The Danish Energy Agency’s recent auction for concessions for three offshore wind farms in the North Sea, totaling 3,000 MW, ended without a single bid. This auction was intended to double Denmark‘s wind power capacity, with an additional 7,000 MW planned for future phases. However, the conditions set by the government discouraged participation: operators would receive no subsidies, pay a 30-year concession fee, and accept the state as a 20% shareholder. Without subsidies, the investment is unappealing, especially as North Sea wind farms face negative energy prices due to overproduction during high wind periods—a phenomenon known as the “cannibalization effect.” This occurs when renewable energy production saturates the market, driving prices to zero or below. Subsidized plants remain viable, but unsubsidized ones do not, making renewables unprofitable in oversupplied markets. Two potential solutions exist: subsidies, which have historically supported renewables, or energy storage facilities to manage excess production. However, storage systems are costly and also require subsidies. For renewable development to continue, investments in either subsidies or storage will be necessary, both of which ultimately increase costs for consumers.
