Denmark has cancelled its upcoming offshore wind power auction and pledged to redesign it. The industry has welcomed the move as it promises to fix a number of flaws in the scheme. It is good news for the renewables sector.
Denmark is synonymous with a number of people and things: modernist design, Peter Schmeichel, bacon, Margrethe Vestager and, increasingly, wind power.
The Danes were an early adopter of the technology and have thrown up as many onshore and offshore turbines as possible over the last couple of decades, taking advantage of their prime windy location on the edge of the North and Baltic seas.
But much more is needed. The Scandinavian nation aims to be fully net-zero by 2045 and is going to rely on wind to do a lot of emissions-cutting and green electricity generation.
Powering the grid but also providing the juice needed to produce clean fuels like hydrogen is a big part of Danish energy policy.
That is why the Danish government and its agencies run regular wind power auctions. Bidding developers are meant to apply for a certain amount of capacity, with the winners being allocated an area to populate with turbines.
Last year though, the latest auction failed as it attracted no bidders. The next round has also been postponed and withdrawn by the government, so it can be redesigned to offer more attractive terms.
Denmark for a long time was happy to rely on developers having enough appetite for new projects to apply and pay for capacity off of their own backs with no state support.
Unlike other countries, which offer financial contracts that guarantee a minimum and maximum price for the electricity that will be generated, Denmark did not offer any state support.
This has become untenable in the current energy and geopolitical context. Developers do not necessarily want straight-up subsidies but they do want security and price assurances about the power their wind farms will eventually feed into the system.
Despite Denmark having ambitious overall targets, the uptake of electrification is not progressing particularly quickly. On windy days, the entire power sector runs on renewables, but in other sectors it is less rosy.
Wind farm developers need to see more transport electrification, more renewable energy usage in the heating sector and more industrial demand for clean fuels like hydrogen, which should be produced using clean power.
Other factors have also destroyed bidder appetite. Denmark has obligated developers to pay for their own grid connections, which is a massive investment and difficult to obtain in the first place as waiting times are often so bad that they kill off projects.
So on first glance, Denmark postponing its next auction and taking 3 gigawatts of potential capacity off the table seems like bad news for the wind industry. But it is actually the right thing to do.
The government has already said that it will address all of the negatives that have been highlighted by the industry, by offering a level of state support and potentially funding grid connections.
Perhaps more tellingly, the Danes are moving forward with plans to build a large-scale hydrogen-export industry that will predominantly feed German industry appetites for clean-burning fuel.
That will include building a pipeline across the sea. If the plans do indeed go ahead, that gives developers even more certainty that the power they will generate from wind farms will actually be bought for a decent price.
Early reports say that the new auction will be published later this year and results will be released in early 2026. Of course, even if the new scheme gets it right, Denmark will be 6 gigawatts of capacity behind schedule and will have to play catch-up.
All of this will be keenly watched by other countries that are also developing wind power but which have not quite reached the saturation that Denmark is now experiencing.
Plenty of important questions about what level of state support is best, how do you roll out more clean electricity when the power grid has already reached 100% and how important hydrogen’s role will actually be could end up being answered by the Danes.
Want more updates and analysis of what is happening in the world of energy and climate? Interested in finding a job in the sector or more information about public tenders? Sign up to our Energy Rundown newsletter here!
