Denmark’s latest offshore wind auction ended in failure, and although it differs, it offers valuable lessons for the much-anticipated design that the Spanish government is preparing. Among the key lessons could be: prioritizing economic certainty and long-term sustainability.

As Kiko Maza, renewable energy expert and CEO of WeMake Consultores, points out, avoiding unnecessary risks and opting for protective mechanisms, such as the “two-way CFD”, will be key to promoting viable and competitive projects in the Spanish market.

In an interview with Energía Estratégica España, he explains: “In Denmark, auctioning the rights to develop a park is done, but there is no guaranteed tariff. Given the current state of the market, it is too risky for a developer to pay for a project without certainty of future revenues.”

This approach has generated uncertainty in a market already facing a high penetration of wind energy, increasing the risk of price cannibalization, meaning the reduction in the value of energy produced due to market saturation.

Another distinctive element of the Danish model is the mandatory participation of the state with 20% of the project’s capital, a measure that, according to Maza, may have discouraged some developers.

Spain, with its vast experience in renewable energy, has the opportunity to design a more robust auction model.

Maza emphasizes the importance of avoiding similar mistakes to the Danish model and stresses that “the key is not to set a tariff cap so that developers are not tempted to game the system and put the viability of projects at risk.”

In this regard, the “two-way CFD” (Contract for Difference) emerges as the most suitable tool to guarantee the financial security of developers. This mechanism, which establishes a fixed price for energy, protects both the promoter and the system from market fluctuations.

“The ‘two-way CFD’ is the best tool, as it provides security and certainty for the promoter,” Maza underscores.

The Spanish market presents unique characteristics that differentiate it from Denmark, such as lower penetration of offshore wind energy and a more flexible regulatory environment. These factors allow Spain to implement a system that encourages developer participation without sacrificing economic viability.

Furthermore, Spain’s diverse renewable resources, including high solar and land-based capacity, reduce the risk of price cannibalization and promote a more balanced auction design.

When the Royal Decree 962/2024 was published in September, which regulates the production of electricity from renewable sources in offshore facilities, it was established that network access, maritime space, and tariffs would be combined into a single process—something that many leaders of offshore teams in development companies had hoped for.

Although it may not be the most competitive or efficient solution, as it limits developers’ ability to measure the wind resource in detail in the assigned area, it will be faster and simpler, facilitating the implementation of the first projects.

This is another of the pending issues inherited by the new Minister for Ecological Transition, Sara Aagesen, from Teresa Ribera, and it is expected that there will be news before mid-2025.