French Total has emerged as perhaps the smartest member of the Big Oil club, wasting no time waiting for oil prices to return to early 2014 levels, instead, venturing into the brave new world of renewables and power storage systems.
This move by the French giant was recently lauded by Lux Research in a paper titled Superpower Darwinism: What Big Oil Can and Cannot Do About Total’s Billion-Dollar Battery Move.
Total is preparing for a world that will be dominated by renewable energy, and betting on it to ensure its long-term success. Meanwhile, other supermajors are finding it hard to acknowledge climate change—the single most important factor that is spurring the renewables boom.
Until relatively recently, this acknowledgement could go unnoticed. Renewable energy was more hype than anything else: it couldn’t be stored for any practical length of time, it was – and still is – heavily subsidized in order to be able to compete with fossil fuels. It just wasn’t a serious competitor of coal, gas, crude and nuclear power plants.
Things are quickly changing, however, with the advent of more economically viable energy storage systems and the concept of distributed generation, with the latter set to transform the face of the power distribution market globally. While many skeptics think it’s too early to talk about any economic viability in renewable energy, Total, at least, doesn’t seem to think so, judging by their $1.1 billion spend on the Saft acquisition. Related: 30 Years After The Disaster: Ukraine Plans Huge Solar Farm In Chernobyl
It’s been said here time and again that diversification would be a smart choice for oil majors for a future where their product is not the single source of energy on the market. It’s nothing more than common sense – you need to move with the times if you want to survive. We’re talking about long-term survival here, of course – interesting and promising as they seem, energy storage systems are just starting.
It’s this nascency of this market that is perhaps the greatest challenge for oil supermajors that are considering following Total’s example, according to Lux Research. As the battery business continues to gain prominence, it also gains value, and the worthwhile companies that buyers can choose from are getting increasingly expensive.
Still, as researcher Cosmin Laslau notes, “As Darwinism looms for the future of power, oil supermajors looking to evolve must choose among more expensive, broader battery players. But they should still act, as waiting longer or doing nothing, would be an even worse outcome.” Related: OPEC Output Freeze Plan In Limbo After Oman Refuses To Join
If we are to believe Lux Research, there is no time to waste, and Big Oil should use the cash it has, while it still has it, to enter the energy storage market. It has become abundantly clear that lying low and waiting for oil prices to reach former heights is useless, since nobody can say with certainty whether or even if this will happen at all.
If we are to believe Big Oil, all is well, and crude will soon jump back to $100 a barrel to the joy of shareholders all around. If it doesn’t, Big Oil will just continue cutting costs and maintaining dividends. The problem with this approach is that it’s unsustainable over the long term. This is just basic survival, while in the meantime, other leaner, more far-seeing companies bet on a future in renewable energy, and will be sure to be the first to capture that flag.
By Irina Slav for Oilprice.com
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