German offshore wind CfD push: BWO tells Berlin to scrap two-stage tender model

Germany’s offshore wind trade association is pushing Berlin to make German offshore wind CfD support the default for every future auction round, not a fallback reserved for projects that cannot otherwise proceed. That distinction matters rather more than it might appear.

The Bundesverband Windenergie Offshore (BWO) set out its position in a formal response to proposed amendments to the WindSeeG legislation. The current government proposal would offer Contracts for Difference (CfDs) only when a project cannot proceed without them, a conditional, two-stage structure that BWO managing director Stefan Thimm says misses the point of the instrument entirely.

‘The two-sided CfD provides an instrument that reduces risks and facilitates the financing of offshore wind projects,’ Thimm said. ‘Therefore, it should become the standard in tenders. This creates greater planning certainty and increases the likelihood that the projects will actually be built.’

How German offshore wind CfD support was stripped from the original law

The context here is important. According to WindEurope, Parliament dropped the CfDs that were in the original WindSeeG proposal altogether. Pinsent Masons reports that the cancellation came at the insistence of the liberal Free Democrats. The result is that the sector is now lobbying to restore a mechanism it was briefly promised, then denied, in a legislative process that has left investors watching from the sidelines.

The stakes are not trivial. According to Taylor Wessing, annual tender volumes for offshore wind energy projects are in the order of up to 9,000 megawatts for the calendar years 2025 and 2026. Whether those volumes translate into real projects, rather than paper capacity, depends significantly on whether financing conditions are workable. That is precisely what BWO argues a universal CfD framework would improve.

Indexation gap leaves Germany trailing European peers

BWO’s submission goes further than simply calling for CfDs to become standard. The association has also urged the use of ‘appropriate indexation’ within those contracts, describing it as an ‘essential instrument for reducing risk premiums and increasing the likelihood of project realisation.’

The warning on this point is blunt. ‘The fact that Germany is the only European offshore wind market to forgo CfD indexation is a significant disadvantage for the competitiveness of the offshore wind industry,’ BWO said. Without indexation, long-term contracts become increasingly exposed to inflation and cost escalation, precisely the conditions that have driven project returns underwater in other markets over recent years. It is a reasonable concern, and one that several developers in the UK and elsewhere have already learned to their cost.

For projects already caught in limbo, BWO has asked the legislative reforms to include a ‘one-time, time-limited buyback option’ for schemes tendered between 2023 and 2025 that have not yet reached a final investment decision. Thimm framed this as a practical, not punitive, measure: ‘An orderly return mechanism creates clarity and opens up the opportunity to develop the sites with new investors. This is better than formally maintaining projects for years whose economic viability is not guaranteed. Such uncertainty harms the entire supply chain.’

The trade association did acknowledge some progress in Berlin’s revised plans. BWO welcomed the government’s commitment to maintaining a 70GW offshore expansion target by 2045, and expressed support for plans to extend the standard contract term to 35 years. Both are meaningful signals for long-horizon investment planning. Neither, BWO appears to be saying, is sufficient without the financing architecture to match.

The question now is whether Berlin will treat the CfD as a universal foundation or continue to reserve it as a last resort. For a market running tender volumes approaching 9,000 MW annually, the structural answer to that question will shape which projects reach financial close and which quietly expire on the grid map.