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Onshore wind and solar power virtually subsidy free

State of Green
By State of Green, December 06, 2019

The price of onshore wind turbines and solar parks is now so low that it suggests that they are close to becoming subsidy free. The result of this year's so-called technology neutral tender, where onshore wind and solar installations compete for subsidies, has, for the second consecutive year, resulted in historically low levels of support. The subsidy rate decreased by approximately 30 per cent in comparison to last year’s rates.

Last year’s subsidy for onshore wind turbines and solar plants amounted to a record low of EUR 0.003/kWh. This year, the subsidy has fallen even further to just EUR 0.002/kWh. The continuation of the same tendency from 2018 suggests that a growing number of projects are being completed without government subsidies. These results mean that current subsidies could potentially be diverted to other infant technologies, where the need for financial subsidy is greater.

“We have gotten far more renewable energy for far less money than expected. That is good news for the green transition. It has been a rapid development and much faster than expected. The subsidy rate has dropped by another 30 percent in just one year” stated the Danish Minister of Climate, Energy and Utilities, Dan Jørgensen.

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The low subsidy rates mean that the tender in 2019 will result in almost twice as much renewable energy as expected, using roughly two-thirds of the allocated budget. Last year’s tender led to an expansion of capacity five times more than what was expected. Collectively, the 2018 and 2019 tenders will lead to an expansion of more than 2.5 times as much renewable energy as expected, using half the allocated subsidy budget.

“The low subsidy rates mean that the money can be used in other areas, where the need is greater. For example, we could use it to provide subsidies for the development of technologies that allow green energy to be stored and converted into, for example, fuel for aircraft and ships” continues the minister.

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Earlier this year it was decided to move EUR 45.3 million worth of subsidies for renewable energy to other aspects of the green transition. Of the EUR 34.5 million, which was set aside for this year’s tender, only two thirds has been paid out, which indicates that more and more projects are being set up without subsidy. It is expected that contracts will be entered into will all parties that have submitted bids.

The Danish government views renewable energy and electricity from wind and solar cells as paramount to their ambitious plan phasing out fossil fuels. When measured by capacity, subsidies have been given to equal amounts of wind and solar energy.

Background

  • The technology neutral tender was initiated on September 27, 2019 with a deadline for offers on November 27.
  • The allocated budget is EUR 34.5 million (2019 prices) with a maximum bid of EUR 0.008/kWh.
  • A total of 7 contracts are expected to be awarded, corresponding to all bids received, including 2 contracts with a total of 72 MW onshore wind turbines, 2 contracts with a total of 97 MW onshore wind turbines and solar cells, and 3 contracts with a total of 83 MW solar power plants (DC power).
  • Calculated as MW onshore wind equivalents, this gives a total expansion of 181 MW in 2019. At the conclusion of the agreement, an expansion in the 2019 supply of 100 MW onshore wind equivalents was expected.
  • The average weighted winning price supplement is EUR 0.002/kWh, in 2018 this was 0.003/kWh.
  • Based on received bids, the entire tender budget will not be used. There will be a remaining balance of EUR 13.5 million (2019 prices).
  • The expected price per MW (onshore wind equivalent) was EUR 810,000. At the conclusion of the agreement, it resulted in EUR 147,000 / MW (onshore wind equivalents). This is a decrease of approx. 82 per cent in the MW price.

The winning projects are:

Onshore wind projects:

  • Overgaard 1B K/S, 36 MW, Randers Municipality
  • Wind Estate A/S, 36 MW, Randers Municipality

Onshore wind and solar projects

  • Eurowind Energy A/S, 37.8 MW of onshore wind and 15.2 MW of solar cells, Mariagerfjord Municipality
  • Eurowind Energy A/S, 25.2 MW onshore wind and 18.9 MW solar cells, Herning and Holsterbro Municipalities

Solar projects:

  • Solar Park Harre ApS, 38.1 MW, Skive Municipality
  • Solar Park Agersted ApS, 26.4 MW, Brønderslev Municipality
  • Solar Park Holmen ApS, 18.2 NW, Ringkøbing Skjern Municipality

Source: The Danish Ministry of Energy, Environment and Utilities (in Danish)

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