BP and TotalEnergies win German auctions with bids totaling EUR 12.6 billion for 7 GW offshore wind farms

Oil and gas majors BP and TotalEnergies will pay German authorities a total of EUR 12.6 billion for the right to build wind farms with a total capacity of 7 GW on four sites in the North and Baltic Seas. By making negative bids, the two companies won two lots apiece in the country's offshore wind auctions.

The selected bidders now have the authority to execute a planning approval procedure for the construction and operation of offshore wind facilities on the awarded locations, as well as to connect to the grid.

"The findings confirm the appeal of investing in offshore wind energy in Germany." Offshore wind power has never been more competitive. "The results are an important step towards meeting the offshore expansion target of 30 gigatonnes by 2030," said Klaus Müller, President of the Bundesnetzagentur, a regulatory authority.

The two companies, which won the rights to two lots each, stated that the investments will help them achieve their goals of becoming integrated energy companies.

As a result, BP paved the door for its first investments in wind energy in Continental Europe. It would be the company's first wind project in Germany. Two companies stated that the funding will help them achieve their goals of becoming integrated energy corporations.

BP wants to use the electricity generated by its proposed 4 GW wind farms to make green hydrogen and biofuels, power electric vehicle charging, and decarbonize its refineries. TotalEnergies stated that it would market the output from its projects, totaling 3 GW, either directly on the electricity market or through power purchase agreements (PPAs) with end-buyers.

According to Germany's energy regulator Bundesnetzagentur, a dynamic bidding mechanism was used for the first time. It was necessary, it maintained, because multiple bids of zero cents per kilowatt-hour had been entered in earlier auctions.

"When several zero cent bids have been made," the agency noted, "the purpose of a dynamic bidding procedure is to differentiate between bidders in a competitive environment."

A total of 90% of the auction revenues will be used to reduce electricity costs

The Bundesnetzagentur emphasised that 90% of the auction revenues would be used to reduce electricity costs, with 5% set aside for maritime nature conservation and supporting sustainable fishing.

Contributions for long-term marine conservation from each successful offer must be paid to the federal government within one year.

"The contributions for lowering electricity costs must be paid in equal annual installments to the transmission system operators (TSOs) required to connect the offshore wind farms over a period of 20 years beginning when a wind farm becomes operational from 2030 onwards," noted the regulator.

BP estimates that the initial payments of EUR 678 million, or 10% of the bid amounts, will be made by July 2024. When the projects are completed in the next decade, the remaining 90% will be paid over a 20-year period.

The commissioning of the wind farms is planned by 2030

TotalEnergies announced a EUR 582 million payment to the German federal government for maritime environmental conservation and the development of environmentally friendly fishing. The corporation also stated that an annual payment will be given to the power transmission system operators in charge of linking the projects over a 20-year period beginning with the facility's commissioning.

The fixed-bottom offshore wind projects will be developed, built, and operated by BP, with grid connection expected by the end of 2030. Its global offshore wind pipeline has grown to 9.2 GW.

TotalEnergies' next step will be to do the necessary investigations and technical analyses on the sites in order to get environmental permissions. It intends to make investment decisions in 2027 and to put the offshore wind farms online by the end of the decade. The company is building an offshore wind portfolio with a capacity of more than 13 GW.

BP’s expected returns for the planned wind farms are 6% to 8%

According to Anja-Isabel Dotzenrath, BP's executive vice president for gas and low-carbon energy, the projects awarded are a significant milestone for the company's decarbonization goals in Germany and a strong reflection of its overall strategy.

"The renewable power we intend to generate will anchor the significant demand we expect for green electrons for our German operations, from a wide range of products and services such as green hydrogen and biofuels production, electric mobility growth, and refinery decarbonization," she said.

TotalEnergies' debut into offshore wind power in Germany, Europe's largest electricity market, is a critical step in the company's plan to become an integrated profitable player in the electricity markets, according to Patrick Pouyanné, chairman and CEO.