Wind-Power Price Driven to Record in North Sea by Vattenfall

  • Vattenfall wins tender with 60 euros per megawatt-hour bid
  • Site is unusually close to the coast, leading to lower costs

Vattenfall AB won a tender to build two offshore wind farms in the Danish North Sea with a record-breaking bid of 60 euros ($67.33) a megawatt-hour.

That’s 20 percent cheaper than the previous record set by Dong Energy A/S in the Netherlands in July. The total capacity of the projects is expected to be 350 megawatts, Sweden’s largest energy company said in a statement.

“With our bid for DNS we have demonstrated that we are able to reduce the costs of offshore wind faster than had been expected, only a few years ago,” said Gunnar Groebler, head of Vattenfall Wind. “This again proves that renewable energy is going to be competitive. We contribute to this growth and we will continue to do so for the next few decades.”

The rapid plunge in the cost of offshore wind farms is fueling a debate about whether the U.K. government should back that technology or nuclear reactors to ensure cleaner electricity supplies in the next few decades. Vattenfall’s units would generate cheaper than the 92.50 pounds a megawatt-hour the Hinkley Point nuclear station needs if it’s to be built by Electricitie de France SA.

The site for the Vattenfall wind farm is unusually close to the shore, leading to lower costs for foundations and transportation. The Danish government has already developed the area, which will result in shorter construction time and potentially lower equity-hurdle rates, according to Bloomberg New Energy Finance.

“It’s turning into a game of big utilities upstaging each other,” said Tom Harries, wind analyst at BNEF. “There’s a bit of irony with the latest bid. It’s so cheap because its so close to shore and easier to build, but you also lose a key advantage of not having a visual impact.”

Even as the industry comes under pressure by European governments to cut costs, Vattenfall’s record is unlikely to be surpassed in the near term by typical offshore wind-farm operators working in deeper waters. The previous low for offshore was 72.70 euros per megawatt-hour, excluding connection fees, set by Denmark’s Dong Energy.

The wind farms are planned to be on the west coast of Jutland near the towns of Hvide Sande and Thyboroen. Construction is expected to start in 2019 with first power in 2020. The projects still need final approval from the government.

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