The new unit, called BP Alternative Energy, will capitalise on a growing interest in low carbon power, managing a fleet of projects with the potential to deliver about $6 billion of sales per year with a decade, according to BP.
Over the next three years, the oil major will invest an initial US$1.8 billion to be divided equally across the different business segments.
The company has already formed the BP Solar business, which it expects to generate $1 billion in revenue in 2008. By the end of next year the unit plans to double its existing 100 megawatts of solar manufacturing capacity in Australia, the US, Spain, and India.
BP's Homebush, New South Wales solar photovoltaic cell manufacturing plant, the largest in the southern hemisphere, would be included in BP Alternative Energy.
The Homebush facility, recently expanded by 20% cent, supplies up to 70% of the Australian market for solar cells, according to BP.
"Our recent experience, particularly with solar, has given us the expertise and confidence to develop new products and markets alongside our mainstream business,” CEO Lord John Browne said.
"We are now at a point where we have sufficient new technologies and sound commercial opportunities within our reach to build a significant and sustainable business in alternative and renewable energy.”
Investment will be delivered on a step-by-step basis, depending on the type and profitability of opportunities, according to BP.
"As the pricing of carbon develops through trading schemes and other initiatives, the market will grow rapidly as low-emission technologies displace less clean forms of power generation," the company said.
BP added that technological improvements, government incentives and higher energy prices meant wind, hydrogen and solar energy projects would be more economical than in the past.
To be based in Sunbury, southwest of London, BP Alternative Energy will initially hire more than 2500 employees worldwide.
Its managing director will be Steve Westwell, reporting to BP's gas, power and renewables division chief executive Vivienne Cox.
