Oil companies see the light in green solar power
Solar parks and filling stations with solar panels on the roof are now a fact of life for several conventional oil and gas companies. Partly because of the political pressure to produce more climate-friendly solutions, but also because they see that green energy makes good business sense. This is now prompting the Danish Confederation of Industry to urge companies to follow their example and increase their investments in renewable energy.
Several major oil and gas companies, such as Total and Shell, are now riding the green-energy wave. They are in the process of a green make-over and are eliminating parts of their petrochemical portfolio for the benefit of sustainable energy, particularly solar photovoltaic cells. At the same time, they are incorporating clean energy solutions into their future corporate climate strategy.
One of the reasons that even oil companies are starting to look towards the sun is because the green way forward is profitable. Troels Ranis, Sector Director, Confederation of Danish Industry, explains:
“It’s financially attractive to have energy supplied from renewable sources. So obviously major oil companies are shifting their focus towards the market of the future: renewable energy.”
The sun is shedding light on the oil companies
The French oil giant Total, one of the ten biggest oil companies in the world, is investing in wind and solar power – and solar in particular is the focal point of a new, more climate-friendly energy company. This is expressed by large solar parks in a wide range of countries, including India, France, Greece, Brazil, Chile, Japan, the United Arab Emirates and South Africa. At the same time, Total is also investing in battery-powered storage of solar energy, and the oil company has raised the bar for the provision of renewable energy from 1.9 GW today to 10 GW in 2023, assisted by, among others, its subsidiaries Total Solar, SunPower and Total Eren.
This is evidenced in Total’s climate report on its corporate climate strategy for the future. It also reveals that in 20 years, 20% of Total’s assets must in be invested in companies with low carbon emissions, including energy from solar photovoltaic cells.
The Dutch-British oil company Royal Dutch Shell, whose revenues of USD 388.37 billion last year make it the second biggest oil and gas company in the world, is also on the lookout for the sun. Shell has large solar parks in places like Tennessee, USA, India and South-east Asia, and it is also investing vast amounts in renewable energy. At the same time, Shell is planning to become the world’s biggest power company by 2030, with the aid of these clean types of energy.
“We know that wind and solar power are the cheapest technologies to invest in to get new electrical capacity. And the demand for electricity is steadily increasing. As a result, a green, low-cost future in the field of renewable energy is beginning to emerge. And that’s precisely where the investors are going,” Troels Ranis says.
Anders Markus, CEO, Obton, confirms this trend:
“In recent years, we’ve experienced a massive, rising interest in solar-power investments. The global climate emergency and subsequent action plans, such as the European Union’s climate targets, have prompted a global demand for solar parks, and investors have started to realise that solar power is both a stable and profitable business.”
Shares in solar and wind power also perform far better than shares in fossil fuels, primarily because the costs of solar and wind have dropped. According to finans.dk, the price of solar power has declined by 85% since 2010, whereas the cost of wind power has fallen 50%.
And, according to a report from the International Energy Agency (IEA), solar energy is the renewable form of energy that will increase the most over the next five years, due to the rising demand for electricity, among other factors.
Political pressure for renewable energy
The reason that oil giants are replacing at least some of the black precious drops with green energy – and are now starting to let the sun shine in as a possible guiding financial principle – is closely related to the fact that they’re feeling the political pressure for more climate-friendly solutions, including the Paris Agreement’s target to limit the temperature increase to two degrees Celsius.
This is why requirements are being imposed to eliminate fossil fuels and replace them with renewable energy, and many European countries, including Denmark, have set a target of being carbon neutral by 2050. Denmark intends to cut its carbon emissions by 70% already by 2030. And the target of the European Union is that 32% of total energy consumption must come from renewable sources by 2030.
“These are striking political aims. The path to achieving these goals is long, but enormous upheavals will occur in the process of phasing out fossil fuels. The major oil companies are closely aligning themselves with the Paris Agreement, because they are keenly aware of the necessity of taking responsibility,” Troels Ranis says, adding:
“And we’ll have to convert to renewable energy and take climate-friendly initiatives to reduce greenhouse gases and reduce global heating.”
This call-out for greener investments is also closely aligned with another specific new initiative from Total. Many of the company’s petrol stations have recently had solar panels installed on the roof – and Shell is headed in the same direction. Over the next four years, Total intends to cut its carbon emissions by 100,000 tonnes by opening 5,000 solar-powered petrol stations and 300 solar-powered industrial areas.
And many petrol stations, such as Shell’s, have now installed charging stations for electric and hybrid cars, which will gradually be increasing in number going forward.
“We need to invest USD 90,000 billion in renewable energy up to 2030 to comply with the Paris Agreement of limiting the temperature increase to two degrees Celsius. Up to now, oil companies have serviced the prevailing demand for energy. Now they have a new reality to consider. And they will be massively increasing their investments in renewable green energy to achieve the goal.”
Oil companies’ U turn inspires companies
The green conversion can have a positive rippling effect and spread to other companies, Troels Ranis assesses:
“It’s pleasing to note that oil companies have set some climate targets. This will accelerate developments among other companies which can benefit from being inspired by these big oil companies,” he says, and continues to view the climate challenge from the perspective of Danish companies:
“The awareness of the climate challenge is high in the Danish business community. Now, we must start using even more tools to get the transportation and manufacturing industries on board so we can further reduce our dependence on fossil fuels. Our companies are motivated to achieve the 2030 target of reducing carbon emissions by 70%, at the same time that we adhere to growth to ensure positive financial development.”