(Bloomberg) -- Oil major TotalEnergies SE and utility EnBW Energie Baden-Württemberg AG were winners in a German offshore wind auction that raked in €3 billion ($3.2 billion) for the government. 

TotalEnergies agreed to pay about €2 billion for the seabed rights to develop 1.5 gigawatts of capacity in the North Sea, with the remainder submitted by EnBW for a 1-gigawatt area, according to a statement from the Federal Network Agency. The wind farms are expected to be operational by 2031.

The results show the high costs involved in participating in Germany’s efforts to diversify its fuel supply, amid its exit from nuclear energy last year and its plan to phase out coal. The nation has relatively little offshore wind capacity and aims to more than triple it to 30 gigawatts by 2030.

However, some industrial groups have expressed concern that higher prices stemming from the auctions will be passed on to them.

EnBW plans to sell large parts of the electricity produced by the offshore wind farm in the future directly to industrial customers via power-purchase agreements, the company said in a statement Friday.

TotalEnergies is doubling down on German offshore wind as it sees prices being sustained over the long-term. Last year, the French major agreed to pay about €5.8 billion for two leases in the North and Baltic seas in what became Germany’s biggest wind auction and one of the most expensive worldwide.

In the most recent auction, it teamed up with RWE AG to form a bidding consortium, though the German utility has decided to bow out of the partnership.

“TotalEnergies will realize the project alone,” an RWE spokesperson said via email. “The bid amounts for the two areas are not compatible with our criteria for economic investments.”

Under the auction terms, TotalEnergies will pay 10% upfront, and the rest in annual payments spread over 20 years, starting from the commissioning date of the sites, the company said. It plans to benefit from synergies with its other project in the North Sea.

High Costs

TotalEnergies and EnBW will have to run their own site analyses, including an environmental review — which could be costly — as Germany hasn’t done its own investigation of the areas. Germany will use the proceeds from the auctions to reduce electricity costs of consumers and, to a lesser extent, promote marine nature conservation and environmentally friendly fishing. 

Some industry groups were quick to criticize the auction’s structure. 

“The tender design must finally be adapted and bid payments should be capped,” said Gerd Krieger, deputy managing director of engineering association VDMA Power Systems. “Cost-cutting pressure due to high bid components makes it difficult to invest in new capacities and jeopardizes the technological resilience of the wind industry in Europe.”

The power output of the windmills is expected to sink because of influence from ships and other wind parks, according to Stefan Thimm, managing director of the offshore wind group BWO. “The development of the areas tendered this year will be more expensive, because they are near a key shipping route,” he said at a press conference. 

The government is planning another auction on Aug. 1, with 5.5 gigawatts on offer in areas that have been investigated by the state.

--With assistance from Priscila Azevedo Rocha.

(Updates with auction details in ninth paragraph, industry group comment in penultimate.)

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