Barely a month has passed in 2020 without yet another huge renewable energy deal involving Total, and as it ramps-up its ambition, Philippe Sauquet, head of the French supermajor’s green power business, has a blunt message for those who believe its greatest contribution to the fight against climate change would be to stop sucking oil and gas from the ground right now.
“They’ve not understood [the] energy transition,” says Sauquet, president of Total’s Gas, Renewables and Power unit, which this year alone has added some 13GW of renewables to its pipeline and set out plans to be a top-five player in the sector with some of the most ambitious green growth goals of any global energy group (see panel at foot).
“A transition means that we go from A to B. If you want to go to B today, without the transition, this will not happen, and we will all fail to meet the climate change challenge,” Sauquet tells Recharge in a wide-ranging interview on its energy transition strategy.
Take the controversial issue of the respective roles in the energy transition of blue hydrogen produced using natural gas with carbon capture and storage (CCS) versus the green variety made via renewables-powered electrolysis.
Green H2’s advocates argue that it alone should be the basis of the emerging hydrogen economy, and that blue hydrogen is a kind of trojan horse for gas’s role in the global energy mix.
But Sauquet says: “We are not developing CCS or blue hydrogen to defend hydrocarbons.
“I don’t care about hydrocarbons. I just care about my customers and the price they are ready to accept to pay today.
“And today I can tell you if I go to them and propose [green] hydrogen at $12/kg when hydrogen I produce from methane which emits CO2 is at $1/kg, there is no industrial customer that is ready to pay that.”
But Sauquet says blue hydrogen produced for $2-3/kg, with CO2 extracted, suddenly begins to look a far more attractive proposition.
“When people say ‘what you could do for the energy transition would be to stop producing hydrocarbons’, I will tell them, ‘yes, Total could stop, but my customers would continue to buy’.
“They are not ready to pay the price today of green hydrogen.”
The argument for blue H2 is part of a wider case for natural gas’ role in the energy transition that will be familiar to most and opposed by many — but one that Sauquet makes with conviction.
“Gas is the cheapest way, and the quickest way to reduce CO2 emissions.
“The challenge of beating climate change, or failing the challenge, in the end is to be decided in China and India.
“In those countries you have massive fleets of coal-fired power stations. If you want really to beat climate change you have to start reducing those emissions today, and do it not in a very marginal but a big way.”
All the above doesn’t mean Total and Sauquet are against green hydrogen, and he makes clear that the group will be actively involved in renewable H2, but illustrates a paradox that the global renewables sector might just have to get used to — having some of its biggest players funding multi-gigawatt wind and solar builds with the proceeds of legacy oil & gas operations.
Steep renewables growth
The pace of Total’s 2020 renewables ramp-up (see panel) became clear when September saw it unexpectedly raise its 2025 gross renewables goal by 10GW to 35GW, and it wants to grow its pipeline by 10GW a year as part of a wider decarbonisation agenda that includes 2050 corporate net-zero targets of its own.
Is such a steep growth trajectory feasible for a company that, as Sauquet himself admits, only became fully engaged with the renewable energy sector after 2016 and the Paris climate agreement “when it became clear the world is changing, and changing very quickly”?
“Yes, we have that ambition, and I’m confident we can manage it,” says Sauquet.
“We don’t see a lack of opportunity in this business. Our only concern is to find the right opportunity.
“Trust me, there are so many opportunities across the world [for renewables growth].”
But to develop continuously at such relentless scale and pace takes “cash and cash and cash,” says Sauquet — the sort of funds that, even with their core products going through a rough patch, the world’s oil & gas giants are perhaps uniquely positioned to bring to the table.
Total expects to be devoting 20% of its Capex, or about $3bn, to renewable power and the energy transition by the end of the decade, up from $2bn for the next five years.
Total, along with fellow European supermajors Shell and BP, is often talked of as a leader in a race among fossil giants to position themselves for the energy transition — a race their US counterparts such as ExxonMobil and ConocoPhillips have so far largely declined to join.
You have to be aware that this business is new for everyone.
Sauquet, however, sees it less as a race and more of a voyage of discovery for everyone involved — and that includes the giant power utilities often characterised (sometimes by themselves) as the pioneering experts in wind and solar.
“You have to be aware that this business is new for everyone,” Sauquet says. While historically involved in electricity as regional or national monopolies, he contends that the world’s power giants have often been on less certain ground outside their home patches.
“When you speak internationally, you start understanding that these guys know very little about going to Africa, the Middle East, China, India,” he said, while his industry has learned “often the hard way” how to enter heavily regulated foreign markets.
