Oil Majors’ Commitment to Net-Zero Emissions Leads to Investments in Wind Energy

Liskow & Lewis

U.S. and European major oil companies are beginning to re-evaluate their business structure and investment strategies in light of the current financial, legal, and social climate. In response, the industry is seeing a varying degree of investments in renewable energy and commitments to climate-related goals.  As companies make this transition into renewable energy, one sector picking up speed is wind energy.

BP, which rebranded itself as “Beyond Petroleum” in 2000, announced in February of this year its plans of becoming a net-zero emissions company by 2050. In August, BP set forth its strategy towards net-zero emissions, which includes plans to have 50 gigawatts of renewable generating capacity by 2030, up from the 2.5 gigawatts it currently has.

Similarly, in April of this year, Royal Dutch Shell (Shell) announced its goal to be a net-zero emissions energy business by 2050 or sooner. In September, Shell announced a reinforced partnership with Microsoft, which provides for various carbon reduction initiatives. In the same month, Shell came out with a report setting forth several action items to achieve net-zero emissions in the shipping sector.

As these companies are moving towards clean energy, an emerging source of renewable energy is wind power. The wind energy sector is gaining global traction, as exemplified by U.K. Prime Minister Boris Johnson’s statement, in a speech given this month, that wind energy would be powering every home in the U.K. within the next ten years.

Indeed, wind energy is one of the fastest growing energy sources in the world and is creating many jobs in the United States. According to the Department of Energy, the U.S. wind sector employs more than 100,000 workers, with the potential to support more than 600,000 jobs by 2050. It is also one of the lowest priced energy sources available, costing 1-2 cents per kilowatt-hour. Given the advantages and opportunities, oil companies are investing in wind power as they move into the realm of renewable energy.

With respect to current operations, BP and Shell boast the more extensive footprints in the wind energy sector. BP operates nine onshore wind farms in Colorado, Idaho, Indiana, Kansas, Pennsylvania and South Dakota in addition to holding an interest in a wind facility in Hawaii. BP’s wind farms generate enough energy to power anywhere from 5,600 to 160,000 homes each year. In September of this year, BP entered the offshore wind market when it announced a $1.1 billion deal to buy 50% stakes in two U.S. developments from Norway’s Equinor with the possibility of future joint expansion.

Shell currently owns and operates one onshore wind farm in Fluvanna, Texas, in addition to co-owning three onshore wind farms with U.S. renewables company, Terra-Gen, in Wyoming and California. Each project can generate enough energy to power anywhere from 12,000 to 48,000 homes. Shell is also engaged in three offshore wind ventures – two in development stages, one currently operational – located off the Dutch coast, and two offshore wind ventures in the development stages off the New Jersey and Massachusetts coasts.

Other oil majors such as Chevron and ExxonMobil also have begun to participate in the renewable energy sector. Currently, Chevron operates the Casper Wind Farm in Wyoming, a former refinery, which was commissioned in 2009 and can produce enough electricity to power approximately 13,000 U.S. homes for a year. In 2018, ExxonMobil agreed to buy 500 megawatts of wind and solar power from Ørsted in Texas and, at the beginning of this year, Ørsted’s 338-megawatt Sage Draw wind farm in West Texas came online pursuant to that agreement.

Evidenced by these investments, wind farms are growing both onshore and offshore. Recent studies show that the Gulf of Mexico is prime for an offshore wind farm. According to the Offshore Wind in the U.S. Gulf of Mexico: Regional Economic Modeling & Site-Specific Analyses study, construction of a 600 MW wind energy project in the Gulf of Mexico could create 4,470 jobs and $445 million in gross domestic product.[1] During the operational stage, it would create approximately 150 jobs and $14 million annually. As time progresses, we will likely see more investments from oil companies in the wind energy sector, including in Gulf of Mexico wind farms, along with other areas of renewable energy.

[1] https://www.evwind.es/2020/05/05/600-mw-offshore-wind-energy-in-gulf-of-mexico-would-bring-4470-jobs/74630

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