BP will buy 9 gigawatts (GW) of solar power projects in the United States from 7X Energy for $220 million, as it seeks to boost renewable generation in a transition away from carbon.
The U.K.-based petroleum powerhouse says the new projects will help it move towards targets of 20 GW of renewables generating capacity by 2025.
BP outlined a new strategy last year that envisions a dramatic shift to renewable energy production. Under the strategy, the company will decrease oil production and sell off some oil and gas assets.
Traditional oil and gas companies are trying to hit a balanced transition into a low-carbon future. This has involved acquisitions of wind and solar projects, as well as positions in potential hydrogen production.
At the same time, oil and gas projects have traditionally been more profitable than renewables. So even as a transition is occurring, oil companies are likely to continue developing their most profitable assets.
BP, which was a pioneer in the development of petroleum as a fuel, has targeted 50 GW of renewables generation by 2030. The company expects the acquisition to generate returns of at least 8-10% and the deal to close in about a month’s time. BP’s renewables project pipeline currently stands at 23 GW.
“We’ll aim to integrate these projects with our existing onshore and offshore wind, natural gas, and trading and shipping businesses to give customers what they want – reliable, affordable and clean energy,” said BP America Chairman and President Dave Lawler.
The projects are spread across 12 U.S. states, with the largest portfolios in Texas and the Midwest.
U.S. President Joe Biden has pledged to continue to push renewables growth as a means to cut carbon emissions and fight global warming. The measures are also expected to deliver job growth and stimulate new industry.
U.K. Prime Minister Boris Johnson has expressed similar sentiments about developing renewables industries to claim competitive advantages in future sales of equipment and technology.
Amid this transition, oil majors like BP are picking their spots for low-risk entry into renewables. In this instance, the pipeline of projects is already in place. With both the UK and the United States on track to continue developing renewables, BP is likely to see its delivery-envisioned profit margins.
