By Anders Lorenzen
In order to make their portfolio more sustainable and respond to lower fossil fuel demand, oil majors are increasingly snapping up renewable energy projects as the pressure grows to take action on climate change.
Reducing carbon intensity
Research from Global Data, an analytical firm, shows that BP, Total and Shell are working actively to restructure their businesses and infrastructure to add renewable power projects in their portfolio. Some of these companies have also unveiled ambitious net-zero strategies. The companies are hoping this will reduce their carbon output.
Ravindra Puranik, Oil and Gas Analyst at GlobalData, said: “Global power demand is expected to grow at a compound annual growth rate (CAGR) of 2.5% from 2020 to 2030. A significant portion of this will be fulfilled by renewable power generation. This growth outlook makes renewable power a key market for players across the energy sector, including oil and gas companies whose traditional market is at risk amid the transition to low-carbon sources.”
Puranik further explained: “Traditionally, renewable power projects had a significant cost disadvantage over coal- and gas-fired power plants. However, in recent years, their economic competitiveness has improved significantly due to government policies and incentives, as well as technological advances. This has incentivized oil and gas majors such as BP, Equinor and Shell to invest in wind power generation. BP and Total are also leading the way in terms of upcoming solar power capacity.”
Wind and solar growth
Within the renewable power sector, solar and wind energy are expected to show the highest growth rates over the next ten years due to ongoing falling costs. Puranik explained that solar power generation, which includes solar PV and solar thermal, is expected to grow at 11.9% between 2020 and 2030. Meanwhile onshore and offshore wind segments are expected to collectively grow at 9.4% over the same period.
In addition,governments are under pressure to increase their climate ambitions before the COP26 UN climate summit which begins at the end of this year and laws are being enacted to facilitate decarbonization. Many countries prefer the easier option of electrification through renewable energy sources.
The growing role of renewable energy poses a major threat to fossil fuel-based power generation. Natural gas-based power generation will especially be threatened by renewables growth and is likely to be the next biggest loser in the energy transition after coal and oil.
Some campaigners are likely to need more convincing that this is not just a greenwashing exercise and a genuine effort to slow down climate action.