Germany is preparing a substantial change to the design of its offshore wind energy auctions from 2027 onwards , after the 2.5 GW tender for areas N-10.1 and N-10.2 received no bids in 2025. The new scheme maintains the commitment to reach at least 70 GW offshore by 2045 and incorporates bilateral contracts for difference (CfDs) as a hedging instrument.
The biggest sticking point is when these CfDs can be used . The draft reform of the Windenergie-auf-See-Gesetz ( WindSeeG ) establishes a two-stage procedure: first, it will be checked whether any developer is willing to run the asset without public backing, and if that stage remains undecided, a second phase backed by the contract for difference will be enabled.
The formula represents a shift from the German merchant exposure model, although it maintains that alternative as the first option . Aegir Insights characterized the new instrument as a support mechanism that returns to German offshore, but not as the default method for developing projects.
For Matthias Janssen, Executive Director of Frontier Economics , one of the main changes could be summarized directly: “ CfDs are coming, ” the executive noted when analyzing the proposal.
Janssen cautioned, however, that the structure designed by Berlin differs from the alternative previously proposed by Frontier Economics. The consultancy recommended a production-based CfD as the default mechanism, with the option to exit or carve out private power purchase agreements until the final investment decision.
The executive appreciated that the proposed instrument is production-based rather than capacity-based, in line with what he defined as “ a simple and bankable design. ” The key difference is that this coverage would only come into effect after verifying that no participant agrees to develop the park under merchant conditions.
The German Offshore Wind Energy Association (BWO) concurred with this assessment. The organization supported the introduction of bilateral contracts for difference, although it questioned whether they should become a last resort solution once the possibility of companies fully assuming market risk has been ruled out.
“With the CfD, the draft takes an important step in the right direction. It is now crucial that guarantees are reliably available from the outset and do not only come into play when no one is willing to assume all the market risk,” said Stefan Thimm , CEO of BWO.
Financing is behind this position. “Offshore wind farms are multi-billion euro projects with long execution times,” the executive remarked about a technology in which current decisions commit capital over long periods of development and operation.
In that context, BWO argued that the awarding framework should allow for the management of financial uncertainties rather than transferring them entirely to the developers. “The design of tenders should make risks manageable, not reward those willing to take the greatest risks,” Thimm stated.
From 2000 to 4800 MW per year and 35-year permits
The reform proposes that Germany tender between 2000 and 4800 MW offshore annually from 2027 , giving greater flexibility to the Bundesamt für Seeschifffahrt und Hydrographie (BSH) to define the specific volumes based on system planning.
The long-term goal remains unchanged. Germany aims to reach 30 GW by 2030, 40 GW by 2035, and at least 70 GW by 2045. To achieve this latter target, the draft itself estimates that, from 2035 onwards, slightly less than 3,000 MW per year will need to be added on average.
The volume tendered for each surface will be, as a general rule, between 500 and 2400 MW , while the Government introduces greater flexibility to synchronize offshore generation capacity with the connections responsible for transporting that electricity to land.
This equation is relevant because, according to official documentation, new offshore connections require estimated investments of around €5 billion to €10 billion in infrastructure . Therefore, one of the regulatory priorities is to increase their utilization rate and contain the systemic costs passed on to electricity consumers.
Among the proposed solutions is an over-installation of generation capacity of up to 20% relative to the connection capacity , defined specifically for each site. Thus, a 2 GW connection could be associated with a higher generation capacity when technical and economic studies justify it.
Frontier Economics, however, considered that the economic optimum is likely to be well below that maximum. Janssen indicated that the analyses prepared for BWO and BDEW point to a range of “around 5% to 10%, depending on the sites.”
The official draft also acknowledges that available calculations suggest over-installation levels clearly below 20% in a standard scenario . Furthermore, it considers reducing power density and redesigning certain areas to limit wake effects and increase equivalent operating hours.
This factor is especially relevant for areas N-10.1 and N-10.2 , which together total 2.5 GW and did not receive bids in August 2025. Both sites are planned again for 2027 and are located in a densely developed area of the North Sea, where losses caused by wakes from neighboring wind farms can affect production and profitability.
Another change aimed at improving the economics of projects involves extending the standard duration of permits for new offshore wind farms from 25 to 35 years . This extension allows the initial investment to be spread over a longer operating period and improves the economic utilization of the assets.
The new CFD and the ceiling for offers
In the model envisioned by Germany, the first stage of the auction will determine whether there are developers capable of building without support. When several participants accept these conditions, the process will advance through dynamic rounds in which the payment companies are willing to make for the contract will increase.
