A competitive tender process for the Thor offshore wind farm was recently concluded in Denmark. The German energy developer RWE was awarded the rights to develop the farm, accepting a contract for differences (CfD) with what initially seems like an incredible strike price of 0.01 ore/kWh.
A CfD with a strike price of 0.01 ore/kWh at face value implies that all revenue which RWE generates from energy production will have to be passed on to the Danish state. The outcome has thus been heralded as a huge success for the Danish Energy Agency (DEA). Wind farms have gone from previously being an expense to now becoming a source of income.
However, the outcome is not as positive as it initially seems. In this brief note, we explain why the tender actually was not a huge success (or at least, not as huge a success as it could have been) – and how the DEA made a big mistake with its tender design.Download