When we speak of green energy, we refer to sources that generate energy with little or no pollution. Solar and wind power are the best examples of green energy sources that are being widely adapted by businesses with a view to curtailing rising greenhouse emissions and develop a sustainable alternative for fossil fuels. With its wide range of commercial and environmental benefits, ‘Going green’ can act as an effective risk mitigation strategy for some of the major oil and gas corporations. However, with shrinking profits and growing market volatility, oil and gas majors such as Exxon and BP have, in the past, either postponed or cancelled their green investment plans. Also, as evident from the figure below, new investments in clean energy have gone down as compared to previous years. In the current market scenario, it is interesting to look at those major oil and gas companies who are still investing substantially in green energy. Related: Have Natural Gas Prices Bottomed?
Source: BNEF
Royal Dutch Shell - Staring At The Larger Picture
Shell is one of the few Big Oil majors that are placing their bets on green energy. Thanks to its merger with BG group, Shell is all set to become the most powerful and the biggest Liquefied Natural Gas producer in the world. It is a fact that as far as alternate energy is concerned, the big oil firm is investing mostly in biofuels that are not exactly ‘green,’ but one must note that Shell Foundation is investing close to $75 million in India’s clean energy sector in the next five years. The firm plans to invest in the global clean energy sector with a major focus on India and Africa. This is one of the wisest investment moves by Shell as India is shaping up to be a potential game changer for the solar power sector. According to Pradeep Pursnani, deputy director- chief operating officer at Shell Foundation “"An average firm in the alternate energy (market) takes six to ten years and $5 million to $20 million before they start making profits. We have patience to fund these companies til the time they succeed as we have a bigger risk appetite." Related: Tesla Could Be Changing The Dynamics Of Global Energy
Total - Investing In Solar
The French oil and gas giant is one of the few companies that increased its investments in green energy. With revenues of $ 2.4 billion in 2012, Sunpower is one of the leading manufacturers of solar panels. Total acquired a 66% interest in Sunpower, thereby enabling it to enter the lucrative solar power business. In fact, Total has now become an integrated operator in the photovoltaic energy sector.
California Valley Solar Ranch is one of the biggest solar power plants in the world and Sunpower as its EPC contractor and technology provider. The solar power plant has a 250 MW AC generating capacity, production equivalent to the power use of 100,000 households and is equivalent to removing around 62,000 cars from local roads and freeways. Total has also invested substantially in concentrated solar power, a technology which converts heat to power more efficiently, produces alternating current directly and utilizes the entire line spectrum. Similar to what Tesla is doing now, the French giant invested $4 million by signing a five year contract with Massachusetts Institute of Technology in 2009. The idea behind this investment was to produce a highly efficient, low cost, long life battery.
Statoil – Placing Its Bet On Wind
The Norwegian multinational company is one of the largest investors in clean energy. Being the biggest shareholder of Statoil, the government of Norway has decided to boost its investments in renewables by utilizing its $860 billion oil fund. As per Norway’s finance minister Siv Jensen “The increased scope we give on green investments will help the fund’s ability to actively manage investments in this area”. Related: EU Needs To Invest €400B By 2020 To Keep Renewables On Track
Statoil is betting big on wind. The company’s offshore wind farm in UK, Sheringham Shoal, has an installed capacity of 317 MW and can provide power to approximately 220,000 households annually. Apart from this, Statoil also acquired a 70% stake in the Dungeon wind farm project in October 2013, a project that can be fully operational by 2017. The company is also part of a consortium called Forewind that is formed by RWE, SSE and Statkraft. The consortium won the rights to develop the Dogger Bank Wind Farm that is located off the east coast of Yorkshire. Dogger Bank Wind Farm would contain a number of offshore windfarms having an installed capacity of up to 1.2 GW. By 2020, the consortium plans to install a total capacity of 7.2 GW that can satisfy close to 8% of UK’s future electricity requirements.
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What we can take from these developments is that on one hand we have big oil majors that are moving away from green energy and focusing solely on fossil fuels. On the other, we have Shell, Total and Statoil who are seeking alternative ways to drive their profits; investment in green energy being one of them. It is interesting to note that both Shell and Total have recently aligned their refining and trading operations as well as stepping up their restructuring in order to maximize their margins. So in the end, it is the money that matters. However, these oil firms are aware that green energy is a long term investment which would not yield immediate monetary benefits.
By Gaurav Agnihotri of Oilprice.com
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