bp announced on Thursday that it plans to enter the offshore wind industry through a partnership with Norway's Equinor, which has offshore wind farms in the U.K. and Germany and more under construction in the North Sea, Baltic Sea and off the U.S. east coast.
The companies plan to develop four generation assets off the coast of New York and Massachusetts, with bp paying $1.1 billion for a 50% interest in two offshore wind farms near Long Island and Nantucket.
The bp-Equinor partnership is part of a broader trend of legacy energy companies moving into offshore wind ahead of a likely growth spurt, according to Walter Musial, a principal engineer who leads offshore wind research at the National Renewable Energy Laboratory.
Although Equinor says the partnership will help the Norwegian company "de-risk" its offshore wind assets, Musial said the move "isn't risky at all" for bp.
"It's a logical step they need to take to get into an emerging U.S. market," he said.
Offshore wind is still an emerging industry in the U.S., and has a long way to go before it meets its own goals, Musial said. But offshore wind has also reached a critical turning point in the U.S. There is now a clear path forward for both investors and regulators, and growth in the industry is likely to accelerate in the years to come.
The U.S. regulatory system "is now mature enough to issue leases, collect revenue and manage those leases," Musial said. On top of this, costs have come down to the point that prices in the U.S. are now in line with similar projects in the European Union — low enough to inspire investment, according to Musial. And state-level policies are increasingly looking to offshore wind as a means of achieving desired renewable energy portfolios.
"On many fronts, a critical mass is forming to help this industry grow," Musial said. "That's where I see this as an opportunity to become part of the group that has a path forward to putting projects in U.S. water."
This merger is evidence that bp plans to make good on promises to integrate renewable energy into its business model, Musial said. But bp is far from the only legacy energy company making the leap to offshore wind, according to Laura Morton, senior director of offshore wind policy and regulatory affairs for the American Wind Energy Association.
"bp's entrance into the offshore wind market is yet another example of a traditional energy major embracing the significant potential of this clean electricity source to boost the company's bottom line, while delivering clean, affordable power to American consumers and launching a brand new energy industry in the U.S," she said.