Big Oil’s Foray Into Green Energy Creates Highly Competitive Market

The increased investments of international oil majors in renewable energy projects are diminishing the returns of the pure clean energy firms, especially combined with a surge in raw material prices this year, executives tell Bloomberg.

For example, Equinor wants to be a big name in offshore wind, and Norway’s major bid for offshore wind acreage in the major ScotWind leasing round last month. So did BP and Shell.

Members of the Big Oil club are now competing among themselves and with the pure renewables players for wind and solar tenders around the world, pushing up prices for acreage and thus raising costs and reducing the profitability of companies that have been operating for years in the sector.

“If you look at renewables -- just renewables, nothing else attached to it -- you reach a stage where the returns are going to plateau and probably go down a little bit in the next years because of increased competition,” Francesco Starace, chief executive at Italy’s to utility Enel, told Bloomberg TV. “Our view is that the strategy of an integrated utility is a much safer position,” Starace added.

At the end of last year, Enel, Europe’s largest utility, said it planned to invest as much as US$190 billion (160 billion euro) by 2030 in boosting renewable power generation, decarbonization, and grid infrastructure as part of a new plan to become a “Super Major” in renewables.

The biggest developer of offshore wind farms in the world, Denmark-based Ørsted, said in June it was concerned that the race of the biggest oil companies to enter offshore wind could lead to spikes in seabed acreage prices, which would undermine project competitiveness and the speed of technology development.

“Our concern is that if that inflation continues it will eventually come to the disadvantage of the speed with which we accelerate the technology or the competitiveness of the technology,” Ørsted’s chief executive officer Mads Nipper told Reuters in an interview ahead of the conference Reuters Events: Global Energy Transition in June.  

By Tsvetana Paraskova for Oilprice.com

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