Danish wind turbine giant Vestas announced back-to-back subsidy-free projects in Denmark and the U.K., as purely merchant wind spreads across Europe. 

Denmark’s first subsidy-free utility-scale wind farm, developed by Hirtshals Havnefond, will comprise four V136-4.2-megawatt turbines on the waterfront in the Port of Hirtshals in the northwest of the country, Vestas said in a press statement.

Hirtshals Havnefond will sell the output from the wind farm to Energi Danmark, a leading energy trading group in Northern Europe, under what Vestas said was a short-term power-purchase agreement (PPA).

The combination of the PPA, the site’s strong wind conditions and Vestas' technology enabled the wind park to be financed on merchant market terms, the turbine supplier said. The project is due for commissioning in the fourth quarter of this year, with Hirtshals Havnefond offering shares in one of the turbines to local citizens and institutions.

Denmark's first subsidy-free project follows the country's November 2018 technology-neutral auction that saw record-low subsidies being offered for wind.

While such auctions will play an important role in Denmark's energy transition, the subsidy-free order "shows that onshore wind [has] now reached a point where projects also are possible on market terms if we can put up the newest technology," said Morten Dyrholm, Vestas global senior vice president for marketing, communications and public affairs.

Separately, Vestas announced a subsidy-free project in the U.K., that country's first standalone merchant wind park to be built without any direct financial support. The 47-megawatt Douglas West Wind Farm in Scotland will be owned by Greencoat U.K. Wind, the renewable infrastructure fund.

Offshore market leading the way

Subsidy-free wind power is spreading rapidly across Europe, as renewable energy is increasingly forced to compete in power auctions and corporations step up to sign PPAs.

Zero-subsidy offshore wind projects have been in development in Germany since 2017, when utility EnBW and Dong Energy (now Ørsted) opted to go without subsidies for plants due to come online by 2025.

The companies dispensed with subsidies as a way of overcoming intense competition for offshore licenses, anticipating rapid reductions in wind's levelized cost of energy and factoring in the German government's willingness to absorb grid connection costs.

And a year ago, Swedish developer Vattenfall won a tender to build up to 750 megawatts of subsidy-free offshore wind capacity in the Netherlands, with commissioning in 2022.

While analysts believe such bids are likely to remain restricted to markets where offshore wind development risk is very low, such as where the government pays for the grid connection, developers have also started to dispense with subsidies onshore.

In May last year, German developer Energiekontor announced it had reached financial close on a project in Yorkshire, northeast England, with a corporate PPA instead of subsidies.

Resorting to corporate PPAs has become increasingly commonplace in Europe, with Daimler in January looking to source electricity from German wind farms after 2020 and Vestas supplying Finland’s first subsidy-free project in November last year.

Subsidy-free wind’s spread across Europe echoes that of solar, which in the last year has progressed from Southern European markets northward to Britain and Germany.