When no participant accepts that modality, the second stage will begin , in which competition will take place through a bilateral CfD with descending rounds intended to determine the level of support required by each developer.
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For areas not previously surveyed centrally, the proposal sets a maximum value of 9.487 euro cents/kWh . For sites with centralized studies, the proposed limit is 9.6715 euro cents/kWh .
The Bundesnetzagentur will have leeway to adjust these values. The regulator may modify the ceiling by up to 10% in accordance with economic conditions and, additionally, adjust the value applicable to a specific area by up to 35% when its projected production differs significantly from the reference case.
The CfD will be linked to the project's generation through a market premium and a revenue recovery mechanism when the market value exceeds the allocated level. The design combines protection against low prices with revenue recovery when the price exceeds the level recognized for the project .
Janssen identified another outstanding issue for bankability: the draft does not include strike price indexation . Frontier Economics had proposed phased, differentiated adjustments to absorb substantial variations in financing costs and key inputs during development.
This factor is significant due to the long timeframes between the award and the start of operations. The government itself acknowledges that if an auction held in 2027 were to result in a CfD being awarded, the corresponding facilities would not be operational before 2032 .
The German government also estimates that, under various electricity market forecasts and assuming allocations at the maximum value, the average support costs could range approximately between -0.07 and 1.23 euro cents/kWh in real terms . A negative result would mean net income from the recovery mechanism.
The problem that the reform does not solve
Beyond future tenders, the concessions awarded between 2023 and 2025 appear to be one of the project's major shortcomings . Some of these assets were granted under a different cost and financing scenario, but there is still no specific mechanism for voluntarily returning the rights and re-tendering the land.
Janssen summarized this situation by noting that “the draft looks to the future, but does not resolve the immediate problem of previous allocations.” The executive warned that retaining potentially unviable allocations could keep both scarce offshore land and grid connection capacity occupied for years.
BWO had proposed an extraordinary mechanism to allow the return of certain projects that had not yet reached their final investment decision. The formula would require the winning bidder to forfeit payments already made, be barred from bidding again for the same area, and make the preliminary studies available .
“Our proposal is not a free pass for companies. Those who withdraw their bid lose the payments already made, are excluded from bidding again, and must make the results of their preliminary studies available,” Thimm explained.
This mechanism would allow the committed sites to be released quickly so that a new investor could attempt to materialize them under an updated economic framework.
“When multi-billion euro projects remain in limbo for years and ultimately are never built, we lose valuable time. An orderly closure with a swift new tender is better than a messy failure after years,” warned the CEO of BWO.
The draft maintains, however, that there will be no unilateral return of awards , as it considers the mandatory nature of the auction results necessary to guarantee stable planning and development horizons.
Offshore hydrogen, resilience and cybersecurity
The WindSeeG amendment also incorporates provisions to advance hybrid projects that combine wind power generation, electricity evacuation and offshore hydrogen production .
The goal is to enable facilities connected by electrical cable and a future hydrogen infrastructure, with the possibility of testing marine electrolysis under real conditions and moving towards greater sector integration.
The Ministry itself acknowledges that offshore electrolysis is not yet economically viable on a large scale , partly due to its early stage of development. The proposal therefore focuses on creating a regulatory framework for pilot tests and larger-scale demonstrations.
Janssen considered the progress still limited and noted that "there is no clear path to scaleable hybrid electricity and hydrogen connections" in the currently proposed text.
New criteria linked to the European Net-Zero Industry Act will also be introduced, especially for centrally pre-screened sites. The regulations incorporate requirements for industrial resilience, sustainability, component origin, and cybersecurity to strengthen European supply chains and reduce critical dependencies.
In digital matters, successful bidders will have to meet specific requirements on data security, supplier certifications and operational control of assets , while certain components will be subject to origin criteria intended to limit excessive concentrations from third countries.
With the sector consultation closed on August 17 , the project must now continue its political and regulatory journey before the tenders planned for 2027, including government and parliamentary processing and European authorization on state aid.
Germany is thus trying to regain appeal for offshore investment without completely abandoning market exposure , through a design in which the merchant alternative retains priority and CfD only appears when that route fails to attract developers.
The discussion about meeting the 70 GW target by 2045 is therefore closely linked to the distribution of financial risk. The effectiveness of the reform will depend on whether the new conditions not only attract bids in 2027, but also allow those projects to reach the final investment decision and subsequent construction stage.