by Tina Olivero

    Offshore Wind: Understanding Negative vs. Contract for Difference Bidding, between Germany & Netherlands

    Germany and the Netherlands have recently announced the results of their latest offshore wind auctions, collectively awarding a total capacity of 6.5 GW. This significant development marks a positive step for Europe’s energy transition. However, both countries utilized negative bidding in their auction designs, a choice that poses additional challenges for offshore wind developers and potentially impacts the wider wind energy supply chain and electricity consumers across Europe.

    The Auction Breakdown

    In these recent auctions, Germany awarded 2.5 GW and the Netherlands 4 GW of new offshore wind projects. To contextualize, the European Union currently has 19 GW of offshore wind capacity in operation.

    Negative bidding, the mechanism used in both countries, requires wind farm developers to bid the amount they are willing to pay for the right to build a wind farm. The higher the bid, the more likely they are to win. Conversely, many other European countries use Contract for Difference (CfD) auctions, where developers bid the amount of revenue they need, and the lowest bid wins.

    In a negative bidding auction, the developer’s revenue is determined by the wholesale market price of electricity. In a CfD auction, the revenue is based on the bid amount, with developers paying the difference to the government if market prices exceed the agreed strike price.

    Financial Implications

    Negative bidding adds direct costs to offshore wind development. These costs must be passed on, either to the wind energy supply chain—which is still recovering from recent disruptions and cost increases—or to electricity consumers through higher prices.

    Auction Results


    • TotalEnergies will pay €1.958 billion to develop the N-11.2 site with a capacity of around 1.5 GW (€1.3 million per MW).
    • EnBW will pay €1.065 billion to develop the 1 GW N12.3 site (€1.1 million per MW).


    • SSE Renewables and the Dutch state pension fund APG and ABP will pay €40 million to develop the 2 GW IJmuiden Ver Alpha site (€20,000 per MW).
    • Vattenfall and Copenhagen Infrastructure Partners will pay €800 million to develop the 2 GW IJmuiden Ver Beta site (€400,000 per MW).

    Previous auctions in both countries also employed negative bidding. The Netherlands previously capped bids at €70,000 per MW, but this cap has since increased. Germany does not impose a cap. Winners of the previous German auction, BP and TotalEnergies, are paying €12.6 billion to develop 7 GW, equating to €1.8 million per MW.

    Financing Challenges

    Negative bidding often results in higher financing costs compared to CfD auctions, which offer fixed revenues, making banks more comfortable providing debt finance. Projects awarded through negative bidding, with their variable revenue dependent on market prices, need to rely more on expensive equity finance, although this can be mitigated through Power Purchase Agreements (PPAs) with off-takers.

    “Negative bidding increases the costs of offshore wind, costs that must be passed on to consumers and the wind energy supply chain. It may provide short-term gains for finance ministries but represents a long-term cost for society,” says WindEurope CEO Giles Dickson.

    Non-Price Criteria

    The Dutch auction included extensive non-price criteria. The Alpha site, focused on biodiversity protection, while the Beta site emphasized system integration. Vattenfall and CIP, for instance, committed to building a 1 GW electrolyzer facility in Rotterdam, powered by renewable electricity from the Beta site. Additionally, the Alpha wind farm will feature artificial reefs on over 75% of its turbines to support marine biodiversity.

    “The Dutch auction demonstrates the European wind industry’s commitment to ecology and system integration. We are building new wind farms while creating lasting value for Europe’s environment and energy system,” adds Giles Dickson.

    In contrast, the German auction used only price criteria.

    Allocation of Funds

    In Germany, 90% of the funds raised from negative bidding will be used to reduce grid levies, with the remaining 10% supporting maritime biodiversity and sustainable fishing practices. However, there is a call for the German government to allocate some of these funds to strengthening the offshore wind supply chain and expanding port capacity.

    The approach to offshore wind auctions in Germany and the Netherlands highlights significant differences in financing models and their broader implications. While negative bidding can offer immediate fiscal benefits, the long-term costs to the wind energy supply chain and consumers warrant careful consideration and strategic planning.

    Source: WindEurope

    About WindEurope

    WindEurope represents the wind industry, actively promoting wind energy across Europe with over 500 members spanning the entire value chain, including turbine manufacturers, component suppliers, power utilities, wind farm developers, financial institutions, research institutes, and national wind energy associations.

    Tina Olivero

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