BP is venturing into partnerships for offshore wind projects in Japan and contemplating investments in hydrogen technology companies, aiming to navigate challenges posed by inflation and logistical bottlenecks impacting the renewables sector.
Amidst the global shift away from fossil fuels, BP aims to substantially expand its presence in low carbon energy in the coming years, aiming for a sustainable business model. However, some investors have raised concerns about this strategy diverting BP’s focus from the potentially higher returns associated with oil and gas businesses, Reuters news report said.
Anja-Isabel Dotzenrath, head of BP’s renewables division, emphasized to Reuters the urgency of executing plans and highlighted Japan as a key market for growth, signaling the intent to seek partners there as part of the solution.
Recently, BP incurred a $540 million write-down on its wind power projects off the coast of New York, citing inflationary pressures and bureaucratic hurdles leading to projects exceeding budgets and timelines, echoing the broader challenges faced by the renewables industry globally.
The struggles aren’t unique to BP. Other industry leaders like Norway’s Equinor and Denmark’s Orsted faced impairments and project setbacks, attributing them to similar issues plaguing the renewables sector.
Dotzenrath underscored the necessity of cost reduction initiatives globally, acknowledging inflation as a prevalent issue. She outlined strategies involving optimized purchasing approaches and potential direct investments in the supply chain to alleviate these challenges.
In the offshore market, BP aims to establish three to five clusters of four to eight gigawatts each globally, with Japan emerging as a prime target. Dotzenrath emphasized the need for local partnerships in Japan, particularly with energy suppliers, as essential for navigating the intricate permitting processes and establishing onshore grid connections.
Additionally, BP is eyeing the hydrogen sector and is contemplating investments in technology manufacturers, potentially becoming an anchor investor in electrolyzer production facilities, even though BP doesn’t produce these units directly.
Dotzenrath highlighted Germany’s significance in the hydrogen market and did not rule out BP’s greater involvement in this space. Despite facing criticism for outbidding local energy giants in Germany’s offshore wind auctions, she defended the move, emphasizing the competitive nature of the industry.
BP has outlined plans to allocate a substantial portion of its investments between 2023 and 2030 — up to $65 billion — toward renewables, hydrogen, biofuels, and electric mobility, aiming to channel half of its investments into these sectors by the decade’s end, compared to 30 percent in 2022.