Eneco no longer wants to invest in offshore wind farms

Dutch energy provider Eneco no longer wants to invest in offshore wind farms. The energy company withdrew just when Belgium announced the conditions for a concession for a wind farm in the North Sea.

The profitability of such installations is a problem. The risks are too big, so the company withdrew from the tender for constructing two offshore wind farms in the North Sea. Eneco calls the current approach to the offshore wind “not future-proof.”

Risky

The project contains two plots, 60 km from the Dutch coast, for constructing wind farms, which must have a capacity of 2 gigawatts: IJmuiden Ver Alpha and IJmuiden Ver Beta. The two farms must produce enough energy to power four million households.

Eneco thinks the plans are too risky. Construction costs have risen too high due to inflation and high demand for labor and materials, and the possibilities of recouping investments are also too uncertain.

The cabinet also wants to see money for a plot for the first time. In the past, the government mainly looked at the ecological aspects of a new wind farm or techniques that would help relieve the overcrowded power grid. This time, suppliers have a better chance of winning if they bring  (a lot of) money. Moreover, Eneco also fears construction will not be completed on time, and wind farm operators can expect hefty fines if delivery is delayed.

Financial contribution

Despite Eneco’s withdrawal, several parties have registered to construct the two largest offshore wind farms. However, it has not yet been announced how many bids have been made and which parties are involved. The winner will be announced in June.

Like Eneco, competitor Vattenfall is critical of the tender procedure, in which bidders are expected to make a financial contribution for the first time. In theory, this contribution could amount to 33 billion euros. Apart from the financial contribution, the government also assesses the bidders on the ecological aspects of the turbines and how the park will be integrated into the overloaded electricity grid.

Bigger and more expensive

Wind farms are becoming increasingly expensive, but the chance that the investment will be recouped is decreasing. Electricity demand is not keeping pace with the supply.

Turbines supply more and more electricity, but they also require increasingly larger construction ships and heavier foundations. And ‘old’ turbines are depreciated more quickly because they are replaced by ones that produce much more energy.

Companies are not bound to offer money, and the Dutch Ministry of Economic Affairs says that the latest market conditions are also considered when developing new parks.

Price guarantee

In Belgium, the price guarantee for electricity is set at a maximum of 95 euros per megawatt hour. If the price guarantee is lower, the government will have to adjust less quickly when electricity prices are low.

“The tender concept was created to attract as many candidates as possible at the lowest possible price. We, therefore, assume that sufficient developers will come forward,” says Stephanie Maquoi, spokesperson for Energy Minister Tinne Van der Straeten (Groen), in the newspaper De Morgen. “Price is the most important criterion.”

There is already a lot of interest from abroad in the Belgian tender, including from Eneco. “In Belgium, the conditions are much more favorable than in the Netherlands, where all risks are placed with the developers,” concludes Eneco.