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Renewables a must-have as shadows lengthen over Big Oil

ONES TO WATCH 2017 | The world's oil giants are all too aware that the tide is turning so expect more activity in wind and solar this year, writes Darius Snieckus

Expectations that Big Oil will increasingly move into renewables have been growing as crude prices continue to stagnate and 2017 will see more “old” energy developers begin to detail their play books for wind, solar and storage.

Many eyes will be on Shell this year. The Dutch-Anglo petroleum giant has been angling to bring its offshore oil and gas project nous – and capital (in the ‘crisis’ of 2015, it still had revenues of $265bn) – to bear on offshore wind. After failing at the first attempt it now has a chance to wet its head on a lead-off project: the 680MW Borssele 3&4 zone off the Netherlands, which it won with a low bid of €54.50/MWh ($57.85/MWh).

Chief executive Ben van Beurden last year admitted regret at having pulled out from its earlier position in offshore wind – apart from a share in the 108MW Egmond aan Zeewind farm commissioned in 2006 in the Dutch North Sea – and Shell’s chief energy advisor Wim Thomas told Recharge “the penny has now dropped that this is the new business space [to be committed to]”.

So anticipate more forward strides from Shell in offshore wind in 2017 – and not just on conventional projects. Shell also has stakes in WindFloat, the floating wind power unit now edging towards a first array off Portugal, and even a high-altitude wind energy outfit called KPS, which has a technology development timeline that will see its kite-driven concept flying offshore by the end of the decade.

"The penny has now dropped that this is the new business space to be committed to"
Wim Thomas, Shell

Total, the French oil company, has shown a commitment to industrial-scale renewables since buying a majority stake in SunPower in 2011. But it was its fell-swoop takeover of battery maker Saft as its “spearhead in electricity storage” that has nailed its solar-plus-storage colours to the mast.

Total chief executive Patrick Pouyanné has made no secret of its renewables ambitions: a top-three solar player within 20 years.

Total is paying the price for its faith. On top of the $1bn deal for Saft, it has had to ride to the rescue of SunPower – after a doubling of the solar giant’s 2016 net loss guidance – with a first aid package that included a cash up-front order for 150MW of PV panels, and “discussions” to buy stakes in SunPower projects in Japan, South Africa, and France.

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Total has also developed a venture capital-fuelled technology scouting programme, under the banner of Total Energy Ventures. Look to see more investment in start-ups in 2017, such as US wind leasing specialist United wind, and AutoGrid, a California-based digital grid management solution developer.

The Petroleum Age is ending and Big Oil knows it: investment in renewables has eclipsed that going into oil and gas for the second year running, fuelled by the latest $310bn spend.

Some oil and gas majors are already on their way. Danish state oil and gas company Dong has begun divesting petro-assets in favour of wind and now has a pace-setting 4.4GW under construction off Europe, and virgin acreage off the US – and no interest in the tail-end of North Sea’s black gold bonanza.

Its Norwegian counterpart Statoil will witness a watershed year for its renewable energy business as its second conventional offshore North Sea wind farm, the 402MW Dudgeon, comes online as does  its 30MW Buchan Deep project – the world’s first floating array. It will also start work on its recently won 1GW zone off New York state.

Statoil's' own venture capital arm will in the meantime get to grips with its flagship solar power investment, part of an $8m package backing commercialisation of Oxford Photovoltaics ultrahigh-efficiency perovskite-based PV technology.

Even Italy's Eni  – a company that until now had shown little interest in renewables, bar a partnership in a floating wind scheme designed to pump more oil and gas out of offshore fields  – has wheels turning on plans to jointly develop large-scale renewables with US industrial giant GE under a framework agreement that encompasses onshore and offshore wind, as well as solar.​

The shadow of stranded assets may be growing ever-longer, but for Big Oil investment prospects are also getting darker by the day. Fitch Ratings pointedly warned last year that failing to diversify into renewables could damage access to capital as global demand for petroleum slows.

Renewables are no longer a "nice to have", they are a existential need.

ONES TO WATCH is Recharge’s exclusive series of insights into the trends, policies, companies and individuals that will shape wind and solar in 2017. The full series can be read online here

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