TotalEnergies, EnBW win offshore wind site for US$3.2 bn

French oil giant TotalEnergies and German utility provider EnBW, in an auction on Friday, won a 2.5 gigawatt (GW) German offshore wind site for US$3.2 billion, the country's energy regulator said.

The site includes two plots in the North Sea, about 120 kilometres northwest of Heligoland. TotalEnergies won a 1.5 GW site with a 1.96 billion euros (US$2.1 billion) pricetag, while EnBW won a 1.0 GW site at 1.07 billion euros (US$1.1 billion). 

Both companies must pay 10% to the German government within the next year, which will be allocated to marine conservation, TotalEnergies said. The company will also pay an annual contribution of 88 million euros to the electricity transmission system operator in charge of connecting the project for a term of 20 years starting from the commissioning of the site.

The planned wind farms are expected to start operations in 2031.

TotalEnergies and British peer BP won a similar auction last year which was perceived as evidence that fossil fuel companies seek to diversify their energy portfolios. TotalEnergies has set a goal of achieving net zero emissions by 2050. 

“With this additional offshore park, we are strengthening our entrepreneurial goal of making the energy transition more market-oriented: I am convinced that the available electricity volumes of this offshore park will again be met with great customer interest,” Peter Heydecker, head of sustainability at EnBW, said in a post on LinkedIn.  “For industry, the long-term green electricity purchase agreements (PPAs) are important components for the further decarbonisation of production processes on the way to their own climate neutrality.”

Experts say auctions have put pressure on wind power supply chains during a time when wholesale power markets in most of Europe’s key economies experienced zero or negative prices for a record number of hours in the first five months of 2024. 

Germany is no stranger to negative prices, given the country hosts Europe’s biggest capacity of volatile wind and solar power generation. However, this is the first year that Spain has seen negative solar prices following several years of growth. 

The negative pricing surge indicates a need for more energy storage across Europe, experts say. 

"Developers who choose not to co-locate their wind and solar PV power parks alongside battery storage or other sources of flexibility may see a drop in potential revenues during peak generation – hampering profits and discouraging investment," the International Energy Agency wrote in a recent annual report. 

The organisation estimates that energy storage in the bloc will need to increase by more than three-fold this decade to match projections of a 69% share of renewable energy in its electricity grid by then.