In 2023, the German government ran its first offshore wind auction based on a dynamic auction design. Germany asked developers to reveal their willingness to pay for the right to develop non-subsidized offshore wind farms. With a tender volume of 7 GW, this was one of the largest European offshore wind tenders to date.

The auction represented a critical moment for energy companies to secure access to offshore wind sites in a market considered highly attractive due to a stable regulatory framework and the availability of significant industrial demand for industrial power purchase agreements. At the same time, it put the new German tender system introduced in 2022 to its first test.

NERA was selected to provide a regulatory assessment, develop a competitor valuation model, and design the bid strategy for one of the biggest players in the auction. The client wanted to ensure it understood the full implications of the market structure, regulatory framework, and auction rules to develop a robust strategy tailored to its goals.

Our role included an analysis of the incentives set by the regulatory framework and a comprehensive competitor analysis. We also undertook extensive qualitative and quantitative competitor analyses and developed a financial model to estimate competitors’ potential bid values. Finally, we developed a playbook setting out macro and micro bid strategy. The bid strategy development relied on the identification of optimal bid levels, running mock auctions (also known as “war gaming”), and continued updates to the valuation model with new information as it became available.

NERA’s support prepared our client for assessing its optimal course of action in what turned out to be a groundbreaking, drawn out, and high-grossing auction.