Ten pre-qualified consortia. Six bidders. There is no question that there was a high level of interest in France’s AO5 tender, for the rights to develop a 250MW floating wind farm off the coast of South Brittany, which concluded on 21st May.
In an era where developers have to think carefully about how they price their bids in offshore wind tenders, the high level of interest in AO5 surprised some in the market. But this can be explained by the unique appeal of the site. This is set to be Europe’s first commercial-scale floating wind project and developers want to gain a foothold in this emerging part of the offshore wind sector.
The successful bid reflected this competition. Elicio and BayWa r.e. won the right to develop the 250MW Pennavel project at a bid price of €86.45/MWh ($94/MWh). This was far below the ceiling price of €140/MWh ($152/MWh). Pennavel can also play an important role in helping bridge the gap between pilot floating projects with headline capacity of 100MW or smaller, and the 1GW-plus floating projects on the horizon. As such, it can help the offshore wind sector grow its floating wind production capacity.
But the winning price has led to warnings for policymakers and developers too. Trade body WindEurope has said policymakers and developers cannot use €86.45/MWh as a new benchmark for commercial-scale floating wind because of some of the unique characteristics of the AO5 tender.
First, it highlighted that Elicio and BayWa will not need to pay for the grid connection, which will be handled and paid for by French transmission operator RTE. This takes out one major cost from the winning bid price.
Second, it said the site conditions at Pennavel are attractive: strong winds, shallow waters, and a location near Europe’s offshore wind heartland in the North Sea.
And third, it explained that the Contract for Difference in AO5 is linked to inflation, so the developers are insulated from the impacts of rising costs, including raw materials. WindEurope said governments must consider the circumstances in their market when they are setting price benchmarks, not just defer to AO5.
But the responsibility is not policymakers’ alone. Developers may be keen to gain a foothold in floating wind, but they must ensure that they are bidding responsibly too. They must look at the merits of each site and focus on project deliverability. This will be an important consideration for the market as the number of floating tenders grows.
Learn about How Developers Can Reduce Construction Delays at Offshore Wind Farms here.
Floating wind momentum
Floating wind is a great opportunity to take offshore wind into new parts of the world, from the Mediterranean to the coast of California. Yet there is evidence that growth is slowing as developers focus more attention on deliverable fixed-bottom projects.
In its Global Offshore Wind report in April 2024, the Global Wind Energy Council said it expected to see 8.5GW of floating wind installed globally by 2030. That is a drop of 22% year-on-year from its 2023 prediction, although would still be formidable growth from the 14 floating wind projects totalling 227MW that were in operation in late 2023. That will require many tenders where developers bid for government backing.
In addition, GWEC said it did not expect floating wind to reach commercial maturity until at least 2030. If the industry is to achieve that commercialization while helping reach 8.5GW by 2030 then the priority will be successfully delivering projects – and that means bidding at levels that make deliverability their overriding concern.
This will be a challenge for developers. The small number of operating floating wind farms means they have limited data to draw from about project costs, both for the up-front capital expenditure to build them and the long-term operational expenditure that is needed to keep them running. But this is where digital technology can play a role.
For example, our simulation solutions help developers to compare project layouts, and optimize their transportation, installation and operations and maintenance (O&M) strategies by using fast simulations. With the experience gained by being involved in more or less all floating wind projects, we help developers to make the right decisions taking into account turbine and foundation technology; long-term weather trends; and availability of ports and vessels. This gives them the data they need to plan projects effectively and prioritize deliverability in their tender bids.
As well as helping developers at individual projects, we expect this to help the sector as a whole. This can help the industry to answer some of the big questions that still face those in the floating wind sector, such as the viability of tow-to-port O&M; and also helps developers to reduce the risk of winning tenders with unviable projects.
Floating wind is a long-term opportunity to take offshore wind into new areas of the world, and France’s AO5 tender shows us the enthusiasm that exists. Like others in the sector, we will watch Pennavel with interest. But developers must also heed the warnings about the need to use robust data to tackle each tender on its own merits.
