Pandemic Pushes Prodigious Pivot Past Petroleum

August 4, 2020

Subject of two pending videos, but things are happening so fast I hope they get posted while they’re still fresh..

Bloomberg New Energy Finance:

The global pandemic of 2020 has slowed down demand for oil and gas but provided a big boost for renewables, said Mona Dajani, partner and global head of energy and infrastructure at Pillsbury Winthrop Shaw Pittman LLP in New York.

Fossil-fuel companies that saw oil futures drop below zero in April are pivoting toward wind and solar in a big way, Dajani, one of the leading deal makers in the renewable energy industry, said in a phone interview with BloombergNEF in June. She is also seeing storage increasingly bundled into packages with wind and solar.

This interview has been edited for brevity and clarity.

Q: There are a lot of weird things going on in the world of energy right now. What are you seeing?

A: A lot of oil and gas majors are headed to renewables and I’m helping them in their transition. And this pandemic, weirdly, is expediting the investment in renewable energy from oil and gas majors — like BP, Enel, Total, Shell — as well as corporate purchasers. The pandemic has heightened the unpredictability of returns, and the market volatility makes the business case for renewables stronger.

I can’t tell you how strong oil and gas is just pivoting in this space. It’s amazing. BP’s chairman, Bernard Looney, made an announcement that, “Yeah, we’re taking a $17 billion hit, but then we’re investing $12 billion in renewables.” It’s like whiplash, it’s crazy.

Q: What else is driving the decision?

A: Market dynamics are continuing to weaken some of the viability for conventional oil and gas resources. And these companies’ interests in long-term contracts and better ROI now go beyond a response to shareholder activism and carbon commitments. I helped Saudi Aramco recently bid a huge deal, just like with BP, where they are really pivoting in this space, they’re buying other companies, technologies, this is Economics 101.

Q: Among renewables, who are the beneficiaries?

A: The big utilities and oil super majors are jumping into offshore wind. They need the resources and staying power to survive, and they’re jumping into this offshore wind, to build out. They’re bringing in deep pockets to capital-intensive products. We’re seeing fossil-fuel super majors repurpose some of the infrastructure needed on flagships and offshore cranes, which is great. We’re seeing very strong M&A activity and a lot of consolidation in the industry to continue in this space.

Q: What specifically are you seeing in the U.S.?

A: This summer we saw Dominion Energy building the next two offshore wind turbines in America that are off a demonstration project in Virginia. This is the first new project to come online since Block Island’s first five offshore turbines in 2017. Virginia has committed to moving beyond fossil fuels by 2030. So have other states — Connecticut, New New York, Massachusetts, New Jersey, North Carolina.

Q: Besides money, what do oil and gas majors bring to the table for a renewables project? Do they have expertise that translates?

 They have the money and the talent and a lot of the existing infrastructure. And if you have that and the mandate to expand in this space, it’s almost like a win-win for both the company and the renewable energy industry. They’re changing how they’re perceived and some of it is obviously very much driven by profits, but it’s a survival strategy too.

Q: What has that meant for wind power contracts? In the early days of wind, a developer needed a 20-year contract at a fixed price to justify going forward.

A: There’s a lot more creativity and flexibility because they’re bringing more money and security to the table. These majors come in with their wherewithal, their financial creditworthiness, and they’re able to take more risks. And so we don’t need to have 20-year contracts.

Q: What other sources of money are out there?

A: Sustainability-linked debt products are also helping drive capital into the market. They’re brand new, but this is going to help innovate how we finance renewable energy products to attract new capital. These SLD products have gained a lot of traction globally.

Q: How much potential do they have?

A: I truly believe that it has potential to drive new capital investments into the market to support the projected $1 trillion-a-year cost of sustainable economic recovery. I’m seeing a much greater demand for these products in London, and I’m seeing big investment houses like Blackrock, Citi and others that are starting to see this. The pandemic is just spurring it on.

Q: What else is the industry looking for on the regulatory side?

A: We can learn a lot from the success in Germany, Denmark and Japan. I’ll just focus on offshore wind. There are over 4,000 offshore wind turbines in 11 countries in Europe. And we’re hoping that if the U.S. could see 1,700 turbines installed by 2030 off the seven Eastern states that are proceeding on this now, that would be great. We can take advantage of the institutional knowledge and technology that’s already been successful there. We can’t afford to take that long. We need the jobs and the investments in the U.S. now.

Q: What do the regulators need to do?

