Yesterday, European Commission President Ursula von der Leyen delivered her annual State of the European Union speech and announced a new ‘Wind Power Package’. What is the opinion of the wind industry sector on that matter? Mads Nipper, CEO of Ørsted shared his thoughts on social media and commented as follow:
Life is full of paradoxes!
During the first six months of this year, 11.8 GW of offshore wind capacity was awarded through tenders in Europe. And yet, the European Wind Industry is not in a good state: Capital and raw material costs are high, which challenges both the supply chain and project realization.
We in the industry should continue taking responsibility to develop the sector in a direction with higher financial viability. Investing in the supply chain and long-term procurement contracts are part of the solution.
But I firmly believe that also politicians need to thoroughly reflect on, whether the incentives given to offshore wind developers and suppliers today, are truly in line with Europe’s political objectives of tomorrow.
Today I was therefore very encouraged to hear Ursula von der Leyen in her state of the union speech, highlight the need for a European Wind Power Package, addressing permitting, auction design as well as skills, access to finance and stable supply chains.
I firmly believe that we need to have a 360 degree assessment of how auctions are designed:
First, before the actual competitive element of the bid, strict minimum criteria should be put in place to ensure project delivery and a level playing field. Such criteria could address societal benefits such as human rights requirements, sustainability and environmental performance.
Second, in the design of the actual bid, non-price factors should play a larger role than today. Competing only on price risks leading to a race to the bottom.
Third, once a site has been awarded, more emphasis needs to be put on project delivery. We should ensure that when seabed is allocated, projects are delivered within a reasonable time frame.
Lastly, given the high uncertainty surrounding both the cost side and future electricity prices, revenue stabilization in the form of two-way CfDs will have to play a larger role in coming years.
As President von der Leyen said in her speech, “the wind sector is a European success story”. If and when we do things right, new and exciting chapters will be added to that story for years to come!
