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BP and Shell: 'We've got the balance sheets for no-subsidy renewables'

Executives tell conference supermajors will be well placed in merchant world where incumbent developers to struggle

Oil supermajors Shell and BP said their huge balance sheets will help them become major renewable energy “players” as subsidies fall away and wind and solar plants rely on merchant power sales, leaving existing developers struggling.

The global move away from subsidies for large renewable energy projects plays to the strengths of new entrants from oil and gas with ambitions in the clean power sector, Shell new energies executive vice president Mark Gainsborough and Nick Wayth, chief development officer for Alternative Energy at BP, told an industry conference.

Gainsborough told a session at the BNEF Summit in London that his company will “have an even stronger role to play in a subsidy-free world”.

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“In reality, as the market shifts more away from subsidies and revenue certainty, for sure there will be challenges. A lot of the existing developers will struggle in that world where you need a bigger balance sheet,” Gainsborough predicted.

Echoing his supermajor colleague, Wayth said: “The trend towards subsidy-free and more merchant generation is a dynamic that in our view plays to some of the capabilities a company like BP has – the balance sheet, the trading capability.”

Shell has been among the busiest of the big oil groups in entering renewables and associated sectors, with stakes in offshore wind projects, the purchase of German battery group Sonnen and investments in several cutting-edge technologies.

BP’s renewable expansion has so far mainly focused on its LightSource BP joint venture, but the UK-based oil group has a US onshore wind fleet and is heavily tipped to enter the offshore wind sector soon.

Both supermajors made clear their intention to be “players” in the new energy world.

Gainsborough said: “It’s kind of inevitable that the large existing energy players are going to want to play in the new spaces. Either that or in the very long run we’ll all have to shut up shop, and we’ve got no intention of doing that.”

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Wayth rejected any suggestion that the renewable energy sector is now closed to new entrants. “Everybody’s got the right to play in this space,” he said.

Global power groups have until now featured heavily in renewable energy development, with the likes of Enel, Iberdrola, EDP and RWE leading the charge, along with transformed oil and gas group Orsted in offshore wind.

But the world’s oil giants are already making their presence felt – notably with Norwegian group Equinor emerging as a big winner in the recent UK contract-for-difference round for offshore wind projects that saw record-low prices, and French group Total and Italy's Eni vowing to enter new contests for offshore wind leases off Britain.

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