On 10th July 2019, the Dutch Ministry of Economic Affairs and Climate Policy is set to reveal the winner of the Hollandse Kust (Zuid) III & IV tender. The tender was opened to develop the sites without government subsidies. The sites have a capacity of 350-380MW each and developers such as Orsted, Vattenfall, Engie, and Witwind (Shell, Van Oord, and Eneco) have applied to build.
The wind farm zone Hollandse Kust (Zuid), 356 km² in total, is divided into 4 sites. Each site can accommodate 350-380 MW. Vattenfall was awarded the permit for wind farm sites 1 & 2 for a total of 740MW.
The above figure (courtesy of RVO.NL) shows in more detail the overall site area together with the bathymetry. We use this site information in the YOUWINd model to calculate the wake losses and the estimated amount of steel needed for the foundations with the respective wind turbines. With the various site data available we have used the information about the zero-subsidy bid to try and guess who the winner will be.
We started calculating South Holland Coast 1 & 2 and simulated the costs and compared that to the estimated costs of Borssele 1 & 2 and South Holland Coast 3&4. These scenarios can be found in the YOUWINd model, included in the free trial here – app.youwindmodel.eu.
We have made an assumption about which turbines will be available in the year of installation. Also, we assume that the foundations will be monopiles in all three scenarios.
The cost and LCOE are considered to reduce compared to Borssele 1 & 2, which is a general trend we have seen while analyzing the two new sites.
But what happens now with a zero subsidy bid compared to Borssele which was won by Orsted with a bid of 72,5 EUR/MWh?
With the LCOE drop and new turbines entering the market, we find still a viable business case for the bidders as can be seen in the below YOUWINd graph. If the Market prices remain the same or even higher there is still a business case in the zero bids, and according to the YOUWINd model then above 6% IRR.
There is also great potential in PPAs that have given possibilities for better prices than the average market price. Therefore there is no wonder the biggest players are competing to get the award for South Holland Coast 3+4.
But as Vattenfall won the first two sites, we believe it is unlikely they will be awarded the second two unless they have made a proposal with additional benefits such as better use of the electricity.
The YOUWINd bet is on Orsted who already has established good work and collaboration from the Borssele project and they have a very innovative approach to the use of electricity afterward. The other players might also have an even more interesting approach that will be very interesting to read about once the results are in.
Note that our assumptions are based on publicly available data and news and with YOUWINd calculations.
Jesus Ramos
