Vattenfall has announced it will be constructing the Hollandse Kust Zuid 3 and 4 offshore wind farm on a zero subsidy mechanism; the second project in the Netherlands following Hollandse Kust Zuid 1 and 2.
The wind farms will have a combined capacity of about 1.5 GW and will be the first two unsubsidized offshore wind farms globally when commissioned, according to GlobalData.
The subsidy free auction in the Netherlands is expected to make coal-based power plants unviable, leading to their closure much before the official ban on them begins in 2030. The closure of these plants should lead to an increase in wholesale prices in the Netherlands, making the operation of the wind power projects profitable even without the aid of subsidies.
Mohit Prasad, Project Manager at GlobalData, comments: “Under the zero subsidy mechanism, the power generated from the offshore wind farm will be sold in the wholesale market instead of a continuous revenue scheme which locks in a fixed income.”
The cost of offshore wind in Europe has been falling and further decline is expected. Some of the leading offshore wind markets in Europe are expected to see a fall in their average project cost. According to GlobalData, the UK, which has the maximum offshore wind installation in Europe had an average project cost for an offshore wind farm at $5,152 per kW in 2018. This is expected to decline to $4,787 per kW by 2025.
During the same time period the average project cost for an offshore wind farm in Germany is expected to decline from $4,268 per kW to $3,989 per kW.
The Netherlands is expected to witness a much steeper fall with project cost declining from $5,700 per kW in 2018 to $4,250 per kW at the end of 2025. The decrease in project cost is estimated based on the price of wind turbine components and the construction of larger, more efficient turbines.