And while accepting that oil & gas players have their fair share of legacy operations to consider, so do the utilities, many of which are saying “’I’d like to get rid of my nuclear, I’d like to get rid of my coal’ — they are looking for a new business model.
“The utilities have competencies – but frankly speaking not all of them. On our side it’s the same.”
So apart from their huge balance sheets and global presence, what else do the oil & gas giants bring to renewables and the energy transition? According to Sauquet, the answer to that will become clearer as renewables grow in scale and, in the case of offshore wind, further out to sea.
Total has already made three significant moves in floating wind this year, off the UK, South Korea and its home French market.
Mass global deployment of floating wind, the Total executive believes, is a prerequisite if renewables are to reach the levels needed to tackle climate change, and the oil & gas sector can help make it happen.
When it became clear that development was needed beyond the Middle East, “where did we go? We went offshore”, he points out.
Basically we are technically minded — we are engineers.
“We went into the North Sea where we could have [fixed infrastructure] then we started to consider floating structures.
“We have learned this path and we have proven the technology. Basically we are technically minded — we are engineers.”
While accepting that floating wind is currently far more expensive than fixed deployment, Sauquet says that the sector is still in its infancy.
“In ten years, I am convinced that the cost of offshore wind will be the same, whether floating or fixed.”
If Sauquet’s analysis is correct and the worlds of oil & gas and power each have unique competencies to bring to the energy transition, can we expect a ‘dream team’ merger between a supermajor and a titan of electricity?
For Total at least, that scale of M&A “is not part of our strategy — although never say never.
“We have so many opportunities to develop through M&A of, I would say mid-sized companies, mid-sized developers of 300-500 people,” he tells Recharge, adding: “When you do that type of mega-deal, for one year, two years, you are more busy with the inside than the outside. And I’d say right now we don’t have the time.”
What Total is keen on is partnerships, and Sauquet points to the potential for more of the type of arrangement that has seen it link with Adani for Indian solar or Macquarie for floating wind.
Sauquet confirms that talks are underway over potential offshore wind partnerships in China — power giant Three Gorges has publicly reported meetings with the French supermajor – to add to an existing solar link-up with Envision that he said is “growing exponentially”.
Total has often said that the visibility of stable, long-term power purchase agreements (PPAs), either with or backed by governments, is among the most attractive features of the renewable power market, compared to the more volatile – but also more profitable – world of oil & gas.
But isn’t Total arriving on the scene just as the age of renewable support is ending, with governments around the world telling developers that subsidies are off the agenda?
Sauquet isn’t so sure that the era of the “public PPA” is over yet, predicting that government-backed mechanisms will continue around the world in some form, and could even make a comeback in some cases.
“In Spain they decided to forget about public PPAs… but today they start to have an issue, there are a lot of projects that are stalled,” says Sauquet, with developers forced instead to hunt for a limited supply of corporate PPAs with private companies to give their projects the bankability they need to advance.
While corporate PPAs will certainly “be part of the future”, in a “lot of countries… there is no real open market for electricity, there will be a need to have public PPAs. That will give us a lot of visibility”.
Sauquet also predicts that Total could eventually emerge among a new breed of global corporate PPA providers, working with multinational companies that need to source power — green or otherwise — in numerous markets.
“We have opened a number of discussions on that front,” he says, while stressing that no agreement has yet been reached.
“There are very few companies such as Total that can give them a global view, a structured view of different forms of energy.
“I do hope some partnerships will be concluded and announced.”
When Total CEO Patrick Pouyanné in September surprised many by raising its 2025 renewable energy goal to 35GW, he said the oil supermajor had again “raised the bar” in its quest to be a top-five green power player.
The new gross capacity goal added 10GW to the previous 2025 target and ensured the French group remained at or near the front-rank of its oil & gas peers in terms of renewable targets – BP had only recently unveiled its own 50GW net ambition for 2030.
Total has already set a blistering pace with deals in both wind and solar this year.
In PV it has taken positions in 8GW of projects across Spain, the Middle East and India, including a stake in 3GW of Spanish solar that it said will allow it to decarbonise power supplies to its entire European operations – contributing to its own corporate 2050 net-zero goals that were unveiled in May.
In wind, the French group made dramatic entries to the offshore sector, buying a majority stake in the 1.1GW Seagreen 1 from utility SSE and ensuring a fast-track route into fixed-foundation development.
It also staked a claim in the emerging floating wind industry, with stakes in a UK project and a link-up with Macquarie for a planned 2GW of development off South Korea.
Most recently, Total in October entered its home floating wind market with a 20% share of the pioneering 30MW Eolmed project that will be one of the first arrays deployed off France in 2023.