The Danish Government and the parties to the Climate Agreement for Energy and Industry of June 2020 (the Climate Agreement), have entered into an agreement about the subsidy scheme for Hesselø Offshore Windfarm (OWF), which is to be located north of Zealand.
This means that for Hesselø OWF there will be offered a 20-year period of risk sharing between the Danish State and the concession owner in accordance with the so-called two-way Contract-for-Difference (CfD) model. The CfD-model gives the concession owner certainty for the investment in the long run, but places more short-term risk by exposing the concession owner to market signals. The price premium will be calculated as the difference between the offered bid price and a reference price, which consists of the average electricity prices in the previous calendar year. The concession owner receives a premium in years in which the offered bid price is higher than the reference price, but correspondingly pays the Danish State in years in which the reference price is higher than the offered bid price. The subsidy scheme provides automatic acceptance of the offered bid price given that the prequalified tenderers do not cross the threshold for net zero subsidies when submitting final tenders by the end of 2022. If the bid with the lowest offered price in “øre” per kWh amounts to the total subsidy costs over the 20-year period, which are equal to or below the budget evaluation threshold of net zero, award is guaranteed without any further approvals.
The Danish Energy Agency will publish the tender conditions in autumn 2021. At the same time there will be open for applications for prequalification to the tender. Hesselø OWF will be located north of Zealand in Kattegat. The OWF will have an installed capacity of between 800-1,200 MW.