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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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How Big Oil Hijacked Germany’s Multi-Billion-Dollar Offshore Wind Auction

  • BP secured leases at two North Sea sites off the coast of Helgoland with total generating potential of about four gigawatts, paying a total of $7.5 billion.
  •  TotalEnergies--through local subsidiaries--secured the other two sites for a total of  $6.5 billion.
  • The U.S. government is considering opening 30 million acres of the Gulf of Mexico near Texas and Louisiana to offshore wind energy projects.
Wind Power

European oil and gas supermajors BP Plc (NYSE:BP) and TotalEnergies (NYSE:TTE) have won all of the capacity on offer in Germany’s 7GW offshore wind auction, the country’s biggest in history. BP secured leases at two North Sea sites off the coast of Helgoland with total generating potential of about four gigawatts, paying a total of $7.5 billion. The new sites--BP's first offshore wind projects in Germany--will nearly double the company’s global offshore wind pipeline. Meanwhile, TotalEnergies--through local subsidiaries--secured the other two sites for a total of  $6.5 billion. Germany currently has 8.4GW of operational offshore wind capacity.

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

But not everyone is particularly pleased with these giant clean energy projects. Multiple bidders, including the winning bids, pledged to build without any subsidies or state support aka ‘‘negative bidding’’, thus triggering an additional “dynamic bidding procedure”. Negative bidding creates additional costs for offshore wind developers, which they pass on either to the supply chain, already struggling with inflation, or to the consumers, who are grappling with higher electricity prices and costs of living. Related: Future Of Oil Demand Is Brighter Than You’ve Been Told

Indeed, WindEurope has called for an end to financial bid auctions after BP’s and Total’s historic wins:

Crucially the European Union wants to strengthen its energy security with competitive and home-grown renewables. The EU needs as much new wind energy capacity as it can get, as fast as it can get it. All the money paid in negative bidding is money our companies cannot invest in other wind energy projects. European governments should therefore not follow the German example of negative bidding. For example the industrial capacity for the construction of wind turbines, foundations and the installation vessels. But investments are also needed in grids, ports and skilled workers. Negative bidding is unhelpful here. Companies along the wind energy supply chain will have to work with even tighter margins, as developers pass on the extra costs of negative bidding to them,”  the trade body said.

Gulf Of Mexico Gearing For Massive Offshore Wind Scheme

Back in the United States, the offshore wind sector is beginning to garner some serious attention after receiving more than its fair share of flak by the former president. Last year, the Biden administration outlined a range of clean energy initiatives, key among them plans to hold the largest-ever sale of offshore wind leases in U.S. history and accelerate the deployment of new power lines to transmit renewable electricity across the country.

At the center of the offshore push was the sale of six commercial leases in the New York Bight between Long Island and New Jersey, the most successful offshore wind lease auction in history. The 488,000 acres offshore wind lease auction fetched a record $4.37 billion from companies looking to develop the waters, with the installed capacity expected to be between 5.6 GW and 7 GW, enough to power 2 million homes. The Department of Energy also launched a Building a Better Grid initiative that will tap billions of dollars in funding from the $1T infrastructure law passed in November to finance new lines and grid upgrades.

Well, the Biden administration is planning to roll out a giant offshore wind project that will dwarf New York Bight. 

According to Politico, the U.S. government is considering opening 30 million acres of the Gulf of Mexico near Texas and Louisiana to offshore wind energy projects, part of Biden’s goal to build 30 gigawatts of wind power capacity by 2030, enough to power more than 10 million homes.

According to a report by the National Renewable Energy Laboratory (NREL), the U.S. will need more than 2,100 wind turbines, at least 2,100 foundations, more than 11,000 kilometers of cables and five wind turbine installation vessels to achieve its offshore wind energy target. Currently, the country has more than 70,000 existing wind turbines listed in continental U.S.

Perfect Fit

Though the Gulf’s waters haven’t sprouted any wind turbines yet, there are several reasons why the Gulf of Mexico is a perfect fit as an offshore wind hub.

First off, the Gulf Coast also has an abundance of companies and workers with decades of experience in producing energy offshore. According to the Energy Information Administration, Gulf of Mexico federal offshore oil production accounts for 15% of total U.S. crude oil production. Major fields include Eugene Island block 330 oil field, Atlantis Oil Field, and the Tiber oilfield (discovered 2009) while notable oil platforms include Baldpate, Bullwinkle, Mad Dog, Magnolia, Mars, Petronius, and Thunder Horse. 

“We have a really mature base for energy. We’ve got the know-how,” Lefton said. The people, the companies, the manufacturers that know how to do [Outer Continental Shelf] energy development are in the Gulf of Mexico,” the Interior Department’s Bureau of Ocean Energy Management director Amanda Lefton has told Politico.

According to Hayes Framme, government relations manager for North America at Danish wind giant Ørsted A/S (OTCPK:DNNGY), the Gulf’s existing oil and gas infrastructure represents “a historic expertise.”


One of the things that makes the Gulf area attractive is the fact that you’ve got a workforce that is accustomed to working on rigs in the ocean. It’s not like you have to build an industry. What you have to do here is basically help an existing industry evolve,’’ Dennis Arriola, CEO of the renewable energy company Avangrid Inc. (NYSE:AGR), has said.

Michael Hecht, the president and CEO of Greater New Orleans, says jobs in the Gulf’s traditional oil and gas industry have declined during the past decade, creating a sense of urgency to make a transition that allows people to retain their skills.

The Gulf could also become an important hydrogen hub, with wind power being used to generate green hydrogen to reduce greenhouse gas emissions from industries such as long-haul trucking, fertilizer manufacturing and aviation.

By Alex Kimani for Oilprice.com

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