In a significant move, British energy giant BP plans to divest its U.S. onshore wind energy business, BP Wind Energy. The decision marks a pivotal shift in the company’s renewable energy strategy, with the sale of its wind assets set to begin in autumn 2024. These assets, which span 10 operating onshore wind farms across seven U.S. states, represent a total net generating capacity of 1.3 GW. However, BP has determined that these assets no longer align with its growth objectives, particularly as it shifts focus towards solar energy through Lightsource BP, the company’s solar energy subsidiary.
This decision comes amidst a broader trend in the renewable energy sector, where rising material costs, high interest rates, and supply chain challenges have led to several offshore wind companies canceling or renegotiating power contracts for U.S. projects. The sale of BP's onshore wind assets could reflect the company’s response to these broader market conditions, signaling a strategic refocus on other renewable sectors that offer greater profitability.
BP's focus is now centered on Lightsource BP, Europe’s largest solar energy developer. In November 2023, BP announced its intent to take full ownership of the company, with the acquisition expected to be completed by the end of 2024. This move signals BP’s intention to scale its solar energy operations as part of a broader strategy to shift its renewable energy focus from wind to solar.
The strategic realignment under BP’s new CEO, Murray Auchincloss, reflects growing investor concerns over the company’s profitability in renewable energy. In June 2024, Auchincloss instituted a hiring freeze and halted new offshore wind projects, signaling a return to BP’s traditional oil and gas operations. This marks a significant departure from the path pursued by his predecessor, Bernard Looney, who had aimed to rapidly transition BP towards renewable energy, away from fossil fuels.
The divestment of BP's wind assets may also influence the broader renewable energy market. As BP shifts its focus, other companies may seize opportunities to invest in wind energy, potentially introducing new innovations and competition.
The pressure from investors to prioritize more profitable assets over riskier renewable investments has affected BP’s overall strategy. With oil and gas profits surging in the aftermath of the COVID-19 pandemic and the conflict in Ukraine, BP has struggled to deliver comparable returns from its renewable energy ventures.
While BP's wind divestment may seem like a step back from renewable energy, the company remains committed to its broader sustainability and net zero goals. BP aims to achieve net zero emissions across its operations (Scope 1 and 2) by 2050, with interim targets to reduce emissions by 20% by 2025 and 50% by 2030. The company also targets net zero emissions in its upstream oil and gas production by 2050 (Scope 3), aiming for a 10-15% reduction by 2025 and 20-30% by 2030.
BP’s divestment could be seen as a strategic simplification of its renewable portfolio, allowing the company to focus on high-value assets like solar energy. This shift toward solar may balance out the impact on BP’s renewable energy goals by bolstering its solar capacity, particularly as the company continues to invest in Lightsource BP's projects. For example, in August 2024, Lightsource BP and Contact Energy secured green financing for the Kōwhai Park solar farm in New Zealand.
Investor concerns have mounted regarding the return on investment from renewables, especially compared to the high profits seen in oil and gas. This has driven BP's decision to concentrate on sectors within renewables that show more promise for financial stability, such as solar energy, which is viewed as more scalable and reliable than wind in the current market climate.
The company’s overarching goal is to become a net zero company by 2050 or sooner. BP has outlined detailed plans to reduce methane emissions, invest in non-oil and gas technologies, and implement nature-based solutions to reduce carbon emissions. By 2023, BP aimed to install methane measurement systems at all major oil and gas processing sites and reduce methane intensity by 50%.
BP's commitment also extends beyond emissions reduction. The company seeks to improve people’s lives by providing access to energy and supporting a just energy transition. BP has emphasized diversity, equity, and inclusion (DEI) within its workforce, while also prioritizing the health and wellbeing of employees and communities. Its sustainability goals further include enhancing biodiversity in areas where the company operates, promoting effective water management, and investing in circular economy principles.
BP’s environmental and social responsibilities have been under scrutiny for years, particularly following notable controversies such as the 2010 Deepwater Horizon oil spill and the 2005 Texas City refinery explosion. The Deepwater Horizon disaster, which released nearly five million barrels of oil into the Gulf of Mexico, remains a dark chapter in BP's history, reminding the company of the critical importance of managing environmental risks. The refinery explosion in Texas City similarly highlighted the need for improved safety measures and operational transparency.
In recent years, BP has also faced criticism for its lobbying efforts against stricter climate regulations. However, the company has worked to rebuild its reputation by investing in cleaner energy solutions.
BP’s decision to divest its U.S. onshore wind energy business signifies a major pivot in the company’s renewable energy strategy, as it places greater emphasis on solar energy through Lightsource BP. This move reflects the complexities of balancing investor demands, profitability, and sustainability in a rapidly changing energy landscape. While wind energy has been a key component of BP’s renewable portfolio, the company’s shift toward solar could strengthen its position in the renewable energy sector, particularly as it works towards its ambitious net zero targets.
