Rebalancing Risk in Denmark’s Offshore Wind Tenders

in Japanese

How to rebalance the risk between the State and by the developer is the key take-away from the new set of tenders for offshore wind projects announced on 20 November 2025. The three tenders, totaling to at least 2.8GW in ‘North Sea Mid’, ‘Hesselø’ ‘North Sea South’ in Denmark follows a significant occurrence which took place at the end of 2024, a 3 GW commercial offshore wind tender in Denmark—the country widely regarded as the origin of commercial offshore wind power—attracted no bids. What can Japan learn from the changes made to the tender in Denmark?

The 2024 Tender and Why It Failed

Original scope of the 2024 tender was covering minimum of 3GW as the first phase of the Danish government’s plan to deploy a minimum of 6 GW of offshore wind capacity by 2030 based on an agreement between the Government and the majority of the Danish Parliament in May 2023¹. The new tender calls for minimum of 2.8GW located in both western and eastern sea areas of the country, based on a renewed political agreement in May 2025. Reducing the scope of the tender catered to the market sentiment that auctioning 6GW in a short period of time could lead to a concentration of supply, which may increase uncertainty in long-term price outlooks. Spreading the potential projects in both DK1 and DK2 electricity market bidding zones also addresses this concern of electricity price. The areas covered in tenders in 2024 and 2025 are shown in Figure 1.

Figure 1　 A Map of Sea-Bed Covered by Tenders in 2024 and 2025

The option of overplanting, however, was kept available to allow the developer to exploit the production capacity of electricity from the offshore wind farm for energy production, such as but not limited to innovative energy production, either offshore or onshore, if this is otherwise possible within the applicable legislation².

Reintroducing CfD: A Fundamental Shift in Risk Allocation

The most notable change between the two tenders is the risk balance; the risk was rebalanced between the state and the developer through reintroduction of Contract for Differences (CfD). In the 2024 tender, the bidder was to pay a fixed concession payment to the state for the right to use the marine area for 30 years. The bidding developer was to be fully exposed to the power price volatility. As opposed to the price risk largely borne by developer in the 2024 tender design, the re-introduction of two-sided CfD in the new tender reduces both downside and upside risks for the developer. Inflation and cost escalation which is causing the current global stagnation in offshore wind development, can also be partially mitigated through the two-sided CfD. CfD was also strongly advocated by the interviewees of the market dialogue conducted by the Danish Energy Agency following the failure in the tender in 2024. In total a payment cap of 55.2 billion Danish Kroner (DKK) including Value-Added-Tax (VAT) (approximately 1.355 trillion Japanese Yen (JPY), with the exchange rate of 24.5 JPY to 1 DKK) has been set by the state. State ownership of 20 per cent called for in the tender in 2024 was scrapped in the new tender³.

Beyond CfD: Addressing Time and Cost Risks

Along with the re-introduction of CfD, pushing back the deadline for operation was another request from the industry, as a short deadline and many countries looking to fulfill their 2030 pipeline target all setting similar CODs led to stressing the supply chain. The three areas covered in the 2025-tender have the following deadlines³.

• North Sea Mid, minimum 1 GW, must be completed by the end of 2032
• Hesselø, minimum 800 MW, must be completed by the end of 2032
• North Sea South, minimum 1 GW, must be completed by the end of 2034 The deadline for submission of tender 20 May 2026 with the awarding of the concession agreement expected to be on 4 August 2026²,⁴.

There was a significant change in the cost bearing of the preliminary investigation and cost related to defense mitigation measures. In the tender in 2024, the developer was to bear the full cost of the offshore preliminary investigations performed by Energinet, the Danish transmission service operator, as opposed to the data provided for free in the new tender5. The preliminary investigation data is available upon registration at https://ens.dk/en/energy-sources/ongoing-offshore-wind-tenders/preliminary-investigations-ongoing-offshore-wind-farm. Though the data is available to the public for free, due to the national security concerns, high-resolution bathymetric data is only available upon approval from the Danish Ministry of Defense. The costs related to defense mitigation measures is also, in accordance with the political agreement on procurement frameworks for three offshore wind farms from 19 May 2025, be borne by the Danish Defense in the new tender, in the contrary to the previous tender². Table 1 illustrates the comparison between the key aspects of tenders in 2024 and 2025.

Table 1　Comparison of Key Aspects of Tenders in 2024 and 2025

Requirement on Sustainability

The requirements relating to sustainability remain to be an important aspect of the new tender announced and specified as follows.

The bid is to include the Life Cycle Assessment (LCA) of electricity produced from the offshore wind at the minimum capacity and, if relevant, at the overplanting capacity, in accordance with the standard DS/EN 17472:2022 or equivalent. The data provided should indicate LCA for 1 kilowatt hour net of electricity produced and based on a required service life of 30 years⁶.

The bid is to include the documentation on the environmental performance of the central components of the offshore wind farm with environmental product declarations (EPD) for these components, which are in accordance with the standard DS/EN 15804:2012+A2:2019 and DS/EN 15804:2012+A2/AC 2021, or equivalent. The central components are identified as turbine, transition piece, foundation of the turbines, cables of the inter-array cable network, including any offshore substations, the export cable network and the onshore cable network, including any onshore substations. The EPD of the turbine includes data on blades, hub, main shaft, generator, nacelle, tower, gearbox, if any, and control system⁶.

The environmental requirement on turbine blades is also called for; there is a requirement to select blades so recyclability rate of at least 70 per cent can be achieved using a recycling process and a recycling technology available at the time of decommissioning⁶. The winning bidder for Hesselø bears an additional environmental responsibility and must establish the offshore wind farm with a so-called nature-inclusive design. The awarded developer is to spend at least 50 million DKK (approximately 1.23 billion JPY) excluding VAT on the actual completion of the nature-inclusive initiative⁷.

What Denmark’s Experience Means for Japan

It has become evident that even Denmark- having introduced the world’s first commercial offshore wind power project in 1991, operated a tender-based system for many years, and successfully driven bid prices down over the past decade—was unable to fully adapt its tender design to recent changes in the international operating environment and geopolitical situation. Based on the market dialogue and a commissioned analysis (for more on this, please refer to Renewable Energy Institute’s column published on May 2025 in Japanese only), the Danish government has redesigned the tender so the allocation of risk is shared between the state and the private sector. In Japan, work is underway to revise the auction guidelines for the round(s) anticipated to be announced this year, and it is likely that many insights can be gained and inspired from the current trends in Denmark’s tender process.

<For interested readers> In Denmark, the government initially directed the incumbent electricity utilities to undertake offshore wind development, leading to the construction of the world’s first commercial offshore wind power plant in 1991. Subsequently, in 2002, the government published formal tender guidelines, and competitive tenders have been conducted for offshore wind projects since 2005. The table below illustrates the evolution of bid prices from offshore wind tenders conducted since the introduction of Contracts for Difference (CfDs) in 2013. The Thor project awarded at a zero-premium in 2021 is the tender immediately preceding the one that resulted in zero bids in 2024. Thor is scheduled to produce first power in 2026, and the bid winner is anticipated to have paid 2.8 billion DKK (approximately 68.75 billion JPY) by 2029. Not only did Denmark realize reduction in state-aid from 2013 to 2021, Thor became the first windfarm in which money must be paid to the state for permission to establish offshore wind.   Following the no-bid in December 2024, the Danish Energy Agency conducted individual interviews with 17 project developers and supply chain companies. In parallel, it commissioned a study by a private consulting firm to analyze the reasons why developers refrained from bidding. Please refer to a column published by Renewable Energy Institute summarizing the analysis and the market dialogue in May 2025 (in Japanese only).