Since the first edition of this report in April on the energy transition strategies of global energy majors, several have made significant investments and deepened their climate commitments. European oil majors continue to lead the way in installed renewables capacity and wider electrification strategies, increasing the gap between the sector's transition investment leaders and laggards.
Just as leading international oil companies were revealing ambitious plans in the renewable energy space early this year, the coronavirus pandemic turned energy markets on their heads, upending demand forecasts and forcing companies to revise their assumptions and outlooks.
S&P Global Platts analyzed Big Oil's energy transition ambitions and strategies in April. These plans were in train before the pandemic struck, so the question was whether the coronavirus would delay or accelerate the transition.
With the pandemic foreshadowing a lower carbon system with reduced fossil fuel consumption, the answer has definitively been an acceleration—at least in Europe.
Total, Equinor, Repsol, BP and Shell are all taking determined steps to realize ambitious targets, adding renewables capacity, making further acquisitions in the downstream energy retail and EV charging space and setting out interim targets for renewables that get them to the long-term installed capacity figures and CO2 emissions targets.
US majors ExxonMobil and Chevron have not bought into this vision yet, nor have they been under the same sort of political and shareholder pressure to do so.
In our updated infographic, we survey the situation towards the end of the year. While our headline rankings for the eight companies—based on operational assets and current activities—have not changed, what's interesting is the beefed-up future targets of several of the companies, reflected in changed ambition scores.
All bar Shell, ExxonMobil and Chevron have enhanced targets for installed renewables capacity, either increasing levels, or fleshing out interim targets, setting a pathway for achieving the longer-term more aspirational goals. Likewise, many have added to installed capacity since April.
Total has added over 2 GW since our last survey, with plans to go further by the end of December. BP, Repsol, Shell and Eni have all lifted installed capacity, while Chevron's installed capacity has fallen, with the divestment of a US geothermal facility it previously listed as an asset. However, the company announced a partnership to develop 500 MW of renewable generation to support its operations across several global locations including the Permian Basin.
Eni and Repsol have taken significant steps to move their renewables businesses forward, with both providing guidance on installed capacity ambitions out to 2030, pushing them above Shell and Equinor in the ambitions rankings. BP and Repsol reduced dividend payments in part to increase investment in their renewables divisions.
Equinor has made a final investment decision on its Dogger Bank A and B windfarms in the North Sea with partner SSE Renewables, with the first 1.2 GW stage expected online by summer 2023. Eni also became a partner, buying a 20% stake Dec. 4. And Equinor made a decisive step into the green hydrogen space Dec. 7, joining Shell in the NortH2 project in the Netherlands.
Ownership of renewables is one piece of the larger electrification story. IOCs are also leveraging their impressive trading and marketing reach to help others manage risk around increased volatility, while selling new services via established brands. But there are areas where all the IOCs remain weak, notably in the crucial power networks that are needed to integrate booming renewables.
And in terms of nailed-on financial commitments, the IOCs generally remain focused on their core businesses, squeezing as much value as they can from fossil fuel assets, and Repsol's 25% of capital expenditure dedicated to low-carbon projects is far higher than the proportion committed by the others. The capacity additions pale in comparison to the overall renewables market. Platts Analytics estimates that renewable additions in 2019 totaled 183 GW (105 GW of solar, 63 GW of wind and 15 GW of hydro).
"Besides offshore wind, where oil companies have already established themselves as large players, the competitive advantage of IOCs, especially versus vertically-integrated utilities, is still not completely clear," S&P Global Platts Analytics head of global power planning Bruno Brunetti said. "That might be a reason why IOCs' renewables capacities still represent a very small portion of the annual solar and wind adds, which are set to total some 180 GW in 2020 globally, according to Platts Analytics. Although COVID-19 has seen some project disruptions or delays, global wind and solar capacity added this year will be higher than 2019."
ExxonMobil said in September that returns from renewables were insufficient, while slashing spending, writing off up to $20 billion in impairments and maintaining dividend payments. Even BP has rowed back in the tone, if not the substance, of its ET messaging after its share price suffered.
"The renewables industry has been prioritizing scale over returns, especially now that renewables projects revenues are increasingly exposed to markets," Brunetti said.
The fact remains, however, that there is a looming opportunity for all energy companies to benefit from global coronavirus recovery programs, with green economic stimulus cornering a sizeable proportion of committed funds. While China is seen as a notable exception on this front, channeling much of its recovery funds into existing industry, change may be on the horizon here too following President Xi Jinping's September commitment to net zero emissions by 2060.