A: We want Congress to include a five-year extension of the Investment Tax Credit, specifically for offshore wind. We want the regulatory and permitting agencies to issue permits in an efficient, transparent, and timely manner. Recently, the Bureau of Ocean Energy Management issued its draft supplemental environmental impact statement for the Vineyard wind project. And they are also scheduled to issue the final supplemental statement on Nov. 13 and record a decision on the project in December. The agency needs to stick to these deadlines. The permitting reviews are the foundation.

Q: By the numbers you just gave, if the U.S. has a really good decade for building wind turbines, they’ll have half as many as Europe has now.

 That’s correct. We’re supposed to be the innovators, and we are clearly behind. But one bright spot is a lot of the Europeans have already worked out the kinks in this space. They’ve gotten cheaper, more efficient, more proven. And we have so much very good space for this too. It’s going to open up the West Coast within five to 10 years. The National Renewable Energy Laboratoryis helping the International Energy Agency design a 15-megawatt turbine that could become the industry standard. And all of this adds up to 40,000 full-time jobs throughout the U.S. by the end of this decade, just with offshore.

Q: Let’s shift to storage. Batteries have been getting better and cheaper, and they’re being paired with solar and wind projects. Lithium-ion is the dominant technology now, but there are other promising technologies on the horizon. What does it take for a promising technology to start to grab market share away from lithium-ion?

 They have to start with a viable, tested technology; I’m amazed how many calls I get from developers that don’t have that yet. Then they need some believers that have money, and those believers can be strategic partners. The technology doesn’t have to be out there for a long time, but you need to have a pilot. And then the model needs to make sense economically. There needs to be a certain level of ROI. And they have to have flexibility to pivot quickly, which requires an experienced management team.

From the developer’s side, they need the money, the vision, the technology, and the tenacity, and to be wide open in terms of who potential strategic partners can be and how they can help. A lot of developers are like engineers: They may have a really cool idea, but unless it’s viable and you’re going to make money, it’s really hard to get something off the ground.


14 Responses to “Pandemic Pushes Prodigious Pivot Past Petroleum”

  1. indy222 Says:

    Believe what they DO, not what they say. And believe the Keeling Curve more than what they DO. Only Nature doesn’t lie in a self-serving way.

    Now, let’s see what the Keeling curve says in the past two years. China went into shutdown in January, we in February, March. Other countries somewhere in between. Do you see any change in the Keeling Curve? I’ve stared at it with squinted eyes and see none whatsoever. Still 3ppm per year rise, same slopes up and down in seasonals.

    The historical connection between the pursuit of energy efficiency and the health of the economy shows that energy efficiency gets worse as we go into recessions. That is also what is predicted by the Garrett Relation, if it continues to hold true as it has for 50 years.

    As long as we single-mindedly pursue economic growth on a finite world, we will stay on course for a very grim future. Here’s the Keeling Curve up to date, last 2 years so you can see the pandemic effect.

    • rhymeswithgoalie Says:

      How much of the difference comes from additional wildfires and permafrost CO2? Eventually, the permafrost will become a significant portion of the GHG release.

      • greenman3610 Says:

        the answer I keep getting, and this is in regard to permafrost releases, is that the volume is something like 10 percent of human releases.
        So, a headwind, but not game over.
        Human decisions still the overwhelming factor.

  2. J4Zonian Says:

    [Our leaders] “go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent. Owing to past neglect, in the face of the plainest warnings, we have now entered upon a period of danger … perhaps, indeed, it is a more grievous period than that, because at that time at least we were possessed of the means of securing ourselves and of defeating that campaign. Now we have no such assurance. The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to its close. In its place we are entering a period of consequences.”
    Winston Churchill, ‘The Locust Years’ House of Commons. 12 November 1936

    The consequences are strong feedbacks and continued fossil fuel use that are raising atmospheric CO2 concentrations; to stop that we’ll have to stop emitting and sequester enough carbon through reforestation and permaculture to reduce C)2 below the level at which those feedbacks are triggered. How much below is a question we’ll have to answer as we go, through scientific research.

    • rhymeswithgoalie Says:

      A couple more old-schoolers were primaried by Progressives yesterday. I hope we can keep this up. Electing Biden as POTUS might stop the hemorrhaging, but we need the firebrands to move things forward.

