Renewables

BP, TotalEnergies win German auctions with EUR 12.6 billion in bids for offshore wind farms of 7 GW

bp totalenergies auctions germany offshore wind

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Published

July 13, 2023

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Published:

July 13, 2023

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Oil and gas majors BP and TotalEnergies will pay a combined EUR 12.6 billion to German authorities for the rights to build wind farms with a total capacity of 7 GW on four sites in the North Sea and Baltic Sea. The two companies won two lots each in the country’s offshore wind auctions by submitting negative bids.

The successful bidders now have a right to conduct a planning approval procedure for constructing and operating offshore wind installations on the awarded sites and to grid connections.

“The results confirm the attractiveness of investing in offshore wind energy in Germany. 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,” said Klaus Müller, President of the Bundesnetzagentur (Federal Network Agency), a regulatory body.

The two companies, which won the rights for two lots each, said the investments would support their strategies to become integrated energy companies

BP therefore opened the way for its first investments in wind power in Continental Europe. It would be TotalEnergies’ first wind projects in Germany. Two companies said the investments would support their strategies to become integrated energy companies.

BP intends to use the electricity produced in its planned wind farms, with an overall capacity of 4 GW, to produce green hydrogen and biofuels, power electric vehicles charging, and decarbonize its refineries. TotalEnergies said it would market the output from its projects, of 3 GW in total, by itself, either by selling it directly on the electricity market, or by entering into power purchase agreements (PPAs) with end-buyers.

Germany’s energy regulator Bundesnetzagentur said a dynamic bidding procedure was conducted for the first time. It was needed because several bids of zero cents per kilowatt-hour had been submitted in previous auctions, it argued.

“The purpose of a dynamic bidding procedure is to differentiate between bidders in a competitive environment when several zero cent bids have been made,” the regulator explained.

A total of 90% of the proceeds from the auctions will go towards bringing down electricity costs

Bundesnetzagentur stressed a total of 90% of the proceeds from the auctions would go towards bringing down electricity costs, and that it earmarked 5% each for marine nature conservation and promoting sustainable fishing.

The contributions for sustainable marine conservation from each of the successful bids must be paid to the federal budget 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,” the regulator explained.

According to BP, the initial payments totaling EUR 678 million, equivalent to 10% of the bid amounts, will be paid by July 2024. The remaining 90% will be paid over a 20-year period when the projects become operational in the next decade.

The commissioning of the wind farms is planned by 2030

TotalEnergies said it would pay the German federal government EUR 582 million for the conservation of the marine environment and the promotion of environmentally friendly fishing. An annual contribution will also be paid to the electricity transmission system operators in charge of connecting the projects over a period of 20 years from the commissioning of the facilities, the company added.

BP will lead the development, construction, and operations of the fixed-bottom offshore wind projects, with grid connection targeted by the end of 2030. Its global offshore wind pipeline now totals up to 9.2 GW.

The next step for TotalEnergies will be to carry out the studies required to obtain environmental permits and perform technical analyses on the sites. It plans to reach investment decisions in 2027 and commission the offshore wind parks by the end of the decade.

The company is developing a portfolio of offshore wind projects with a more than 13 GW capacity.

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

Anja-Isabel Dotzenrath, BP’s executive vice president for gas and low-carbon energy, said the awarded projects are a huge milestone for the company’s decarbonization plans in Germany and are a strong reflection of its wider strategy.

“The renewable power we aim to produce will anchor the significant demand we expect for green electrons for our German operations, from a whole host of products and services including green hydrogen and biofuels production, electric mobility growth, and refinery decarbonization,”, she stressed.

BP said it expects returns from the planned wind farms to be 6% to 8%.

According to Patrick Pouyanné, chairman and CEO of TotalEnergies, the firm’s entry into offshore wind power in Germany, Europe’s largest electricity market, is a key step in the implementation of the company’s strategy to become an integrated profitable player in the electricity markets.

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