Oil giants' multi-billion-euro German negative bids 'fuel offshore wind profits squeeze'
Wind groups unanimous in rejection of 'dynamic bidding process' in 7GW tender won by BP and TotalEnergies at massive cost of $14bn
While welcoming the healthy appetite for offshore acreage in Germany’s biggest-ever wind power tender, wind groups were unanimous in their rejection of the ‘negative bidding’ that led to record revenues for the German state.
“The bid values show that offshore wind energy can drastically reduce the costs of power generation in Germany,” said Dennis Rendschmidt, managing director of VDMA Power Systems, a group representing wind manufacturers.
“However, the bidding component and the dynamic bidding process in the tender design leave too little scope for earnings in the manufacturing offshore wind industry.
“They have to make significant investments in ramping up capacities in order to achieve the ambitious expansion targets in Germany, Europe and worldwide.”
Equinor after the tender outcome confirmed that despite its reservations against negative bidding, the Norwegian oil giant did participate in the German offshore auction.
German offshore operators were also concerned.
“The high negative bid component puts additional pressure on the value chain,” said Stefan Thimm, managing director of the German federation of offshore wind operators (BWO).
“We need, however, appropriate framework conditions to remove the foreseeable bottlenecks in the value chain, such as industrial capacity for the construction of wind turbines, foundations and the installation vessels needed for them."
Industry lobby WindEurope stressed that additional costs for offshore wind developers through billion-euro lease prices must be passed on either to the supply chain – which is already struggling with inflation and surging input costs – or to consumers who already face higher power prices and cost of living.
“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,” WindEurope said in a statement.
For a timely delivery of the four North and Baltic Sea projects allocated Wednesday (which are scheduled for commissioning by 2030), Germany needs to expand its wind supply chain, WindEurope stressed, for example the industrial capacity for the construction of wind turbines, foundations and installation vessels, as well as 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 group said.
The success of BP and Totalenergies in the tender also confirmed earlier industry concerns that only big corporations with very deep pockets – such as oil and gas majors – can set aside enough money for very expensive offshore wind leases if negative bidding is uncapped.