A battle for clean-energy assets is brewing between green-minded oil giants and the utility companies that currently dominate the fast-growing business.
Last week, Portuguese utility EDP became the latest energy producer to raise its ambitions for renewable energy—it plans to double capacity by 2025. It joins an increasingly crowded field, consisting not just of other forward-thinking utilities but also the European oil and gas supermajors.
Among the latter, BP won two 1.5 gigawatt U.K. offshore wind leases in February by bidding almost double the amount fetched by similar-sized leases at the same sale. A handful of auctions around the world in the coming year will further test the new competitive dynamics—and perhaps highlight the risks. Future returns for investors will depend on companies paying sensible prices.
Oil and gas shares have fallen amid growing uncertainty about petroleum’s future profitability. Renewables are an obvious opportunity: Demand for clean power is expected to boom as economies decarbonize and transport and industry electrify.
BP has promised to increase its renewables capacity from 2.5 GW to an extraordinary 50 GW by 2030. In addition to the U.K. leases, it has partnered with Norwegian peer Equinor for offshore wind in the U.S. and owns 50% of solar-developer Lightsource BP. French giant Total wants to increase its renewables capacity fivefold to 35 GW by 2025, and more than double that again by 2030. Shell plans to invest $2 billion to $3 billion into clean-energy projects through 2025.