Could the success of Denmark’s upcoming auction be at risk?

March 20, 2024
 | 
2 min read
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Denmark's upcoming auction for 3 GW of prime North Sea locations is one of this year’s most anticipated. But Aegir Insights’ latest analysis shows returns could be as low as 3 to 6% on even prime sites – which puts the auction success at risk.

A competitor bid simulation – made using Aegir Quant’s Monte Carlo features – provides powerful strategic insights considering project uncertainties and developer capabilities.

Some of the interesting findings were:

  • Standalone project returns (% IRR) indicate that it will be very challenging to meet typically expected return requirements of 6 to 8% IRR.
  • Considering different value levers of potential bidders, Aegir estimates approximately 2% absolute IRR delta between best and worst case for potential bidders.

There are several strategic implications at play:

  • Could Denmark's upcoming auction be a flop? Several players, that you would typically expect to see in auctions in mature markets, may decide not to bid due to challenging business cases in a framework with steep delay penalties.
  • Will cash rich players sweep the table? By pursuing the three North Sea sites totaling 3 GW in one go, a single player could try to win through ‘scale benefits’.
  • Will offtake determine the winner? Finding a market for integration or export and securing offtake will be key, as the three North Sea sites all come with large overplanting possibilities, which can either be connected to the grid or supplied directly to Power-to-X production.


Aegir Insights Software tool kit for auction and competitor simulation

Aegir’s Quant solution (available to subscribing clients) provides developers and governments with the sector’s most powerful solution for auction and competitor simulation, backed by a team with close to 20 GW of offshore wind auction experience from 18 auctions globally.

Reach out to us to learn more about Aegir Insights advanced commercial tool kit which helps governments and developers make the best investment decisions.

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Aegir Insights provides industry-leading intelligence powered by data science for offshore wind energy developers, governments and financial institutions.

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1058 Copenhagen,
Denmark


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CVR no.: 39104792

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Aegir Insights

Aegir Insights
Havnegade 27,
1058 Copenhagen,
Denmark


Contact

info@aegirinsights.com
CVR no.: 39104792

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