Big Oil Makes Concerted Push into Power

BP made headlines in early August when it announced it wants to develop about 50 GW of net renewable generating capacity by 2030—a 20-fold increase from the 2.5 GW deployed in 2019—as part of a new strategy to pivot from an international oil company to a customer-oriented integrated energy company. The company’s move is the latest in a string of similar efforts by global oil and gas companies to redirect more investments into the power sector, low-carbon technologies, and mobility in response to climate concerns, investor activism, and an oil price rout that has been intensified by the pandemic.

On the heels of its February commitment to net-zero carbon emissions by 2050 and June-announced $5 billion divestment of its global petrochemicals business to UK-based chemicals company INEOS, BP said on Aug. 4 that it would cut its oil and gas output by 40% by 2030 and spend $5 billion a year on low-carbon projects. Along with its 50-GW renewables goal, the company wants to increase its production of bioenergy from 22,000 barrels per day (b/d) to more than 100,000 b/d. It will also seek early positions in hydrogen and carbon capture, utilization, and storage (CCUS). It plans, for example, to ensure its hydrogen businesses have grown to have a 10% share of core markets by 2030. Finally, it will increase its stake in electric vehicle (EV) charging points from 7,500 today to more than 70,000 by 2030 by cultivating energy partnerships with 10 to 15 major cities around the world.

2. BP subsidiary Lightsource BP in 2016 launched a 6.3-MW floating solar installation on the surface of the Queen Elizabeth II reservoir just outside of London. Courtesy: BP

BP’s focus on renewables echoes that of several other “Big Oil” majors. As BP Executive Vice President of Strategy and Sustainability Giulia Chierchia explained on Aug. 4, the move responds to a “backdrop of uncertainty,” where demand for fossil fuel could plunge by 75% in a “net-zero” scenario.

“The world is electrifying at pace and we believe that renewables will be a clear winner,” she said. “Under the ‘rapid transition’ scenario, global electricity demand increases 80% by 2050. Renewables account for more than 40% of primary energy, a near tenfold increase. Even in a ‘business as usual’ scenario, renewables still capture 90% of net energy growth.” BP generally expects that as the world electrifies, its uptake of renewables (Figure 2) and hydrogen will grow while “supply will become more local, more complex and will require more integration across multiple energy sources to provide stability, maximize system efficiency and transition,” she said.

Eni Goes Heavy on Renewables, CCS. BP’s announcement came just days after Italian oil giant Eni affirmed its long-term strategy to install more than 55 GW of new renewables by 2050, and up to 10 GW by 2030. Eni also communicated a strategic climate change–oriented corporate overhaul in February, and as part of its ambitions to cut 80% of net greenhouse gas (GHG) emissions by 2050, it is banking on large-scale CCUS investments to help clean up increasing gas production, which it expects to represent up to 60% of its total production mix in 2025 and as much as 85% in 2050.

Shell Goes Net-Zero, Boosts Renewables Acquisitions. Shell, a company that has served the power sector for nearly two decades through its Shell Energy business, notably made strides in the power space through its 2016-created New Energies division. This April, it also went net-zero. The company has made a series of lucrative acquisitions over the past two years: In 2018, it snapped up UK power retailer First Utility, and in 2019, it acquired German battery storage system firm sonnen; Australian energy company ERM Power; French floating wind developer EOLFI; and California-based Greenlots, a company that provides EV charging posts, charging network software, and grid services across the U.S. and has a growing presence in Canada, Thailand, Malaysia, and Singapore.

Shell also acquired substantial interests in offshore wind project developments. It is part of the Blauwwind consortium in the Netherlands; it is partnering with EDF Renewables for offshore wind projects off the New Jersey coast; and it has minority interests in Silicon Ranch Corp., a U.S. solar developer, and Cleantech Solar, which provides solar power to commercial and industrial customers across Southeast Asia and India. Shell has said that between 2021 and 2025, its investments in power could grow to $2 billion to $3 billion per year on average.

