BP and TotalEnergies have emerged as the winners in a German offshore wind site auction worth €12.6 billion ($13.96 billion), indicating the growing appeal of renewable energy assets in Europe. This move comes as major oil companies in Europe aim to expand their low-carbon businesses by entering the renewables sector, traditionally dominated by utilities.
The auction, which involved a 7 GW offshore wind site, highlights the attractiveness of investing in offshore wind power in Germany. The president of Germany’s energy regulator, Klaus Mueller, called it an important step toward achieving a national offshore capacity goal of 30 GW by 2030.
The high price for the auction demonstrates the significant interest in European offshore wind sites from energy companies and developers. The auction included three sites located northwest of the island of Heligoland in the North Sea, and one in the Baltic Sea near the island of Ruegen.
BP secured the rights to develop two projects, marking its entry into offshore wind in continental Europe. These projects represent 4 GW of the total capacity. TotalEnergies, on the other hand, won the awards for the other two sites. This allows them to develop, build, and operate the plants, as well as receive network connections.
Both companies expressed their commitment to growing their presence in the renewable energy sector. TotalEnergies’ CEO, Patrick Pouyanne, stated that entering offshore wind power in Germany, Europe’s largest electricity market, is a crucial step in implementing their strategy to become a profitable player in the electricity markets.
The revenue from the auction will primarily be used to reduce electricity costs and implement marine protection measures. BP expects returns from the project to range between 6% and 8%, aligning with its integrated energy strategy and disciplined capital allocation.
Under the terms of the auction, BP will make initial payments totaling €678 million ($753 million) by July 2024. The remaining 90% of the bid amount will be paid over a 20-year period once the projects become operational. TotalEnergies also committed to paying the German Federal government €582 million ($647 million) and an annual contribution to the electricity transmission system operators for 20 years.
This development highlights the increasing focus of oil majors on renewable energy projects, as they seek to diversify their portfolios and adapt to a changing energy landscape. The successful acquisition of these offshore wind projects demonstrates their commitment to sustainability and reducing reliance on fossil fuels.
Germany’s push for offshore wind capacity expansion is part of its broader efforts to transition to a low-carbon economy and meet its renewable energy targets. The country aims to increase its offshore wind capacity to 30 GW by 2030, which will require significant investments in infrastructure and technology.
The winning bids by BP and TotalEnergies in the German auction represent a significant milestone in the transition to cleaner and more sustainable energy sources. By venturing into offshore wind, these oil majors are taking concrete steps towards a greener future and positioning themselves as significant players in the renewable energy sector. The success of the auction also underscores the strong interest from energy companies and developers in European offshore wind projects, further driving the growth of renewables across the continent.
