Equinor’s offshore wind developments along the U.S. East Coast may just be the start of its expansion into the country’s renewables market.
The Norwegian oil giant has been evaluating potential onshore renewables investments in the U.S., according to Michael Wheeler, the company’s principal strategist for North America. And in floating offshore wind, where Equinor is the global leader, California beckons as a future market.
“We've been screening the U.S. renewables market for some time now, all the way from the Northeast to Texas,” Wheeler said recently at GTM’s Power & Renewables Summit in Austin.
“There are synergies when it comes to renewables and oil and gas companies,” he said. “We have a lot of regulatory personnel [in the U.S.]; we have a trading organization, so we’re not afraid of a merchant future.”
European utility and oil companies have a long history in the U.S. onshore wind market, and many are playing a larger role in solar.
BP, EDF and Iberdrola’s Avangrid are among the largest owners within the country's 100-gigawatt onshore wind fleet. Shell is the largest shareholder in Nashville-based solar developer Silicon Ranch, and this week Ørsted announced a 460-megawatt solar-plus-storage project in Texas.
Equinor’s foray into onshore renewables has been far more modest by comparison; last year it acquired a minority stake in developer Scatec Solar, and it has invested in a few projects in Latin America. Those deals may be the start of something bigger.
“I think there is a future in onshore renewables for Equinor; I just can’t tell you when that is yet," Wheeler said.
The bottom line
In the meantime, Equinor is not holding back in the offshore wind arena, likely to remain its primary avenue for renewables growth.
The company has been steadily growing its investments in European offshore wind projects for nearly a decade, but the past few years have seen it blossom into one of the global market's most important developers.
Many oil companies are wrestling with whether they can invest in renewables while convincing shareholders they're maximizing profits. That debate has been laid to rest within Equinor, which is two-thirds owned by the Norwegian government and hauled in $80 billion of revenue last year.
"Bottom line: Equinor thinks they can make a lot of money doing this," Wheeler said of offshore wind.
He pointed to a deal last month that will see Equinor selling a 25 percent stake in the 385-megawatt Arkona wind farm off Germany to Credit Suisse funds for €500 million ($550 million).
“The 25 percent equity we sold paid for our own initial investment,” Wheeler said, with Equinor to retain ownership of another quarter stake in the recently completed project.
"Maybe oil and gas companies aren't truly making as much money as we think they are, if you think about things like shale full-cycle returns," he said. "And maybe renewables-focused companies are making more money than we think they are."
In September, Equinor and partner SSE won contracts to build 3.6 gigawatts of offshore wind farms off the U.K., the world’s largest such development. That same month Equinor signed a memorandum with China Power International to cooperate on offshore wind projects in China and Europe.
In the U.S., meanwhile, Equinor has spent nearly $180 million over the past few years securing the rights to two large development zones facing New York and Massachusetts. Its bet on New York paid off this summer when it won a contract for an 816-megawatt project — Empire Wind — that will deliver power into New York City starting in 2024.
Looking deeper into the 2020s, Equinor is expecting big things from floating wind farms, a technology domain in which it is the established early global leader.
“The prize for floating offshore wind is huge,” Wheeler said, highlighting estimates that 80 percent of the world’s offshore wind resource is located in waters too deep for conventional bottom-fixed turbine foundations.
Equinor built the world's first and only existing large-scale floating wind farm, Hywind, off Scotland several years ago. Last month it pulled the financial trigger on its next such project, three times larger and known as Hywind Tampen, which will feed power to oil and gas platforms off Norway's coast.
“You’ll see us do more of this — 200 megawatts, 400 megawatts — in the mid-2020s,” Wheeler said. “You should expect floating wind to be fully scalable by the end of next decade.”
The Gulf of Mexico is not a particularly good bet for offshore wind, Wheeler said, given the abundance of cheap natural gas and onshore renewables in the adjacent power markets. But California is another story.
Equinor is one of more than a dozen developers known to be interested in building floating wind farms off California’s coast. A competitive lease auction is expected next year; Equinor has come out a winner in two of the last three such auctions in the U.S.
The cost of floating wind farms will need to fall dramatically before they can compete in California. But the combination of the state's 100 percent clean-energy mandate for 2045, its solar "duck curve" challenge, and the difficulty of building in-state onshore wind farms, has developers excited about the offshore market.
The water depths off California's coast will necessitate floating turbines, potentially making the Golden State the world's first large floating wind market.
“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.”