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12/10/2024
What does BP’s latest move in offshore wind mean for its renewable energy strategy? BP and Japanese power company JERA have announced a joint venture (JV) to create one of the world’s largest offshore wind operators. The deal signals a shift in BP’s approach to renewables, as it focuses on profitability while stepping back from aggressive green energy investments.
THE JOINT VENTURE: KEY DETAILS
The 50-50 JV, named JERA Nex bp, will combine assets and projects with a potential generation capacity of 13 gigawatts. BP and JERA will fund up to $5.8 billion in approved projects by 2030, with BP contributing $3.25 billion and JERA $2.55 billion.
This move places the JV among the world’s top five offshore wind operators, joining industry giants like Ørsted, Iberdrola, and RWE.
BP’S RENEWABLES RETREAT
Under CEO Murray Auchincloss, BP is pivoting to a “capital-light” approach in renewables, focusing on profitability and shareholder returns. Offshore wind, once a cornerstone of BP’s energy transition strategy under former CEO Bernard Looney, has faced mounting challenges, including soaring development costs, supply chain bottlenecks, and inflation.
Auchincloss’s strategy reflects a broader industry trend. Rivals like Shell and Equinor are also scaling back investments in offshore wind in favor of higher-return oil and gas projects.
“We need to grow into an electrifying world while maintaining a capital-light model for our shareholders,” Auchincloss said.
JERA’S STRATEGY: EXPANDING THROUGH PARTNERSHIP
JERA, co-owned by Tokyo Electric Power Company and Chubu Electric Power, entered the offshore wind sector in 2019. Its renewables arm, JERA Nex, operates wind farms in Europe, Asia, and Australia.
“We can’t grow alone,” said JERA CEO Yukio Kani. “We need scale, a diversified portfolio, and more capabilities. BP is the best choice for us.”
JERA Nex bp will be headquartered in London, with JERA recommending that Nathalie Oosterlinck, JERA Nex’s current CEO, lead the venture.
THE NUMBERS BEHIND THE PARTNERSHIP
- Generation Capacity: Initial contributions include 1 GW from operating wind farms, a pipeline of 7.5 GW in projects, and 4.5 GW in secured leases.
- Funding: BP will invest $3.25 billion, and JERA will contribute $2.55 billion by 2030.
- BP’s Offshore Wind Pipeline: 9.7 GW, focused in the British North Sea, Germany, and the U.S. East Coast.
- BP’s Stock: Up 3.4% after the announcement, but still down 16% year-to-date.
WHY THIS MATTERS
The partnership is significant for both companies and the broader offshore wind industry:
- For BP, the JV reflects its shift away from renewables as a core focus as it seeks to improve near-term profitability.
- For JERA: The collaboration boosts its scale and capabilities in offshore wind, helping it compete globally.
- For the Industry: Rising costs and slow returns in offshore wind are pushing companies to reevaluate their strategies.
WHAT’S NEXT?
BP and JERA's partnership, pending regulatory approvals, is expected to close by Q3 2025. As the offshore wind sector grapples with challenges, it represents a calculated effort to maintain a foothold while managing risks.
The big question: Can this joint venture successfully navigate the financial and geopolitical hurdles facing offshore wind? Time will tell.
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