Indexation of strike prices could reduce the costs of offshore wind projects in Germany, according to a short analysis by Frontier Economics commissioned by the German Offshore Wind Energy Association (BWO). The analysis examines the potential effect of indexation on offshore wind projects tendered between 2027 and 2030 under the planned introduction of Contracts for Difference (CfDs).
For the 4 GW of offshore wind capacity planned for tendering in 2027, the analysis estimates potential cost reductions of up to €2 billion over the operating lifetime of the projects. By 2030, the planned tender volume of 9 GW could result in potential cost reductions of up to €4.4 billion.
The German federal government’s draft amendment to the Offshore Wind Energy Act, adopted by the federal cabinet on 2 September, proposes the introduction of CfDs for offshore wind. The draft does not currently include indexation of strike prices, although the government is examining indexation for the planning and construction phase.
According to Frontier Economics, indexation could reduce the weighted cost of capital for an offshore wind project by 0.32 to 0.64 percentage points. In the analysis, this would reduce the levelised cost of electricity by around €2.20 to €4.30/MWh.
The analysis assumes that indexation would reduce cost risks between the tender and project commissioning, resulting in lower risk premiums for equity and debt financing.
The estimated €4.4 billion represents potential cost reductions for offshore wind projects tendered up to 2030 over their operating lifetime. It does not represent a direct saving for the German federal budget. The analysis does not include the cost of any potential transfer of risk to the state.
The BWO supports a CfD-only model with indexed strike prices, arguing that this would better reflect cost risks between tendering and commissioning.
