A number of governments are now tempted to apply \u2018negative bidding\u2019 in their wind energy auctions, to make companies pay them for the right to develop a new wind farm<\/p>\n
When renewables auctions started, the idea was that governments would offer some form of financial support to project developers. The most common form of support now is the Contract for Difference where governments pay developers when the market price is below the auction price but developers pay governments when it\u2019s the other way round. That\u2019s a good system: it\u2019s cheap for governments \u2013 and cheap for society as it ensures stable revenues so minimises finance costs.<\/p>\n
Some governments have started using \u201czero-bid\u201d auctions, where wind farms simply earn the market price of electricity. It sounds cheap but means higher finance costs because banks are less willing to lend as they don\u2019t see stable revenues.<\/p>\n
\u201cNegative bidding\u201d has the same problem. And worse. It imposes additional costs on wind farms which then have to be passed on society.<\/p>\n
Denmark\u2019s last offshore wind auction, for its Thor wind farm, used negative bidding. The winner is paying the government \u20ac375m for the right to develop the project. The Netherlands are inviting bidders to pay \u20ac50m in their current offshore wind auction \u2013 they\u2019ll score less if they don\u2019t. And now Germany, inspired by Denmark, is looking to introduce negative bidding for some of its new offshore wind auctions.<\/p>\n
Governments may be tempted to make money in this way. But they need to remember that negative bidding imposes additional costs on those developing wind farms \u2013 and that developers have to pass these costs on to someone. They either pass them on to consumers in the form of higher energy bills. And\/or they pass them on to their suppliers, as they\u2019ve less money to pay for the turbines.<\/p>\n
(Even) higher energy bills is the last thing consumers want today. Or at any time, not least when they\u2019ve been told renewables are cheap and will bring down their bills. And more pressure on costs is the last thing Europe\u2019s turbine manufacturers want: all 5 of them are operating at a loss today, with inflation in input costs and supply chain disruptions. Rather than adding its woes, governments should be supporting Europe\u2019s wind energy supply chain.<\/p>\n
It\u2019s one thing for governments to charge wind farm developers a reasonable lease for the seabed space they use once they are operating a wind farm and earning revenue from it. But negative bidding imposes immediate costs on developers during the period of greatest risk when they\u2019re building the wind farm, sinking money and earning nothing.<\/p>\n
WindEurope CEO Giles Dickson said: \u201cNegative bidding in wind auctions creates additional costs that have to be passed on to someone. To energy consumers who are already struggling with higher bills. And\/or to the wind supply wind chain, which is already operating at a loss. Either way it\u2019s a straw to break a camel\u2019s back. It might look like a gain for finance ministries. It\u2019s a huge cost for society. Don\u2019t do it.\u201d<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
A number of governments are now tempted to apply \u2018negative bidding\u2019 in their wind energy auctions, to make companies pay them for the right to develop a new wind farm When renewables auctions started, the idea was that governments would offer some form of financial support to project developers. The most common form of support\u2026<\/p>\n","protected":false},"author":2,"featured_media":12137,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_scj_primary_category_id":60,"_scj_featured":false,"_scj_featured_from":"","_scj_featured_until":"","_scj_featured_order":0,"_scj_visibility_class":"current","_scj_layout_family":"standard","_scj_article_style":"","_scj_display_overrides":[],"_scj_intro_image_id":12137,"_scj_intro_alt":"Negative bidding in wind auctions is bad for consumers and bad for the supply chain","_scj_intro_caption":"","_scj_intro_class":"","_scj_intro_float":"","_scj_full_image_id":12137,"_scj_full_alt":"Negative bidding in wind auctions is bad for consumers and bad for the supply chain","_scj_full_caption":"","_scj_full_class":"","_scj_full_float":"","_scj_media_type":"","_scj_media_provider":"","_scj_media_external_id":"","_scj_media_url":"","_scj_media_poster_id":0,"_scj_media_width":0,"_scj_media_height":0,"_scj_media_aspect_ratio":"","_scj_media_description":"","_scj_gallery_items":[],"_scj_related_post_ids":[],"_scj_additional_authors":[],"scj_layout_family":"standard","scj_media_provider":"","scj_media_url":"","scj_full_caption":"","footnotes":""},"categories":[60],"tags":[],"class_list":["post-12138","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-sustainability"],"yoast_head":"\n