The European Commission has approved a €5bn ($5.7bn) Danish scheme to support the buildout of offshore wind capacity, in a push to meet the European Union’s 2030 net-zero target.

The scheme, set to run for 20 years, will support the construction and operation of two offshore wind farms – Hesselø and North Sea I Mid.

The Hesselø wind farm is expected to have a capacity of at least 800MW and generate around 3.2TWh per year. The North Sea I Mid wind farm is expected to have a minimum capacity of 1GW and generate around 4.6TWh per year.

The combined annual production of these two wind farms will be equivalent to about 25% of Denmark’s total electricity production last year.

Under this scheme, the aid will take the form of a monthly variable premium under a two-way contract for difference. This will be calculated by comparing the bid price to a reference market price, weighted by the offshore wind farm’s monthly capability.

The beneficiaries will receive payments when the reference price is below this bid price. When the reference price is above the bid price, the beneficiaries will have to pay the Danish authorities.

“With this €5bn scheme, Denmark will be able to deploy offshore wind capacities faster, in line with the Clean Industrial Deal. It will also help Denmark and the EU reduce their dependence on fossil fuel imports and increase their share of renewable energy, while ensuring that any potential competition distortions are kept to a minimum,” said Teresa Ribera, EVP for Clean, Just, and Competitive Transition.