Lithuania kicks off offshore wind with first 700 MW auction - WindEurope
Lithuania kicks off offshore wind with first 700 MW auction | WindEurope
7 August 2023
Lithuania kicks off offshore wind with first 700 MW auction
The Lithuanian Government presented the results of its very first offshore wind auction. A consortium of the Ignitis Group and OceanWinds is the winner. They were willing to pay €20m to develop the project. It will most likely be operational by 2030. The consortium has received a permit to operate the site for 41 years.
Lithuania is the first of the Baltic States to turn its offshore ambitions into reality but its neighbours also have plans to build offshore wind before 2030. These new projects will be crucial for the region. Offshore wind will help the Baltics increase their energy independence, bring down electricity prices and get the resulting economic benefits. They will also be able to become an energy exporter instead of an importer. Estonia is already planning a subsea electricity cable to Germany to export electricity in the future.
While Lithuania is moving in the right direction with offshore wind, this auction did not apply the right auction design. First of all, developers had to pay for the right to build the wind farm. The negative bid of €20mn did not reach the levels we saw in Germany recently. Nevertheless, applying uncapped negative bidding leads to extra costs that need to be passed on to the supply chain and consumers who are already struggling.
In addition, the Government hasn’t done any of the site and environmental surveys yet – something that is common in other countries. This will add about two years to the project development timeline. This also meant that developers were bidding without much knowledge about important factors such as wind speeds and therefore potential electricity production. This decreased interest in the auction for many developers and only two parties entered a bid.
Developers will need to set aside at least €5m for environmental protection. And they need to offer support to local communities, handing over €1 per generated MWh to them. This is good as local communities will be able to benefit directly from the new wind farm.
Lithuania wants to organise another offshore tender later this year. They will apply a CfD model for that one. And they have already set the price range. Developers will be able to bid in between €64.31/MWh and €107.18/MWh. This is better. CfDs provide a more stable system for future offshore development than the one they used for this auction. Overall, the country is moving in the right direction and will benefit greatly from offshore wind.
WindEurope CEO Giles Dickson said: “It’s good to see Lithuania taking its first steps on offshore. It’ll help reduce their energy imports. And it’ll bring wider economic benefits including to local communities. But this tender could have been structured better. Negative bidding is not the way forward. It’s good that the next auction in September uses CfDs. This will generate more interest from other offshore wind developers.”
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.