EnergyOMNI's Perspectives I Offshore Wind Industry Facing Headwinds: Tenders Attract Little Interest Across Countries

Edited by EnergyOMNI

In the UK, the fifth allocation round(AR5) of the Contracts for Difference (CfD) auction in 2023 failed to attract any bids from developers. The main reason was that, given current cost conditions, the government's price cap of £44/MWh was not economically viable. In response, the UK government raised the price cap by 66% to £73/MWh in AR6 (2024), successfully awarding 5.3 GW of offshore wind contracts.

In Lithuania, a 700 MW offshore wind tender held in 2024 attracted only one bidder and was subsequently canceled in April of that year. The government redesigned the tender process and conditions in early 2025. Specific changes included the transaction price will now be indexed to inflation and changes in the average annual electricity price on the Lithuanian exchange for eight years. The new tender is scheduled to open for applications on September 8, 2025.

Denmark also held a 3 GW offshore wind tender in 2024 under a negative bidding scheme, but no bids were submitted. Developers said the result was not surprising and pointed to several issues. Beyond global challenges such as supply chain costs and financing expenses, they cited insufficient project timeline flexibility, unclear construction planning, and high uncertainty around future electricity prices. The Danish government suspended the tender and pledged to redesign the framework. It later shifted to a CfD model, introduced up to €7.4 billion in state subsidies, reduced penalties for project delays and grid connection, and removed the requirement for 20% state equity. The tender is expected to relaunch in autumn 2025.

Germany recently experienced a failed offshore wind tender in 2025 as well. Despite offering a total capacity of 2.5 GW and pre-surveyed sites by the federal government, no bids were received in the August auction. Rising project costs, supply chain bottlenecks, and unpredictable market and trading risks were cited as the main reasons. Since Germany also uses a negative bidding system, WindEurope and the German Offshore Wind Association (BWO) have urged the government to switch to a CfD model combined with long-term power purchase agreements to revive interest.

Due to weak market response and the adoption of a zero-subsidy model, the Netherlands announced in May 2025 that part of its planned September tender would be postponed. Of the original 3 GW, only 1 GW will proceed with tendering, while 2 GW will be delayed. The government also signaled its intention to introduce financial support mechanisms, such as CfDs, by 2027 to attract investors. Besides Europe, India has also seen tenders fail to attract bids. In August 2025, the state-owned Solar Energy Corporation of India (SECI), under the Ministry of New and Renewable Energy (MNRE), announced the cancellation of a 500 MW offshore wind project and 4,000 MW of seabed lease rights due to lack of developer interest. The main reasons included high construction costs, insufficient infrastructure, and an immature local supply chain. Although no official announcement has been made, industry insiders expect the government to revise and relaunch the tenders.

According to Boston Consulting Group(BCG), these failed tenders reflect a market reversal. In the past, developers competed fiercely for limited auction slots. Today, however, with global auction capacity exceeding demand and developers exercising greater capital discipline, they have become far more selective about which tenders to pursue. Governments must now compete to offer more attractive terms to draw developer interest. To do so, they must first provide developers with a clear outlook for development capacity. Project attractiveness increasingly depends on regulatory conditions such as cost structures, protection against power purchase risks, and overall policy stability.

Different types of developers also show varying strategies and preferences. Utility-approach developers focus on minimizing the levelized cost of electricity (LCOE). They usually accept lower internal rates of return (IRR) and prefer low-risk projects, making them more inclined toward markets that offer long-term contracts such as CfDs.

Developers with oil and gas backgrounds emphasize maximizing returns while reducing upfront investment risks, often entering partnerships to share large capital expenditures. They leverage trading capabilities or integrated energy systems (e.g., power-to-X) to generate profits. However, with muted trading markets and immature hydrogen infrastructure, system integration opportunities are currently limited, narrowing this advantage.

Newcomer developers or financial investors stress flexibility, often bidding through joint ventures to secure promising sites at minimal upfront cost while deferring major spending or decisions. They also retain the option to adjust strategies or even exit if conditions worsen. In today's market environment, however, such developers are increasingly avoiding tenders altogether.