BP, TotalEnergies Scoop Up German Offshore Wind Leases in $14B Auction

BP offshore wind farm — Image courtesy BP

Germany has pulled in bids totaling $14 billion from an auction of about seven gigawatts of offshore wind development rights in the North Sea and the Baltic.

BP and TotalEnergies emerged as the big winners. BP secured leases at two North Sea sites off the coast of Helgoland, paying a total of $7.5 billion. According to BP, these locations have total generating potential of about four gigawatts. They nearly double BP's global offshore wind pipeline, and once permitted and built out, they will be BP's first offshore wind projects in Germany. TotalEnergies secured the other two sites (through local subsidiaries) for a total of $6.5 billion.

“These awards are a huge milestone for BP's decarbonization plans in Germany and are a strong reflection of our wider strategy," said Anja-Isabel Dotzenrath, BP's EVP for gas and low-carbon energy. "The renewable power we aim to produce will anchor the significant demand we expect for green electrons for our German operations."

Addressing the financial prospects of the projects - an important consideration in a changing offshore wind market - Dotzenrath said that BP expects returns of 6-8 percent, in line with its plans for renewables. Additional value may be realized by integrating the power output from the wind farms with other projects in the German market (like green hydrogen production and the decarbonization of refineries).

"The results confirm the attractiveness of investing in offshore wind energy in Germany," said Klaus Müller, President of the Bundesnetzagentur. "Competition in offshore wind power has never been so high. The results are a key step towards achieving the offshore expansion target of 30 gigawatts by 2030."

For the first time, German power network regulator Bundesnetzagentur used a "dynamic bidding procedure" for the auction. It received so many zero-subsidy bids for the sites that it activated a procedure for competitive negative-subsidy (paid) bids. This multiple-round online auction extended over the course of several days, and the bidding took 72 rounds for the most in-demand Baltic site.

"The results confirm the attractiveness of investing in offshore wind energy in Germany," said Klaus Müller, president of the Bundesnetzagentur. "Competition in offshore wind power has never been so high. The results are a key step towards achieving the offshore expansion target of 30 gigawatts by 2030."

90 percent of the proceeds from the offshore wind power auctions will go towards subsidizing electricity costs, plus five percent each towards marine nature conservation and promoting sustainable fishing. The electrical cost subsidy portion may be paid out over 20 years.