Poland Defies Europe’s Offshore Wind Malaise With First Auction
(Bloomberg) -- Poland will on Wednesday kickstart its first offshore wind auction, pressing ahead with plans to ramp up green energy production amid a fast-approaching exit from coal and tender cancellations elsewhere in Europe.
The nation has emerged as an outlier on the continent in developing offshore wind in recent years. Poland awarded early projects outside the auction procedure and continued development with the help of foreign partners such as Orsted AS and Northland Power Inc. Some tenders in Europe have been canceled due to spiraling costs, supply chain bottlenecks and limited visibility over future revenues.
Projects in Poland are currently competing to win so-called contracts-for-difference, which provide a top up when wholesale power prices dip below the agreed contract level. Polenergia SA with Norway’s Equinor SA, as well as state utilities PGE SA and Orlen SA are set to bid with a total of about 3.5 gigawatts.
“We are now at the best moment in a decade,” Janusz Gajowiecki, head of the Polish Wind Energy Association PSEW, told Bloomberg News. “Poland may become the most important offshore hub in the Baltic Sea region.”
If the country keeps the pace, there is “a real chance” of building 18 gigawatts in offshore capacity by 2040 and even more than 30 gigawatts after 2040, he added.
Cost Woes
The industry group estimates that the offshore wind push may spur 869 billion zloty ($242 billion) in investments, create a completely new driver of the Polish economy and eventually halve power prices.
The maximum prices in the inaugural auction were set in a range of 486 zloty to 512 zloty per megawatt hour, above current market levels. Final prices at similar tenders for other renewables have historically been “significantly” below the maximum, PSEW’s Gajowiecki said.
The issue of costs for end consumers and the future competitiveness of the local economy lies at the heart of deliberations about the energy mix among policymakers in Poland.
Last month, the head of the national power grid urged a pause in offshore investments in favor of focusing on cheaper onshore wind expansion as excessive spending may cause an increase in energy bills.
PSEW dismissed those concerns, arguing that offshore costs have been steadily falling and will continue to drop.
“Facts are clear: offshore reduces energy prices for the entire market,” Gajowiecki said, noting that production is stable and matches high demand periods.
Bullish Outlook
Poland is one of the most attractive markets thanks to “generous auction price caps and long 25-year CfDs that reduce revenue risk, making it easier for developers to secure financing,” according to Bloomberg New Energy Finance’s 2H Offshore Wind Market Outlook.
BNEF has cut its global cumulative offshore wind capacity forecast to 2035 by 19%, yet raised its estimate for Poland by 8% citing a “flurry of permits” ahead of the auction.
“We had previously assumed that the auction would be unsuccessful but given this project progress we now expect the 2025 auction to proceed as planned,” BNEF said in the Dec. 16 report.
The Polish regulator is expected to announce auction results by year-end.
“The success of the first offshore wind auction would send a strong signal to the world,” according to PSEW’s chairman.
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