The Danish government and the parties to the Climate Agreement for Energy and Industry of June 2020 (the Climate Agreement) have selected a subsidy scheme for the 1.2 GW Hesselø offshore wind project, which is to be located north of Zealand. The subsidy scheme is similar to that decided for the Thor offshore wind project. The country plans to offer a 20-year period of risk sharing between the Danish State and the concession owner in accordance with the so-called two-way Contract-for-Difference (CfD) model: the concession owner will receive a premium on top of the reference price (average electricity price in the previous calendar year) when it is lower than the offered bid but will correspondingly pay the Danish State when the reference price is higher than the offered bid price. The final tenders will be submitted by the end of 2022.
In addition, the subsidy scheme for Hesselø provides automatic acceptance of the offered bid price if the bid is within the "net zero subsidies" level, determined by the Danish Energy Agency using its electricity price forecast: if the bid with the lowest offered price (in øre per kWh) amounts to or is below the total subsidy costs over the 20-year period, the project is awarded without any further approvals. If not, the parties to the Climate Agreement will decide whether to accept the bid and locate the required subsidy funds or whether to reject the bid.
Earlier in March 2021, the European Commission approved Denmark’s support for the Thor offshore wind project, which will be located in the Danish part of the North Sea, under EU state aid rules. Denmark had approved an aid measure with a total maximum budget of DKK6.5bn (€870m), to support the design, construction and operation of the 800-1,000 M offshore wind project and of associated substation and grid connection.
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