Your browser is not supported. Please update it.

1 October 2020

Total fuels European majors’ race to renewables, still lack ambition

Total has added 3.35 GW to its solar development pipeline in Spain, in co-operation with local developer Ignis. This is a further shift toward renewable energy for one of the Big Oil supermajors, and also involves the world’s biggest corporate PPA. But when looking at its future outlook, the company is still reluctant to shake its oil and gas habit.

Total also this week released its “Energy Outlook 2020”, an analysis of future oil demand and green energy development. Two scenarios were considered – a ‘Momentum’ scenario in which only Europe adopts a Green Deal with the rest of the world’s approach being much more ad-hoc, and in which only proven renewable technologies are pushed: and a ‘Rupture’ scenario in which the world adopts net-zero for 2050 and many future technologies such as hydrogen are fully implemented.

Even the ‘Rupture’ scenario overstates coal’s future dramatically, and it likely overstates natural gas, which isn’t key to grid stability if it can be replaced by renewable baseload options such as batteries, hydrogen and solar thermal storage. It may seem like a big admission for a company to make – that the traditional core of its business will enter permanent decline in ten years – but BP and others have recently predicted that peak demand may have already occurred, if there is never a full post-Coronavirus rebound.

In February Total made deals with Powertis and Solarbay for 1650 MW in the same country, meaning it now has a solar power pipeline of 5 GW in Spain. The Ignis projects are due to come online between 2022 and 2025, while the Powertis and Solarbay projects are due 2020 through to 2023. The 3.35 GW projects with Ignis are located mostly around Madrid, with the rest in Andalusia. Total has said it will itself purchase the projects’ 6 TWh annual output, making for the largest corporate PPA yet seen anywhere.

From full commissioning in 2025, this will be enough to power all of Total’s European industrial sites. Earlier this year it was reported that the company wants to have 7 GW of renewable power capacity and 3 GW of gas in Europe by 2025. The company has a global goal of 25 GW renewable capacity by that time, both wind and solar.

At the end of last year, the company stated that it had 3 GW of renewable capacity online, and was investing between $1.5 billion and $2 billion annually on low-carbon electricity generation – more than 10% of its $18 billion or so total capital expenditure. To meet those targets, and the several gigawatt-scale renewable projects it’s announced this year, Total’s renewable energy investment will have to increase about four times over to reach half of total investment.

Even though Total is still putting 90% of its investment into non-renewables, this puts it ahead of Shell and BP. Shell is likely to at most scrape through on the lower end of its $4 billion to $6 billion renewable energy spending target for the 2017 to 2020 timeframe, despite having overall capital expenditure about a third bigger than Total at $23 billion.

Similarly, BP has a 50 GW renewable target for 2030 – considering its capital expenditure is about on par with Total’s, and that renewable energy is always becoming cheaper and more mainstream, this is a less ambitious target than 25 GW by 2025.

This ambition is being realized with massive utility-scale developments like the 800 MW Al Kharsaah solar complex in Qatar, by buying into Adani solar and gas assets in India, but also with distributed solar such as a recent move by Total Solar DG into Vietnamese rooftop buildout. While still overwhelmingly dealing in oil, gas and petroleum products, Total’s renewable activities have been steadily accelerating since its acquisition of solar manufacturer and developer Sunpower in 2011.

Chairman and CEO Patrick Pouyanne has called Spain a priority country within Europe. Besides its own industrial assets, Total’s power plants serve 2.5 million residential customers there, and 3,000 industrial customers. Within Western Europe, Spain is by far the most favourable country for utility-scale development right now, with the best combination of high solar resource, land availability, and incentives since a 2018 reform. Solar is being developed there faster than France, Italy and the UK combined, while Germany generally doesn’t allow for utility-scale projects on the hundred-MW scale.

In July, shortly after this year’s oil price crash, Total announced $8.1 billion in impairments. Its Canadian oil sands accounted for 75% of that; besides the lowering of the oil price outlook, those oil sands are energy-intensive, and Canada introduced a carbon tax last year. Every oil major suffered similar write-downs when the oil price collapsed; Total revised this year’s expected average price from $60 to $35, and right now it’s still below $40.

However, Total seems to have been hit less hard than peers BP and Shell, due in part to its ongoing shift to electricity generation and renewables. In recent years it’s bought into car battery manufacture, the French energy utility sector, and it entered North Sea wind in June and South Korean floating wind earlier this month. Renewable stocks have fared especially well through this year’s unusual events, compared to fossil fuels.

Total pledged itself to a carbon-neutral 2050 this May, which came across as partly a reaction to the oil price collapse. This is in contrast to BP, which pledged 2050 net-zero in February, but not Shell, which likewise pledged after the crash, in April. Total’s carbon-neutrality promise applies only to its own operations; as for emissions from its products used by customers, it has a 2050 net-zero target applicable only to Europe, and 60% reduction for the rest of the world.

This same week, Total told EnergyWatch that it’s considering oil expansions in Danish waters, which would access undeveloped resources within the Halfdan Nord, Valdemar Lower Cretaceous, and Adda fields. These would be unmanned facilities connected to Total’s Halfdan and Tyra Southeast infrastructure. This acknowledgement of possible fossil fuel exploration comes with more caution than usual regarding financial viability in the Coronavirus era, which has forced the oil majors to review their spending extensively. Even when discussing oil exploration, the company makes mention of emissions efficiency, and with possible Danish political opposition in mind, it supposes a late 2020s timeframe for these tentative projects.