Equinor Tightens Offshore Wind Investment Criteria

Equinor has quietly raised the financial threshold for its offshore wind projects, requiring them to achieve a 10% nominal equity return before accounting for gains from farm downs (asset sales). Previously, projects could meet this target including the effects of farm downs and project financing. Now, while the headline 10% hurdle rate remains unchanged, the underlying requirement is more demanding: a project must clear the bar on its own merits, without relying on the profit from selling a stake. This profit from farm downs has been reclassified as "portfolio uplift" and is now counted above the hurdle rate.

Strategic Shift and Integration

This change coincides with CEO Anders Opedal abandoning the company's renewable energy targets, admitting he hadn't tried to reach them for years. The renewables focus has shifted from a "disciplined and returns driven" approach to a "competitive integrated power business," emphasizing improved returns and growing cash flow. The standalone renewables segment has been folded into a broader "integrated power" business, which includes trading and flexible generation. The headline target has also shifted from installed capacity (10-12 GW by 2030) to generated output (more than 20 terawatt-hours by the end of the decade). Equinor already credits its trading arm, Danske Commodities, with a one percentage point uplift to the wind portfolio's equity return from handling balancing.

Implications and Unanswered Questions

In the context of Equinor's legacy oil and gas projects, which historically generated internal rates of return of 25-30%, the difference between a wind project making 10% only after a divestment and one standing at 10% unaided is significant. The latter represents a competitive allocation of capital, while the former is merely tolerated. The key question is whether Equinor has confidence that projects can meet this higher bar, or whether it is raising the threshold to justify cutting spending on offshore wind and reallocating capital elsewhere. The historical performance of the portfolio, specifically how much of the "above 10%" returns came from farm down gains, remains unclear.