Amended WindSeeG Welcomed, But Two-Stage Model Seen as Barrier

Germany's Federal Government has approved a draft of amended offshore wind legislation introducing two-sided Contracts for Difference, a move welcomed by the German Offshore Wind Energy Association. However, the association says there is considerable need for improvements, rejecting the proposed two-stage tendering model in favour of a CfD-only approach. It argues the current model creates perverse incentives that reward willingness to pay rather than project feasibility, while welcoming the examination of indexation and smaller tender areas.

 

Details of the Legislation

 

Germany has advanced new offshore wind legislation. The Federal Government approved a draft amendment. It is intended to drive new offshore wind capacity. The draft introduces two-sided Contracts for Difference. This marks a significant policy development.

The industry welcomed key elements. The German Offshore Wind Energy Association responded positively. It welcomed the adoption of Contracts for Difference. It also welcomed exploring the use of indexation. However, it identified considerable need for improvements.

 

The Two-Stage Model Concern

 

The association opposes a central feature. It rejects the proposed two-stage tendering model. It has called for a CfD-only model instead. This reflects a fundamental disagreement. It concerns the structure of the auctions.

The proposed model works in stages. Auctions would begin with a dynamic bidding process. This would have no price cap. Contracts for Difference would only follow. They would apply if no bids emerge at the first stage.

 

The Perverse Incentives Argument

 

The association warns of unintended effects. It argues the model creates perverse incentives. These reward willingness to pay and take risks. This comes at the expense of feasibility. The focus shifts away from actual project viability.

The association favours an alternative approach. A CfD-only model would reduce risks. These affect developers, financing and the supply chain. It would maintain competition for the lowest price. This combination is central to its argument.

 

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The Indexation Question

 

The association welcomed one key element. This is the examination of indexation. Indexation would account for cost increases. These occur between award and construction. The association called this a positive step.

The association stressed the need for firm rules. It said indexation must become binding regulation. Long timelines make this crucial. Five to seven years can elapse before commissioning. Without indexation, Germany could face a competitive disadvantage.

 

The Competitive Dimension

 

Indexation carries competitive implications. Other European markets already use it. They factor cost developments into their systems. Germany risks falling behind without it. This affects both financing and investment decisions.

The association framed this as a warning. Company leadership stressed the competitive stakes. Indexation is an important signal. It must translate into concrete regulations. This would keep Germany competitive for investment.

 

Other Provisions and Outlook

 

The association welcomed further elements. It supports a return option for certain projects. These were awarded between 2023 and 2025. It called this option essential. It should remain in the legislation.

The association also welcomed smaller tender areas. These would fall to 1 to 1.2 GW in capacity. This is down from a maximum of 2 GW. Smaller areas would strengthen competition. They would also increase the diversity of market participants.