The encyclopedia · Finance & Accounting · Financial decision · 2023
Germany auctioned offshore wind sites and oil majors paid €12.6bn for them
Germany's 2023 offshore wind auction inverted the subsidy model: BP and TotalEnergies bid €12.6bn to pay the state for 7 GW of sites.
BP · TotalEnergies · Bundesnetzagentur
the move
Germany's 2023 auction for 7 GW of offshore wind sites was the first in the country where developers paid the state instead of receiving subsidies. BP and TotalEnergies won the four sites in the North and Baltic seas with a record €12.6bn in bids.
The mechanism was an electronic clock auction: offers started at €30,000 per MWh and rose in steps as long as all bidders stayed in; once bidders dropped out, increments fell to €15,000. Winners paid between €1.56m and €2.07m per MW.
90% of the proceeds goes to cutting grid fees, with the rest funding marine-environment protection and sustainable fishing. The regulator called it proof that offshore wind competition had never been stronger; industry groups warned the entry fees favoured oil majors and could be passed on to consumers.
why it works
- Dynamic bidding let the price rise until the marginal bidder dropped out.
- Winning bidders internalise the value of guaranteed grid-connection rights.
- Revenue is earmarked for grid costs, turning the auction into a public good.
- Zero-subsidy commitments made state support unnecessary.
what transfers
When demand for a resource outruns supply, keep the auction open-ended: letting bidders raise the price until they drop out extracts the scarcity value instead of leaving it on the table.
what came after
The €12.6bn result reshaped German offshore policy: later tenders copied the pay-the-state model, and the proceeds helped fund the grid expansion needed for the 30 GW-by-2030 target. Critics continued to warn that only deep-pocketed oil companies can now compete.
references
- Oil majors pay €13-bln entry fee in 'quantum leap' for offshore wind energy
- How Big Oil Won the Bidding for German Offshore Wind Sites
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