BP (LSE: BP) is committed to going ‘beyond petroleum’. Not only is the company planning on investing less on oil and gas in future decades, but also management is investing more in green energies such as offshore wind. Given management’s efforts, here is more on the company’s offshore wind investments and what I’d do given BP share price.
What is offshore wind?
Offshore wind energy is a form of renewable energy generated by wind turbines located offshore. Although the engineering needed to place wind turbines offshore can be pretty challenging, offshore wind has some key advantages versus traditional onshore wind turbines. Not only does offshore wind not use land, but also wind speeds offshore tend to be faster than onshore winds. With faster wind speeds come the potential for substantially more energy generation.
Offshore wind has substantial potential globally. According to estimates made by the Ocean Renewables Energy Action Coalition, offshore wind has the potential to power 10% of global electricity demand by 2050 while also saving billions of metric tons of carbon dioxide emissions annually.
BP and offshore wind
With the company’s background and financial strength, I reckon BP is pretty well suited for offshore wind. In the long run, I think the BP share price could benefit. Given its history of handling challenging engineering problems associated with offshore drilling, the oil giant has the engineering capacity to make offshore wind work in many cases.
As it stands, BP’s home country of the UK also has more installed offshore wind capacity than any other country. This gives the oil giant a front row seat on offshore wind’s potential and a potential growth market. Given the UK’s shoreline, the country has around 11 GW of installed capacity currently. The UK government plans to increase that offshore wind capacity to around 40 GW by 2030.
BP recently entered into the UK offshore wind market by partnering up with German company EnBW for two 60-year UK offshore wind leases that collectively could have 3GW of capacity. Previously, BP partnered up with Equinor to develop US offshore wind projects that have a potential generating capacity of 4.4GW.
BP share price: what I’d do
I think offshore wind could help BP achieve its greener goals faster. If the market remains bullish on green energies, I think management investing in offshore wind could help the stock. Given the current BP share price, I’d buy.
With this said, I reckon BP share price currently depends a lot on the price of oil. If oil prices decline substantially, BP won’t make as much profits and its stock could decline significantly. Given that making high returns on capital in green energy can be difficult, management will have a lot of work ahead.
Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.