3. Saft is leading Total’s efforts to gain a foothold in the global energy storage market. In January 2020, the company announced it will build a pilot electric vehicle battery manufacturing plant at its Nersac facility in France. The plant will be followed by a larger 8-GWh battery storage production facility in the northern Hauts-de-France region, followed by a second of equal capacity in Germany. Total wants to reach 48 GWh of combined production capacity by 2030, which would represent about 10% of the European market. Courtesy: Saft

Total Doubles Down on Wind and Solar. French oil giant Total, perhaps one of the earliest Big Oil movers into the power space, has already deployed 3 GW of renewables capacity. While it is already a major power supplier in Europe through Total Direct Energy and Lampiris, it is now looking to expand its installed base to 25 GW of renewables globally within the next five years, leveraging the expertise of recently established affiliates Total Solar, Total Eren, Total Quadran, and SunPower. The base will likely include investments in solar PV, and onshore and offshore wind power. But Total is also notably banking heavily on energy storage, acquiring battery maker Saft (Figure 3) for $1.1 billion in 2017. It recently expanded that subsidiary’s footprint into the distributed energy and microgrid sector through the June 2019 acquisition of U.S. firm Go Electric.

Repsol Bracing for Energy Transition. Spanish oil firm Repsol, which also has net-zero ambitions by 2050, has so far installed about 3 GW of power generating capacity. Most of it is gas-fired, clustered in Spain, but it also includes three hydropower projects, a total of 700 MW, in northern Spain. It is also a collaborative partner in the innovative WindFloat Atlantic project (a 2020 POWER Top Plant). Repsol is now developing more than 1 GW of wind and solar, and it is targeting 7.5 GW of low-carbon generation capacity by 2025.

4. Vattenfall’s Nuon Magnum gas power plant in the Netherlands currently has three combined cycle gas turbines with a capacity of 440 MW each. A consortium is working to convert the plant to run wholly on hydrogen by 2023. Courtesy: Equinor/Sander Van Der Werf

Equinor Capitalizing on Offshore Wind. Norwegian state-owned Equinor, a company formerly known as Statoil, is already a brand-name offshore wind developer. By 2026, Equinor wants to install up to 6 GW of renewables capacity and expand that capacity to between 12 GW and 16 GW by 2035, depending on “availability of attractive project opportunities.” Equinor, notably, is also engaged in building a European value chain to capture and store carbon dioxide from third-party industrial sites, and it’s “prepared for future growth in hydrogen,” which it has said offers large-scale opportunities for “zero-emission energy.” One interesting project it is spearheading is the conversion of Vattenfall’s Magnum gas-fired power plant in the Netherlands to run on hydrogen by 2023 (Figure 4).

Chevron Ramps Up Renewables. U.S.-based Chevron, which already considers itself an integrated energy company, on July 30 announced an agreement with Algonquin Power & Utilities Corp. to co-develop 500 MW of renewable power projects over the next four years. Initial renewable power projects are expected to be sited on Chevron land, and construction is planned to start in 2021. “The projects will be focused on powering Chevron’s operations in the U.S. Permian Basin (Texas and New Mexico), Argentina, Kazakhstan and Western Australia,” the company said. Chevron is also relying on technology innovation to boost its future portfolio. In August, for example, in a notable move for a Big Oil firm, it announced a Series A investment in Zap Energy, a Seattle-based startup company founded in 2017 that is developing a fusion modular nuclear reactor and says it has made breakthroughs in plasma confinement technology.

“We see fusion technology as a promising low-carbon future energy source,” said Barbara Burger, president of Chevron Technology Ventures. “Our Future Energy Fund investment in Zap Energy adds to Chevron’s portfolio of companies we believe are likely to have a role in the energy transition.” Burger noted that Chevron has so far made 10 investments as part of the Future Energy Fund, which the company launched in 2018 to explore “breakthrough technologies that enable macro decarbonization, the mobility-energy nexus, and energy decentralization.” The investments, which include more than $1 billion in CCS projects in Australia and Canada, serve to provide Chevron with “strategic insight into power generation markets and potentially disruptive impacts of innovative approaches, like fusion, geothermal, wind, and solar, on the conventional power value chain,” she said.

Sonal Patel is a POWER senior associate editor.

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