      • J4Zonian Says:

        Biden will never in a million years do what’s needed to avoid cataclysmic climate chaos. Electing him will make so many activists go back to sleep it will be a thousand percent harder to get anything passed on climate. If he wins it’s likely midterms will turn at least the Senate back over to the other half of the corporate duopoly. Until the progressives are a large majority of Congressional Democrats and Democrats and/or Greens are a supermajority of Congress it’s unlikely enough will happen on climate to save civilization.

        Electing Trump is unacceptable. Electing Biden is unacceptable. If we want civilization and most life on Earth to survive, we need to do whatever it takes to elect Bernie.

        • rhymeswithgoalie Says:

          Even Bernie as POTUS would leave him constantly being distracted by the wars, pandemics, humanitarian disasters, etc. The real power to do things is in Congress making laws, so we have to take the Senate.

          • J4Zonian Says:

            There’s a LOT that can be done by the president alone, and nothing that can be done by Congress alone without a veto-proof majority, which will never happen.

            Just 3 big examples:
            Fossil fuel extraction ban on all federal lands
            All Executive Branch (EB), military, homeland security, etc. vehicles to be EVs
            Electrifying and efficientizing all EB buildings. Renewablizing?
            Rejoining Paris. And insisting it be stronger?

          • Abel Adamski Says:

            A concern about Bernie is that he is going to present a Bill to tax the profits of individuals that have profited greatly during the Pandemic, He singled Elon Musk because of the meteoric rise in Tesla Share price which had nothing to with the Pandemic (apart from all the stimulus cash given to Wall St), that profit to be taxed at 60% with the money paying for healthcare.

            Elon does not earn a salary rather lives by borrowing Against his Tesla and Space X Shares and currently has approx $1Billion in personal Debt.

            Also the Bonus he has received as remuneration for achieving performance milestones are an option to purchase a given number of shares per milestone at $350, they are kept in escrow for 5 years and cannot be sold or disposed of.

            It is not just Elon in Tesla and Space X (whose value has risen sharply after the manned flight to and from the ISS, once again nothing to do with the pandemic.
            Also all the key people, the brightest and best and the board members would be hit with the same tax.

            Without Tesla and it’s innovation we would not have the EV revolution happening around the world, that is why it has been the most shorted stock in history with deep pockets trying to destroy it and Elon.

            This bill would lead to the would be destroyers pushing the price up until tax cutoff, then short it down to $300 or less, meaning Elon and Tesla’s key people would be faced with a 60% tax bill on paper unrealized profits at something like $2000 a share and would be forced to sell their entire holdings at a relative pittance and still owe the Tax Department and Banks $Billions bankrupting them and they would no longer have shares or positions in the company so the Wall St sharks would own the company and sell of the prized Supercharger network and FSD/AI technology and the other secret IP such as their new batteries.

            Tesla would be effectively gone and no longer innovative or a threat to Dinosaur legacy ICE manufacturers who are still only making token efforts efforts towards EV’s as their profits and capital are tied up in their ICE models.

            This would also kneecap Tesla’s Solar and Grid Battery capacity saving the Fossil fuel energy business.

            Bernie seems more interested in destroying any attempt to reduce Carbon Emmissions and tthe transition to clean energy

          • J4Zonian Says:

            yes, Abel,

            That’s a concern. We all know money is the only motivation; saving humanity or becoming revered by billions of people never got anyone to do anything. (I think of band and tribal societies like the Lakota where no one ever sacrificed anything or did anything brave or useful because there was no possibility of becoming rich over it—they couldn’t own more than they could carry so no advances ever happened, like the revolution of adopting horses to completely change life. Oh wait, that one did. Twice. Well, other than that…)

            Bernie, as someone who would tax mbillionaires enough to slightly slow the rate at which they close in on being trillionaires, would deprive the world of 2% of the tremendous altruism and advances we see exhibited daily by Zuckerman, Larry Ellison, et al. Their giving, at about 0.003% of the rate at which the poor give, shows what we get with great wealth. How could we give that up?

            It is nice to know Bernie is so much more brilliant at destroying the hard work of selfless billionaires than all the destitute fossil fuel, auto and other social-good oriented corporate officers and the short sellers you point out as trying so hard, and would make a much smarter though worse president than the selfless but mentally ill current rapist and the selflessly racist, misogynist one with dementia who wants to be.

            And I won’t mention the magnanimous yet money-motivated few who all on their own have come up with the brilliant idea of getting rich from government projects like basic research and creation in medicine, the internet, and Tang.

  3. fjohnx Says:

    As the author notes, this the second time British Petroleum asserts that BP stands for Beyond Petroleum.

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