BP is exploring ways to reduce soaring costs in the renewables sector by considering potential investments in the supply chain and development partnerships, the supermajor’s renewables business chief has told Reuters.
The energy giant, which plans to boost its renewables energy business, is weighing potential partnerships in offshore wind in Japan and investments in technology companies building green hydrogen electrolyzer plants, Anja-Isabel Dotzenrath, Executive Vice President of Gas and Low Carbon Energy at BP, told Reuters.
“We are also trying to reduce costs in other regions using various levers, for example through optimised purchasing strategies, which may also lead us to invest directly in the supply chain,” the executive said.
BP is also looking to form partnerships or invest in a technology manufacturer in the hydrogen business where collaboration could be essential to overcoming bottlenecks and reducing costs, Dotzenrath added.
Earlier this month, BP’s renewables business chief said at the FT Energy Transition summit that the U.S. offshore wind industry is “fundamentally broken” and needs a reset.
But the regulatory and permitting environment for the industry can be fixed, Dotzenrath said on the conference, as carried by Reuters.
Currently, the U.S. regulatory environment is challenging for developers due to a lack of mechanisms to adjust for inflation, permitting issues, and a lag between the signing of the power purchase agreement and the construction of the projects, according to BP’s green energy boss.
BP itself booked a pre-tax impairment charge of $540 million in the third quarter related to U.S. offshore wind projects.
BP and Equinor’s filing to renegotiate the power purchase agreements associated with the Empire Wind 1 and 2 and Beacon Wind 1 wind farms off the coast of New York was rejected last month.
“Equinor and BP are assessing the impact of the decision on these projects and future development plans,” BP said.
Ørsted, the world’s biggest offshore wind developer, added insult to injury for the industry, saying it would cease the development of two offshore wind projects in the United States due to supply chain delays, higher interest rates, and changed project assumptions including tax credit monetization and the timing and likelihood of final construction permits.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com