Big Oil's Renewable Retreat: A Step Back in Time
Earlier in the week, British oil giant BP showed another indication of reducing investment in renewable energy, pegging the amount of investments it would make in its equally-owned joint venture offshore wind business Jera Nex at $3.25 billion, making experts to suggest that the company might renege in its commitment to invest around $10 billion in offshore wind business between 2023 and 2030.
Recently, Shell showed indications of stepping back from new offshore wind investments, agreeing to sell 80 percent stake in the 1.26 MW MunmuBaram floating offshore wind project off the coast of Ulsan in South Korea to its joint venture partner Hexicon.
In the same vein, Norwegian oil giant Equinor plans to reduce its commitments to the development of the renewable energy sector, by reducing workforce in the sector by 20 percent, a reduction that equates to approximately 250 full-time jobs.
European oil companies seem intent on reducing investments in renewable energy, cutting down on the number of their workforce, selling their business, pegging the amount of investments they would make in their joint-venture businesses.
Shareholders had been putting BP under pressure over its losses in the offshore wind business, such as recording $540 million impairment related to offshore wind projects off the United States north-east coast in the third quarter of last year, due to a rejection of its requests for better terms.
At the same time, stakeholders st Equinor have been putting pressure on the company over its offshore wind business also, caused by the company recording $300 million impairment related to its offshore wind portfolio in the United States, the impairment including $100 million in projects, $200 million related to real estate in New York and cables, and $16 million in contract termination fees.
Stakeholders have been putting Shell under pressure over the situation in the offshore wind business, which made it to sell 50 percent of its stake in SouthCoast Wind Energy last year, due to a slowdown in 2023 from rising inflation, high borrowing costs, and supply chain challenges bringing a jump in costs.
Swedish company Vattenfall has been under pressure as well, from an increase in the cost of construction of an offshore wind by 40 percent last year, making a planned 240 turbine offshore wind development in a place like the North Sea to become unfeasible.
The decision of Shell, Equinor, and the others to reduce their investments in the renewable energy sector comes as a result of many factors and has ramifications in the climate front.
The International Energy Agency (IEA) estimates that in order to limit global warming to 1.5 degrees Celsius above pre-industrial levels renewable energy capacity must triple while energy efficiency must double by 2030.
The International Governmental Panel on Climate Change (IPCC) indicates that greenhouse gas emissions need to be slashed by 43 percent by 2030, as one of the measure to enable the planet reach net-zero by around mid-century.
The United Nations Environment Programme's (UNEP) 2023 Emission Gap Report found that global low-carbon transportation are required to deliver cuts of 28 percent for a two degrees Celsius and 42 percent for a 1.5 degrees Celsius pathway.
Though European oil companies have reasons to reduce investments in renewable energy, this can have significant impacts on climate change, and may in fact hinder progress towards global climate goals, especially when oil companies put profits above everything else.
Governments can halt the trend,by offering incentives for renewable energy investments, such as tax credits, flexibility during negotiation of contracts, and other measures to encourage investments by big oil companies in the renewable energy sector.
What to Eat
Vegan food from Chile, Credit, Happycow. Net.