027, 2029 and 2031.
Why differential pricing?
The Ministry of Climate and Environment points to the diversity of areas designated for offshore wind farms. Different geological conditions, water depth or distance from the shore have a direct impact on the costs of building and operating such farms. Setting a single, uniform maximum price for all projects could lead to a situation where projects in areas with more challenging conditions would not be able to compete in auctions. Consequently, this could lead to the failure of the auction if the required minimum of three bids were not submitted.
What does this mean in practice?
With the new solution, the government will be able to tailor the level of support to the specifics of individual projects. In theory, wind farms located in more difficult terrain or further offshore could count on higher support. On the other hand, projects located in more favourable areas could receive less favourable support conditions.
What are the potential impacts of this change?
On the one hand, the differentiation of maximum prices could contribute to a fairer distribution of public funds and increase the attractiveness of investments in offshore wind farms in different regions. On the other hand, it may lead to a situation where projects with lower production costs will have a competitive advantage, which may limit the development of projects in areas with greater energy potential but also with more difficult conditions.
The draft amendment to the law is expected to be adopted by the government by the end of this year.
Source: ministry of climate
