German industry body urges CfD-only offshore wind auctions

A German industry body has asked for offshore wind auctions to run entirely on contracts for difference, Renewables Now reports. The model would put every megawatt-hour under a fixed strike price, with nothing left to the wholesale market.

For a project-finance desk, the appeal is immediate. A CfD turns revenue from a forecast into a contract. Lenders size debt against that contract rather than a merchant-price curve, which lowers borrowing costs and lets sponsors compete on engineering efficiency instead of market timing. The effect is to make offshore wind look like a utility asset, not a commodity trade.

The cost is just as immediate, though less visible. Under a pure CfD regime, the state becomes the residual risk-holder. When wholesale prices land below the strike price, the government pays the difference; when they land above, it collects the surplus. That obligation would run for the life of the assets — a budget line substituted for a power-price forecast. The trade-off is straightforward: developers gain certainty, the state gains exposure.

Bid dynamics would shift as well. With the revenue line standardized, auctions turn on cost per megawatt-hour and on delivery credibility: the proven ability to build on time and on budget. Sponsors with strong balance sheets and established supply chains hold the edge. What gets lost is flexibility — the option to structure hybrid CfD-plus-PPA deals that let developers hedge risk privately.

The identity of the industry body matters for the proposal's chances; a federation's weight is different from a single developer's. But the structural argument is hard to dismiss. A CfD-only auction simplifies the financing case for offshore wind and hands Berlin a large, open-ended obligation in exchange. The next tender will show whether the government wants to hold that risk, and at what number. It is a request that frames the next auction as a choice about who bears the merchant-price risk—and at what price.