BP enters UK offshore wind market with £900 million bet

BP is entering the UK offshore wind market, with the firm set to operate a series of wind farms in the Irish Sea that are capable of producing 3GW of electricity. 

In order to enter the offshore wind market in the UK, BP will need to invest a significant amount of money. That’s why it’s teaming up with Energie Baden-Wuerttemberg AG (EnBW) to ensure that it has the expertise in place to realise a return on its investment. 

The two companies will form a 50-50 joint venture to operate a set of two leases in the Irish Sea, which will cost the two companies around £924 million. The leases will last for a total of 60 years, with BP’s CEO noting that the development of these wind farms will deliver a minimum of 8-10% return on its investment. 

Bernard Looney, CEO of BP, noted, “These projects – in which we are teaming up with an experienced partner EnBW – are absolutely in line with our determination to invest with discipline into only the very best opportunities. We are fully confident that these highly advantaged resources will deliver – at a minimum – the 8-10% returns we demand of our renewables investments.

“Additionally – offshore wind is integral to delivering the UK’s green industrial revolution. Building on the UK’s strengths, the government’s 10-point plan aims to produce enough offshore wind to power every UK home, quadrupling output to 40GW by 2030 – and bp is delighted to play a part in this.”

Is BP paying too much?

BP is clearly bullish regarding its entry into the UK offshore wind market, but its investment is significantly larger than other firms who bid for leases as part of the Crown Estate Leasing Round 4.

Take Total for example, it’s spending just £83,000 a year in an annual option fee during the development phase of its 1.5GW offshore wind project. 

Despite the higher payment, BP is confident that it will represent a good investment on its part. It’s hoping that the wind farm projects will be operational in seven years, with their near-shore location allowing for lower cost, more reliable transmission infrastructure than some other projects.