The Climate Transition: How an Oil Company Becomes a Renewables Company

At-a-Glance:

In late April, a raft of oil majors released their first quarter results with companies like Royal Dutch Shell Plc showing a return to pre-pandemic profit levels. At the same time, some of the majors increased their energy transition commitments. Spanish firm Repsol SA devoted 40% of its capital expenditure to low-carbon projects, and France’s Total SE stated plans to increase its renewable energy capacity five-fold over the next four years. To learn more, read “The Climate Transition: How an Oil Company Becomes a Renewables Company.” Reading this article may require a subscription from the news outlet.

Key Takeaways:

Norway’s state-owned oil producer, Equinor ASA posted more than $2.6 billion of earnings in the first quarter of 2021, 49% of which was from renewable energy.

Last quarter, Equinor earned more from renewables than it did from oil and gas exploration and production.

Equinor is farming down to two European oil majors: BP Plc is buying into the U.S. projects, and Italy’s Eni SpA is buying into the U.K. projects – they are paying Equinor for the privilege of taking on the early stages of developing offshore wind.

One reason Equinor could be an early developer of U.S. offshore wind is that it has decades of experience developing and operating offshore oil and gas assets.

Equinor is two-thirds owned by the Kingdom of Norway, with Norway’s Government Pension Fund Global owning another 3.59% of the company via Folketrygdfondet, which expects its portfolio companies to integrate climate change considerations into policies and strategy.

Path to 100% Perspective:

Bloomberg New Energy Finance has found that more than two-thirds of Earth’s population already lives in countries where solar or wind — or both — are the least-expensive sources of new electricity generation. As wind and solar power become increasingly cost-competitive, investments in traditional, inflexible base load plants such as large coal, nuclear, and gas combined-cycle plants are declining. This signals an end to the era of large, centralized power plants that run on fossil fuels. Global financial trends reflect this dramatic shift, with renewable generation attracting more investment dollars than fossil-powered generation year after year. Worldwide investment in renewables has exceeded $230 billion for nine years in a row.

At-a-Glance

While renewable energy is now widely accepted as the cheapest form of electricity generation, energy demand growth, government growth requirements and the need for a responsible transition mean fossil fuels will still have a role. But for that to work with climate goals, carbon capture and storage (CCS) technology must be mainstreamed. In Iceland, Climeworks is showing how direct air capture/storage (DAC) could change the game. To learn more, read “The Future Of Carbon Capture Is In The Air.” Reading this article could require a subscription.

Key Takeaways

Climeworks new plant, named Orca, will combine Swiss-based Climeworks’ direct air capture technology with the underground storage of carbon dioxide provided by Iceland’s Carbfix and the plant should be online in spring 2021.
What makes Climeworks use of DAC so interesting is that it doesn’t just work in removing emissions associated specifically with power generation, but can capture emissions directly from the air. This is the company’s largest plant so far, intended to capture around 4,000 tons of CO2 per year.
There has been significant movement in the CCS market recently. In the UK, as part of its recently announced green infrastructure plans, the government has promised £1 billion to set up four industrial clusters for CCS.
The Norwegian government is working with Equinor, Shell and Total on a project intended to standardize and scale carbon capture, transportation and storage in Europe. The Northern Lights Project is expected to capture CO2 from industry in the Oslo-fjord region, following which the carbon will be liquefied and shipped to an onshore terminal on the Norwegian west coast and then taken out to the North Sea for long term subsea storage.
In Canada, Carbon Engineering says its technology can be scaled up to remove up to 1 million tons of CO2 from the air annually, with a large-scale plant in development with Occidental Petroleum with a completion date reported to be 2026.

Path to 100% Perspective

Capturing carbon dioxide from the air, utilizing synthesis to combine these into hydrocarbons suitable for synthetic renewable fuels offers substantial opportunities to take valuable steps towards carbon neutral communities. These renewable fuels could be used in transportation, energy storage and energy distribution which improves power system sustainability, reliability and flexibility.

Photo by Thomas Kolbeck on Unsplash