Dutch climate minister promises action plan to ensure successful wind tenders

Last week, solar generation was minimal across most parts of Europe, particularly in southern Germany, where cloud cover was persistent. The Netherlands, however, was an exception, experiencing relatively high solar output compared to neighboring countries. Despite this, prices remained relatively high, with gas and coal plants being marginal for most of the week. The average Dutch spot price was 106.2 €/MWh.

The Dutch statistics agency (CBS) released preliminary figures on electricity production in 2024 in the Netherlands last week. Fossil fuel-based generation from coal and gas declined by about 4% compared to 2023, while wind generation increased by approximately 13%. Offshore wind production saw a notable 32% rise due to an increase in installed capacity at the beginning of the year. However, additional offshore wind capacity is not expected to grow significantly for several more years. Meanwhile, concerns over the financial feasibility of large offshore wind projects continue to rise. Developers are facing increasing financial risks, as construction costs are significantly higher than in previous years, and securing investors has become more challenging.

At the end of last year, a tender for 3 GW of offshore wind capacity in Denmark failed after no bidders showed interest. In response, Dutch Climate Minister Hermans has promised to present a detailed plan before the summer to ensure future offshore tenders in the Netherlands are successful. The introduction of a contracts-for-difference (CFD) mechanism is being considered, where the government compensates developers if power prices fall below a certain level and collects revenue when prices exceed a predefined threshold.

Additionally, European Commission President Ursula von der Leyen reiterated that the EU remains committed to fully phasing out Russian gas. The gas price for April rebounded by approximately 2 euros, closing just above 42 €/MWh. CO2 prices followed gas, rising by 2 euros to 71 €/EUA. Dutch power prices also increased slightly, with April climbing by 6 euros to 78.2 €/MWh, while May and June saw a 1-euro increase. As a result, clean spark spreads for those months worsened by around 4 euros, with the clean spark spread for May ending the week at nearly -40 €/MWh.