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Investments by oil and gas majors to expand their renewable
energy portfolios continued in recent weeks, with TotalEnergies
nearly doubling its US renewable power portfolio and Shell
purchasing a wind and solar company in India.
The latest deals continue the companies' strategies of pursuing
their net-zero by 2050 goals through investments in renewables
companies in well-established markets, though they each also have
invested billions of dollars in emerging technologies, such as
carbon capture and storage, green hydrogen production, and
sustainable aviation fuel.
TotalEnergies
TotalEnergies' purchase of Core Solar, announced on 27 April,
adds 4 GW of renewable generation that is either operating or under
development in the US, bringing its total to nearly 10 GW in the
second largest market for renewables by installed capacity, it
said.
Under the company's net-zero plan, it will own and
operate 35 GW of renewable power worldwide by 2025 and 100 GW by
2030, "with the objective of being among the world's top five
producers of electricity from wind and solar energy."
The US is a key market for the company, said Dhroov Sharma,
research analyst, S&P Global Commodity Insights. "As
TotalEnergies is already an established and much larger player in
the US market it is expected to provide financial and operational
strength to Core's businesses," he said.
Following this deal, TotalEnergies' US portfolio exceeds 10 GW
gross capacity of renewable projects that are operating, under
construction, and in development, the company said. These include
2.2 GW of projects acquired through SunChase Power, and 1.6 GW of
projects in partnership with Hanwha Energy. The projects under
development also include energy storage, TotalEnergies added.
The acquisition of Core Energy shows how TotalEnergies is
looking for proven business models for a significant part of its
energy transition, alongside investments in emerging technologies—and
not only in Europe, which accounts for about 70% of its annual
revenue, according to S&P Global. "A company like TotalEnergies
can do both," said Sharma. "It's a smarter choice to invest in a
company with a proven market and technology."
Gianni Chianetta, CEO of the US-based Global Solar Council,
said: "We are currently witnessing an acceleration of investments
by big oil companies in renewables—with a preference for large
plants that have the lowest prices and allow for large economies of
scale—but they had begun many decades ago."
"The difference is that now, they have understood that this is
the only way forward and that the oil age will soon end," he told
Net-Zero Business Daily by S&P Global Commodity
Insights.
At the same time, TotalEnergies is shifting the emphasis of its
multi-billion-dollar fossil fuel business from oil to gas. In 2021,
it acquired a 20% stake in Adani Green Energy Limited
(AGEL) from Adani Group in India for $2.1 billion. AGEL had a
portfolio of 3 GW of renewable power in operation and 3 GW under
construction at the time, but also distributes natural gas.
"This investment in AGEL is another step in the strategic
alliance between Adani Group and TotalEnergies, which covers
investments in LNG terminals, gas utility business, and renewable
assets across India," Sharma said.
Shell
Shell latest dive into renewables also is taking place in India,
as on 29 April it agreed to acquire Solenergi Power Private Limited
for $1.55 billion from Actis, an investment firm that specializes
in sustainable energy and infrastructure.
India is seen as a major growth market for renewable power, as
the nation has goals of 100 GW of renewables to be
installed by the end of 2022 and 450 GW by the end of 2030.
However, third parties watching the industry say the country is
only going to reach about 70% of its upcoming target.
Solenergi owns Sprng Energy, which has 2.9 GW
of wind and solar assets in India (2.1 GW operating and 0.8 GW of
contracted supply). The company had been put on the block last
year, and Shell topped more than 20 bidders, according to local
media.
"This deal positions Shell as one of the first movers in
building a truly integrated energy transition business in India,"
said Wael Sawan, Shell's Integrated Gas, Renewables and Energy
Solutions director, in a statement. "I believe it will enable Shell
to become a leader across the power value chain in a rapidly
growing market where electrification on a massive scale and strong
demand for renewables are driving the energy transition."
The acquisition nearly quadruples Shell's renewable capacity
globally of about 1 GW solar and wind combined. But much more is
coming. Shell says it now has 38 GW of renewable generation at some stage of
development.
As with the TotalEnergies acquisition, this deal is being made
for a secure revenue stream which Shell believes it can grow.
"Sprng Energy generates cash, has an excellent team, strong and
proven development track record and a healthy growth pipeline.
Sprng Energy's strengths can combine with Shell India's thriving
customer-facing gas and downstream businesses to create even more
opportunities for growth," Sawan said.
Shell is an investor in CleanTech Solar, a
Singapore-based developer of more than 600 MW of rooftop solar for
corporations across Asia. Its latest deal, announced 28 April, is
for a 625 kW-rooftop solar PV system for Yachiyo India
Manufacturing Private Limited in Rajasthan, India.
Shell's other renewables investments include: Savion, a US-based
solar and energy storage operator; solar development company
Solar-Konzept Italia, acquired in January 2022; and WestWind, which
operates wind farms in Australia. It's also involved with
prototypes of floating offshore wind farms in France, Ireland,
Norway, Scotland, and South Korea.
Impact on renewables
Having an influx of money and expertise from Big Oil can change
the dynamics for the renewables industry, just as it can open doors
to clean energy for oil majors.
"Big oil companies have been used to big revenues and are
starting to see renewables as an equally attractive business, which
is positive," Chianetta said. "Their investments are good for the
solar and renewables market. These companies can bring more capital
and a global experience in the energy transition."
Because a renewables project is less costly to develop than an
oil field, Chianetta said the industry's lower barriers to entry
have attracted more participants, including companies such as oil
majors that are applying some capital to the sector while remaining
in their core businesses. "While they used to be opponents, today
they can become allies and make a difference in the global race
towards net-zero," he said.
Net-zero strategies
TotalEnergies and Shell are taking different routes to reach
their net-zero goals.
For TotalEnergies, its goal covers
Scope 1 (direct) and Scope 2 (indirect) emissions, and also Scope 3
(use of its products) for its European customers, which are
responsible for more than 70% of current purchases. Using a 2015
baseline, TotalEnergies is aiming for a 40% global reduction in
Scopes 1 and 2 by 2030, and recently announced a goal of a 30%
reduction in its Scope 3 emissions as well. Through 2021, it had
achieved a 15% reduction for Scope 1 and 2, and 14% for Scope 3
from the 2015 baseline, it said last month.
Shell is aiming for all three scopes to be net-zero worldwide by 2050, and
its interim goals are defined by carbon intensity reductions: 6-8%
by 2023; 20% by 2030; 45% by 2035, and 100% by 2050 (against a
baseline of 2016). In announcing its plan last year, Shell said its
oil production peaked in 2019, and it "expects" that its GHG
emissions for all three scopes peaked in 2018 at 1.7 billion metric
tons.
For Shell, it's a strategy to "build material
low-carbon businesses of significant scale by the early 2030s" by
having "a presence across the entire energy system."
But both companies have been the subject of
lawsuits—successfully against Shell—for alleged
inadequacies in their climate plans and progress so far. In May
2021, Shell was ordered by a court in The Netherlands to
improve its Scope 3 climate plan.
TotalEnergies was sued in May 2022 by Greenpeace
France, Friends of the Earth France, and Notre Affaire à Tous for
its advertisements saying it's "a major player in the energy
transition," thanks to its net-zero plan. The lawsuit calls the
claim greenwashing, in part because it says TotalEnergies is
delaying the start of a meaningful exit from fossil fuels until
2030.
Chianetta said that for some oil companies, investments might
have an element of greenwashing, but "for others, it was a way to
be present in the entire spectrum of the energy mix because it has
always been clear that renewables would have potential ... I hope
they show consistency by divesting from fossil fuels."
