Oil majors dip their toes in 'clean energy' and try not to lose money doing it

Bloomberg/Fuel Fix:
The world’s biggest oil companies are closing more clean energy deals as pressure to diversify their businesses mounts and growth accelerates among green technologies.

Oil majors more than doubled the number of acquisitions, project investments and venture capital stakes, to 44 in 2016 from 21 the year before, according to research published Tuesday by Bloomberg New Energy Finance. In the last 15 years, they’ve completed 428 transactions and spent $6.2 billion building stakes in clean energy companies.

“This reflects their underpinning strategy to test out new ideas and businesses,” said Richard Chatterton, one of the London-based analysts that authored the report. “The international oil companies are identifying opportunities and building expertise, and when a commercial opportunity becomes clear, they will invest at scale.”

To be sure, the sums expended on clean energy still represent a fraction of the money invested in crude every year, showing that the oil majors are still very much focused on their core business. Royal Dutch Shell Plc, for example, budgeted $25 billion this year for capital expenditures.

Some of the investments by oil majors in projects and startups isn’t disclosed, according to BNEF, which estimates that the clean energy industry attracted almost $290 billion in 2016.

Solar energy generated the largest number of projects backed by oil companies. Wind created the second-highest volume of deals, with offshore wind investments beginning to catch up with windmills stationed on land. Oil companies have been looking to leverage their know-how in extracting fossil fuels from seabeds to install turbines in similarly harsh climates.

Wind projects offshore also tend to be some of the largest-scale and riskiest in the renewable energy industry, leading to higher profitability. Shell has a stake in the Borssele III and IV wind projects in the Dutch North Sea and Statoil ASA developed the world’s first floating wind farm off the coast of northern Scotland.
So-called clean energy is notoriously inefficient.  At its current stage of usage, it is unable to modulate the flow of energy to meet demand or scale it back when there is less demand.  Proponents are trying to solve this problem with batteries, but they are not there on a scale needed to keep a grid up and running when the wind is not blowing or the sun is not shining.

Offshore wind seems to have the greater potential because it cycles back and forth as the earth heats up and clouds move from the sea to hot spots on shore.  Currently, all of the alternative sources require a backup generator such as natural gas or coal, which tends to raise the price of their projects.  They are at best a supplemental form of energy at this point.

Solar energy is far from free and it may be the most expensive source of "clean energy" and the least dependable and manageable.


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