The Dutch government will hold a third zero subsidy offshore wind tender next spring, for the circa 700MW 'site 5' wind farm in the Hollandse Kust North area, with developers needing to hand in their bids during April, the government said in its official gazette.

As part of Hollandse Kust North (NKZ) is located within the Dutch 12-mile exclusive economic zone (EEZ), future operators actually will have to pay for the exploration of the zone. At €704,659.20 ($783,703.76) per year for the quarter of the wind zone that lies within the EEZ, that cost is not very high, though.

The area is the fifth consecutive zone to be auctioned off as part of a 3.5GW expansion plan that is slated to take the country’s cumulative capacity for wind at sea to 4.5GW by 2023.

After that, the Netherlands plan to build-out its offshore wind capacity even faster in order to reach 11.5GW by 2030.

The first two Dutch tenders, for the Borssele 1&2 as well as 3&4 areas, in 2015 and 2016 were still for the lowest price, while the government in 2018 and 2019 opted for its first zero subsidy auctions for the Hollandse Kust South 1&2 and 3&4 zones - a practice disliked by the wind sector that it is continuing with the Hollandse Kust North area next year.

Industry group WindEurope said it is good that the Dutch government are keeping up their rhythm of regular offshore wind auctions, but thinks it would make more sense to switch to a UK-style two-sided CfD model rather than persist with zero-bid auctions.

"The costs of capital on CfD projects are 2.5 percentage points lower than they are for zero-bid projects which offer no prospect of revenue stability," WindEurope chief executive Giles Dickson told Recharge.

The UK, France, Poland and Spain are now using or moving to the CfD model. And Denmark opted this year for CfDs over zero-bids for their next offshore wind auction.

"The higher capital costs of zero-bid projects mean total societal costs are much more than they are with CfDs. You quickly lose any short-term fiscal gain a government might get," Dickson said, adding that the fiscal cost of CfDs is very low now that offshore wind has become so cheap.

"Look at the UK: they’re going to auction 20GW of new offshore wind in the next decade (now 30GW with Boris Johnson’s new commitment), and they’ve only set aside £557m ($729.9m) to support this. Because they know that with the two-sided CfD the wind farms will be paying back to Government almost as much as the Government pays out to them.”

The Dutch government in its official gazette, by contrast, stressed that the cost offshore wind producers face depends greatly on their choice for turbine technology, foundation technology and the operational approach.

"A substantial cost reduction has been achieved in recent years,” the government said.

“The application procedures for permits for the plots of the Hollandse Kust South wind energy area have shown that under current market conditions it is possible to build and operate wind farms without subsidies”

As the Hollandse Kust North zone is very similar to the Hollandse Kust South area, the government is opting for zero subsidy again in 2020, it added.

Similar to earlier zero subsidy tenders, bidders for Hollandse Kust North will be evaluated for non-monetary criteria such as the timely construction of the wind farm, the quantity of energy produced, a sound risk management and experience in offshore wind construction.

Dutch transmission system operator TenneT will again provide the transmission to shore for a maximum of 760MW.

Successful bidders will have four years for the construction of the wind farm after winning the tender.

The Dutch government for tenders after Hollandse Kust North is currently discussing new rules.

But an amendment to the country's offshore wind legislation is currently held up by talks about a North Sea Accord between various interest groups, including fishermen, the oil and gas sector, and environmental organisations, the Netherlands Wind Energy Association (NWEA) told Recharge.

UPDATED with comment from WindEurope, NWEA

Wind

Dutch cue up next 700MW zero-subsidy offshore wind tranche for tender