BP wind sale highlights renewable energy struggles

BP is getting out of the wind power business, selling its U.S. wind farm operations, including four in Texas.

A company spokesman said the decision is part of a continuing effort “to become a more focused oil and gas company … and to unlock more value for shareholders.”

The sale reflects the complicated relationship between the major oil companies and renewable energy over the past decade, even as wind and solar energy slowly gained market share.

“When … $50 million spent developing shale plays gives you $250 million in value, and $50 million spent developing a wind farm gives you $10 million in value, it’s not hard to figure out,” said Edward Hirs, an energy economist at the University of Houston.

But Alex Klein, research director for renewable power at IHS, said BP “has actually had a very successful recent few years in terms of growing its wind business.”

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While oil and gas may yield more profit, he said renewable energy, and especially wind, can be attractive investments for power companies, financial institutions, pension funds and other investors.

BP spokesman Matt Hartwig said the company would not discuss the value of the properties, which include 16 operating wind farms in nine states, as well as other projects.

BP’s shares closed down 24 cents, at $41.90 Wednesday.

BP, which once launched a “Beyond Petroleum” public relations campaign, is now focusing on oil and natural gas as it seeks to rebuild in the aftermath of the 2010 Gulf oil spill. The company agreed last year to a fine of $4.5 billion and to plead guilty to 12 felony charges in the deaths of 11 men in the explosion of the Deepwater Horizon drilling rig; a trial over civil damages is now in its sixth week in New Orleans.

The company set a goal after the spill of selling $38 billion in assets by the end of 2013; it was close with the announcement last fall that it had sold its Texas City refinery and related inventory to Marathon Petroleum Corp. for $2.5 billion.

But the decision to sell BP Wind Energy also reflects a broader trend, as the major oil companies struggle to balance shareholder demands for profits with the financial reality of renewable energy.

BP shut down its solar business in 2011.

“We’ve thrown in the towel on solar,” CEO Bob Dudley told an audience at an IHS CERAWeek session last month. “We worked on it for 35 years and never made money.”

Exxon Mobil Senior Vice President Michael Dolan talked briefly at the same conference about his company’s efforts to produce fuel from algae.

“I think we learned in the first few years it’s probably harder than we had all hoped,” he said.

And David Dudek, research manager of fuels technology for the Americas at the Shell Technology Center in West Houston told a group of University of Houston students Wednesday that the company continues to work on producing ethanol from wood, grasses or other inedible parts of plants.

“Ten years ago, people thought cellulosic ethanol was five or 10 years down the road,” he said. “It’s still 5 or 10 years down the road.”

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BP said its U.S. wind energy assets include interests in 16 operating wind farms in nine states with a generating capacity of 2,600 megawatts, as well as other projects in various stages of development.

One megawatt of electricity can power about 200 homes during periods of peak demand.

The BP wind farms currently in operation contain nearly 1,500 wind turbines, according to the company.

The Texas wind farms include:

  • Two in Pecos County, one of which has operated since 2008 and is a joint venture with NRG Energy. The second began operating in 2011 and is fully owned by BP.
  • The Silver Star 1 Wind Farm southwest of Dallas-Fort Worth began operating in 2008 and is fully owned by BP.
  • The Trinity Hills Wind Farm spans Archer and Young counties and opened in 2012; it is fully owned by BP.

The company also owns or co-owns wind farms in California, Colorado, Kansas, Hawaii, Idaho, Indiana, Pennsylvania and South Dakota.

Hartwig said in an email that the company operates one wind farm in the United Kingdom, where BP is based, but that operation is not part of BP Wind Energy and is not for sale.

Klein declined to speculate on whether the properties are likely to be sold as a block or in pieces.

“It depends on how aggressive BP is in wanting to sell,” he said.

Hartwig noted that BP will remain in the alternative energy business through its investment in ethanol and biofuels.

He said BP has ethanol production facilities in Brazil and in Europe, while conducting biofuels research in the United States and Europe.