European oil majors BP and Equinor will partner up for the U.S. offshore wind market, marking BP's first substantial move into the offshore wind industry.

The deal will see BP paying $1.1 billion for a 50 percent stake in Equinor’s Empire Wind project off New York and its Beacon Wind project off southern New England.

The Empire Wind project, located in the region known as the New York Bight south of Long Island, already has an 816-megawatt contract with New York state and can hold up to 2 gigawatts. The project is scheduled for completion in 2024 and will help to jump-start New York's offshore wind supply chain.

The Beacon Wind zone, located south of Massachusetts and won in the most recent federal U.S. offshore wind lease auction, could host more than 2.4 gigawatts of capacity. That project is likely to still be going through permitting by the time Empire is delivering power to New York.

Norway's Equinor currently has 100 percent ownership of both leases and will serve as the operator of the projects through to the operations phase when staffing will eventually be shared.

In February BP announced a thinly detailed ambition to achieve net-zero emissions by 2050 under new CEO Bernard Looney. Next week, BP will host a series of capital market days, where it will continue to flesh out its strategy toward its 2050 net-zero target and its diversification away from fossil fuels.

BP has been widely expected to launch into offshore wind at some point. The oil giant's renewables efforts have thus far been spearheaded by its 50 percent ownership of solar developer Lightsource BP. The offshore wind deal with Equinor opens a new front in its clean energy strategy. BP is targeting 50 gigawatts of renewables by 2030.

Writing on LinkedIn, Looney said: "By leveraging [Equinor's] skills with our own expertise in areas like trading[,] we expect to be a great team. Especially as we look to develop more opportunities in the U.S. over time."

Although no formal announcement has been made, BP is expected to participate in the impending Scottish seabed auction for offshore wind sites and the 2021 U.K. contracts for difference auction that will award support for projects.

Equinor has stakes in around 1 gigawatt of operational offshore wind projects in the U.K. and Germany. Its development pipeline, when adjusted for the size of its stakes, totals 7.7 gigawatts across the U.S., U.K. and Poland.

Several European oil majors, including Total, Shell, Repsol and BP, have reinforced their climate targets and started laying out strategies to diversify into the power sector. Offshore wind is seen as a natural fit for them, given their marine engineering and operational expertise gained from offshore drilling, plus the scale of the individual project investments.

Shell has stakes in offshore wind projects in the U.S. and the Netherlands. Total has recently added projects in Scotland and South Korea. 

Equinor’s floating offshore wind edge

Equinor and BP “will consider future joint opportunities in the U.S. for both bottom-fixed and floating offshore wind,” according to an Equinor statement. Equinor has established an early leadership position in floating offshore wind.

Hywind Scotland, Equinor’s 30-megawatt floating pilot project, has been generating power since 2017. The project has notched up a capacity factor of 56 percent. The company is now developing the 88-megawatt Hywind Tampen project to power two of its offshore drilling operations in the North Sea.  

In an interview with GTM last year, Michael Wheeler, Equinor's principal strategist for North America, talked up the potential for floating wind in the U.S.

“What we’ve seen with Hywind that’s interesting and relevant for California is the really high capacity factors — we’re talking mid-50s [percent] here," Wheeler said. "That competes with, and is better than some, gas power plants.”

RWE and Mitsubishi recently acquired the University of Maine's floating wind demonstration project, which could get built as soon as 2023; it would be the first floating project in U.S. waters.

The big prize for U.S. floating wind, however, is California, where the technical potential exceeds 100 gigawatts, according to the National Renewable Energy Laboratory. The water depths off the California coast make conventional bottom-fixed foundations unusable.