Client Story

Invenergy and energyRe

Winning a multi-billion dollar offshore wind auction

Picture the scene: you’re in a three-day online auction, bidding against other major energy companies from around the world. The prize on offer is a lease on which to build a gigawatt-scale offshore wind farm – enough to power 800,000 homes in the US – in the new, but fast-growing US market. Bidding is a complex process with multiple variables and decisions need to be made in a matter of minutes. How do you prepare for a high-pressure, high-stakes situation like this?

Invenergy and energyRe came to us as a consortium looking to better understand the market fundamentals, map its competitors, and prepare for the rigorous auction process. As a new entrant to the offshore wind market, it wasn’t an odds-on favourite to acquire a site.

Our offshore wind and auctions team has deep expertise in the global offshore wind market and a strong track record in helping major clients win these type of auctions. We leveraged our tried and tested approach, framework, models, and software to prepare a winning bidding strategy. And we guided the consortium through the auction, collaboratively setting up a war room and advising senior leaders at the same time.

The result? The consortium won one out of the six sites available against 14 other bidders including some of the biggest energy companies in the world. The lease was for an 84,000-acre area of seabed, with a price of $645 million. It was the site with the second-best wind characteristics according to TGS, and we helped the consortium win it at the second lowest price per acre in the auction.

By winning this first site, Invenergy and energyRe have gained entry and significant market share in one of the fastest growing sectors in the US and global energy transition.

Key successes

  • Supported a new market entrant to win an offshore wind farm site through a government auction.
  • Enabled Invenergy and energyRe to acquire a site at 20 percent lower price per acre than equivalent sites, paying roughly $140 million less than winners of equivalent sites.
  • Combined bespoke software, game theory, data management, and extensive market knowledge to prepare and succeed.

Setting the consortium up for auction success

Invenergy is a leading privately held, global developer and operator of sustainable energy solutions and is looking to grow its presence in the renewable energy market. By forming a consortium with energyRe – a developer of large-scale clean energy solutions – both organizations increased its chances of forming a winning bid.

Renewable energy is a growing market, and offshore wind offers opportunities for the development of large-scale energy resources. But because offshore wind projects are costly to build and project developers tend to be some of the largest energy companies in the world, the auction of prime sites off the coast of New York was set to be competitive. For the six sites up for sale, there were 20 entities registered to bid, so not everyone would walk away a winner. The right kind of preparation was vital.

Understanding the value of the sites and competitor dynamics

The first task was to understand the overall landscape the Invenergy and energyRe consortium was bidding in. The consortium needed to understand how others might bid strategically. The team made use of our expertise in the US energy markets and the global offshore wind market to analyze the fundamentals, exploring competitor site preferences, valuations, return requirements, and budgets. And we supported decision making by analyzing the likely demand and clearing price of each seabed lease area.

In these auctions, all bidders are looking for a competitive advantage. Our industry leading tools and insights provided this – helping the consortium secure a site at roughly $140 million less than winners of equivalent sites. Our structured and analytical approach to these auctions, bringing together our unique market knowledge, valuations and forecasting, systems thinking, game theory and competitive intelligence, all under one roof is helping our clients secure sites whilst retaining as much value as possible.”
Global Head of Auctions and Market Design, PA

Bringing software and analytics expertise to the table

We used our proprietary auctions simulations tool to understand likely auction outcomes and associated price levels. Our experts also created an auction management system that mirrored the platform the government would use to run the auction. This secure, cloud-based system was the sandbox to prepare and rehearse different scenarios with the consortium in advance and work with them to develop their auction strategy.

Accounting for the human element of the auction process

Understanding the human element was just as important as the technology. The team had to understand and agree pitfalls and opportunities in advance. So together with the consortium, we developed a playbook with resilient decision-making processes for each round of the auction, each day of the auction, and the auction as a whole. We set up war games and mock auctions, all in service of getting the right result during the process.

Supporting the consortium through the auction process

During the three-day auction itself, we set up a war room where we could sit with the consortium to guide them through the process. Our software played an important role; a bid tracking tool was used to analyze bidder behavior and how best to respond in subsequent rounds. But just as importantly, we were on hand to advise and guide round by round.

Equipping the consortium for future renewable site bids

Thanks to a combination of agile ways of working, bespoke software, and industry expertise, the consortium won one of the most favorable of the six sites available against 14 other bidders, including some of the biggest energy companies in the world. The site in question was secured at 20 percent lower price per acre than equivalent sites, meaning the consortium paid roughly $140 million less than winners of equivalent sites.

The opportunities within renewable energy are only going to grow and the consortium is now equipped with the knowledge, skills and experience to capitalize on these.

Working with the talented leadership team in the consortium, the PA team applied unique market knowledge, systems thinking, game theory, competitive intelligence, and advanced auction simulation models to not only win a site, but to acquire it at a 20 percent lower price per acre than equivalent sites.”
Global Head of Auctions and Market Design, PA

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