European oil majors BP (BP -0.54%) and Total (TTE -0.81%) won the rights to develop several offshore wind farms in the U.K. These moves mark the latest step in their transition away from fossil fuels toward renewable energy

BP teamed up with German utility EnBW on bids that won the rights to develop two leases. The 50-50 joint venture will make four annual payments of 231 million pounds sterling ($317.4 million) on each lease before the projects reach a final investment decision. The company expects the two projects to be operational in seven years. These leases have the combined potential of generating three gigawatts (GW) of renewable energy, enough to power 3.4 million U.K. households. Despite the hefty lease premium and the projects' development cost, BP anticipates that it can earn 8% to 10% returns -- at a minimum -- from these investments. 

An offshore wind farm.

Image source: Getty Images.

Meanwhile, Total teamed up with Macquarie's Green Investment Group to win the rights for a 1.5 GW project off the U.K. coast. The project is a significant early-stage investment for both partners in the U.K. wind sector. 

The joint venture undertaken by BP and EnBW represent BP's second major foray into the offshore wind sector. It previously partnered with fellow European oil giant Equinor (EQNR 1.20%) to develop offshore wind projects in the U.S. that have up to 4.4 GW of generating capacity. These investments are part of the company's plan to shrink its oil business 40% by 2030 while increasing its renewable energy production capacity from 2.5 GW in 2019 to 50 GW by the end of this decade. These European oil majors hope that by shifting fuel sources early, they'll get out ahead of the energy transition, which will pay dividends for their shareholders in the coming years.