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Big oil and gas won’t ‘sit around while renewables cannibalise their profits’

Image: Getty.

Image: Getty.

Oil and gas majors are expected to make significant plays in the solar sector in the coming years as continued cost reductions threaten their margins.

This was one of the conclusions heard at this week’s Solar Finance and Investment conference, organised by Current± publisher Solar Media, which saw financial heavyweights in the sector consider that O&G firms will not just “sit around while renewables cannibalise their profits”.

That statement was made by Aldo Beolchini, managing partner at top-five UK solar asset holder Next Energy Capital, referencing moves and investments into the solar sphere from the likes of BP, Shell and Orsted.

In late 2017 BP acquired a minority stake in UK solar developer Lightsource in something of a return to the technology it once sought to manufacture. BP originally sought to enter the upstream solar market through acquiring Lucas Energy Systems in the early 1980s and then Solarex in 1999, but shuttered the division in 2011 citing economic feasibility concerns.

But Lightsource BP, as a downstream developer, is now active in numerous markets and has recently featured prominently in the O&G major’s new advertising campaign, highlighting its role in the energy transition.

Shell, meanwhile, has acquired both US developer Silicon Ranch and Asian installer Cleantech Solar, cementing its status in the downstream solar market in much the same way.

Those investments are only expected to increase as the cost of solar developments continues to fall. Projections from German solar company BayWa r.e. at this week’s conference revealed that it expects utility-scale solar PV to have reached grid-parity in most European countries by 2021, with some markets already there.

This was followed by Abid Kazim, managing director at solar asset manager Wise Energy, who suggested that solar should be able to generate at around £35/MWh before 2020, a price which would bring the technology significantly cheaper than gas.

And the advent of grid-parity solar is expected to have a lasting effect on the industry, with Kazim also suggesting that there will be a “culling” of solar developers as “new entrants with deep pockets” enter.

While BayWa r.e.’s Benedikt Ortmann refuted that suggestion and insisted that his firm was “not scared” of O&G majors squeezing out existing solar firms, Kazim was steadfast in his assertion that M&A activity could yet continue.

“The talent’s here, but they’ve got the pockets,” he said.

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