BP Sells It's U.S. Onshore Wind Business for $2 Billion

As Solar is Set to Triple Wind Capacity by 2035, BP Reshapes Its Renewable Portfolio

Table of Contents

• Why is BP Selling Its Wind Business?
• The Bigger Picture: BP's Evolving Energy Strategy
• What's Next for Wind Power in the U.S.?
• Challenges Facing Wind Energy

In a significant move, BP has announced its plan to sell its US-based onshore wind energy business, which marks another step in its evolving energy strategy. The decision comes as part of a broader realignment of BP’s renewable energy portfolio, particularly as it shifts focus toward solar and its joint venture with Lightsource BP, a solar energy developer.

Why is BP Selling Its Wind Business?

The onshore wind business, valued at ~$2 billion, includes wind farms spread across seven U.S. states. These wind assets generate about 1.7 gigawatts (GW) of power, with BP owning 1.3 GW of that total capacity. These assets have been operational and contribute clean energy to the grid. However, BP states that wind is no longer a core part of its future renewable plans.

Instead, BP intends to fully commit to Lightsource BP. With solar projects often easier and more cost-effective to develop, it’s no surprise that BP sees a larger potential here. In fact, solar energy is expected to account for nearly three times more new capacity than wind by 2035, according to Bloomberg.

According to William Lin, BP’s Executive Vice President for Gas & Low Carbon Energy, the wind business was no longer in sync with the company’s strategy. "We believe the business is likely to be of greater value for another owner," said Lin, indicating that BP’s onshore wind assets might be a more natural fit for a buyer looking to expand its footprint in the U.S. renewable sector.

The Bigger Picture: BP's Evolving Energy Strategy

BP’s decision is part of a broader shift. Under its new CEO, Murray Auchincloss, the company has been doubling down on its traditional oil and gas operations while also rethinking its approach to renewables. It’s a move that has drawn mixed reactions. Some investors have been concerned about the profitability of BP’s renewable energy projects, especially after the company reported lower-than-expected returns from clean energy investments over the past few years.

The market reflects these concerns. BP’s share price has fallen by over 20% in the last year, and analysts have pointed out that its $7 billion annual share buyback might not be sustainable beyond 2025. In this light, selling off the wind business could help BP raise the cash it needs to meet its financial targets while focusing on areas where it sees stronger growth potential.

What's Next for Wind Power in the U.S.?

The sale of BP’s U.S. onshore wind portfolio comes at a time when the wind industry itself has faced some headwinds—pun intended. High material costs, supply chain disruptions, and rising interest rates have slowed new wind installations in the U.S. by 26% in 2023. At the same time, solar energy continues to surge ahead, partly because it’s cheaper to develop and easier to get projects approved.

It’s worth noting that wind still plays a crucial role in the U.S. energy mix, accounting for about 10% of total power generation in 2023, compared to 4% from solar. However, solar is quickly gaining ground. Bloomberg projects that from 2024 to 2035, the U.S. will add 737 GW of new solar capacity, nearly three times the 199 GW expected for wind during the same period.

Challenges Facing Wind Energy

BP's decision to step back from onshore wind also highlights broader challenges facing the wind sector. In the past year, soaring material costs, higher interest rates, and supply chain disruptions have created significant headwinds for wind projects across the U.S. Several offshore wind companies have canceled or renegotiated power contracts, and even major manufacturers like Siemens Gamesa, Vestas, and GE Vernova have reported losses in their wind segments.

In 2023, new wind installations in the U.S. fell by 26% compared to the previous year, reflecting the economic pressures the industry is currently facing. These challenges have forced BP to reconsider its wind investments, especially in light of its struggles with U.S. offshore wind projects. The company wrote down the value of its offshore wind business by $1.1 billion last year after slow progress on several east coast projects. According to BP’s former renewables chief, Anja-Isabel Dotzenrath, "offshore wind in the U.S. is fundamentally broken".

BP’s decision to sell its U.S. onshore wind business is a clear reflection of the shifting priorities within the energy sector. While wind energy has faced economic and operational challenges, solar power is rising as a more reliable and cost-efficient renewable source. As BP continues to simplify its portfolio, it looks like solar will be the star of the show.

It will be interesting to see how this move impacts BP’s overall renewables footprint, especially as the world moves toward greener energy. But one thing is clear—BP is taking calculated steps to navigate its complex role in the energy transition, even if it means letting go of some wind along the way.