Oil Majors Look to Fill Businesses’ Growing Appetite for Green Power

At-a-Glance:

Businesses are buying more renewable power, and oil majors want a piece of the action. European oil companies including BP PLC and Royal Dutch Shell PLC are building new wind and solar projects and striking deals to supply electricity to big corporate buyers like Amazon.com Inc. and Microsoft Corp., treading into the domain of traditional power companies. To learn more, read Oil Majors Look to Fill Businesses’ Growing Appetite for Green Power.” Reading this article may require a subscription from the news outlet.

Key Takeaways:

  • Oil companies say securing long-term deals to supply electricity will provide a new source of income and underpin their expansion into wind and solar power as they seek to reduce their dependence on fossil fuels and prepare for a lower-carbon economy.
  • Corporate power-purchase agreements are an area of focus for BP’s solar-power joint venture Lightsource BP, which this year signed deals to supply Amazon, Verizon Communications Inc. and a unit of insurer Allianz SE.
  • New deals continue to be struck at a rapid pace, rising 75% in the first four months of the year versus the same period a year ago, the BNEF data showed.

Path to 100% Perspective:

Bloomberg New Energy Finance projects that new wind and solar will cost less than existing coal and gas generation in China by 2027, and that new wind and solar will be cheaper than existing goal and gas generation in most of the world by 2030. 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.

How Wind and Solar Power Got the Best of the Pandemic AND Wind, Solar Power Made Strong Gains in 2020, IEA Says

At-a-Glance:

Global recessions, wars, and pandemics have a way of driving down energy demand. Last year, the International Energy Agency (IEA) said the collapse in global primary energy demand brought on by COVID-19 was the biggest drop since the end of World War II, itself the biggest drop since the influenza pandemic after World War I. IEA also reported that renewable power capacity grew at its fastest pace this century in 2020, raising its growth forecast for wind and solar power for this year and next.According to the Paris-based energy watchdog, renewables were the only energy source for which demand increased last year. The addition to the world’s renewable electricity capacity last year was 45% more than in the prior year and the biggest jump since 1999, as wind and solar farms sprang up across the world’s major economies. To learn more, read How Wind and Solar Power Got the Best of the Pandemic AND Wind, Solar Power Made Strong Gains in 2020, IEA Says.” Reading these articles may require a subscription from the news outlets.

Key Takeaways:

  • Renewable energy installations not only increased during the pandemic, they exceeded even the most bullish of expectations, with wind installations increasing 90% and solar increasing 23%.
  • IEA estimates that in 2022, renewables will account for 90% of new power capacity expansion globally.
  • ​​“Wind and solar power are giving us more reasons to be optimistic about our climate goals as they break record after record,” said IEA Executive Director Fatih Birol, adding that greater use of lower-carbon electricity was needed for the world to achieve its carbon-reduction goals.
  • The European Union plans to spend $1 trillion to reach its goal of net carbon neutrality by 2050.

Path to 100% Perspective:

U.S. renewable energy adoption continues to rise, in 2019, renewable energy sources accounted for 17.5% of total utility-scale electricity generation, with renewable energy generation reaching 720 TWh. More than 70% of energy stimulus funding is currently allocated to legacy fossil fuels, compared to less than 30% to clean energy. However, reallocating $72 billion in energy stimulus funding could achieve:

  • 107 GW of new renewable energy capacity
  • 6.5 % rise in share of renewable electricity generation (from 17.5% to 24% renewable electricity).
  • 544,000 new jobs in renewable energy, 175% more jobs than if the same stimulus was used to revive the legacy energy sector.

The New Green Energy Giants Challenging Exxon and BP

At-a-Glance

A decade ago, NextEra, Iberdrola and Enel were sleepy regional utilities with little name recognition. Now they are fast-growing giants with market values rivaling the likes of oil majors Exxon Mobil Corp. and BP PLC, thanks to their early all-in bets on wind and solar farms. Their early lead in the global transition away from oil has put these companies on track to become the major energy companies of the coming decades—the “green energy majors.” But they now face the threat of increased competition as some of the oil titans that have traditionally dominated the energy industry diversify into wind and solar power. To learn more, read “The New Green Energy Giants Challenging Exxon and BP.” Reading this article could require a subscription.

Key Takeaways

  • NextEra, Enel SpA and Iberdrola SA are Wall Street darlings, after Spain’s Iberdrola and Italy’s Enel became global builders of green energy projects, while NextEra became America’s largest generator of wind and solar power.
  • Enel and Iberdrola have outlined plans to substantially expand their portfolios of renewable-energy projects over the next decade with about $170 billion in collective investments.
  • Florida-based NextEra grew into America’s largest renewable energy producer by keeping debt levels low, capitalizing on federal tax subsidies available to help finance wind and solar projects around the country and reinvesting its profits to expand further. NextEra expects to have invested $60 billion in renewable energy projects between 2019 and 2022.
  • Denmark’s Ørsted A/S, a company formerly known as DONG Energy that focused on oil and gas, has transitioned into a leading player in offshore wind projects.

Path to 100% Perspective

As NextEra became more valuable than Exxon in 2020, it became increasingly clear that the status quo in energy is now in the rearview mirror and the path to 100% is nearly paved. Oil companies are not holding on to the past or unrealistic expectations for the future of energy. Instead, they are joining the race to renewables using their name recognition, influence in the energy sector and budgets to spur more competition to the benefit of those striving for a renewable energy future.

 

Photo by Efe Kurnaz on Unsplash