Oil and gas buying into renewables

C A L G A R Y • As falling costs for wind and solar energy threaten the dominance of oil and gas, oil and gas companies are increasingly getting into the renewables business, oil executives were told Wednesday.

Costs for solar power have fallen by 90 per cent while wind power costs have fallen by half, oil executives and major oil and gas investors attending an investment forum were told.

As costs for those alternative sources of power have fallen, renewable power producers are now able to sell electricity into certain markets — depending on factors such as transmission availability and weather — at a price that is competitive or in some cases lower than natural-gas-fired generation. As a result, said Jackie Forrest, director of research for ARC Energy Research Institute, the oil and gas industry must adapt if it wants to continue to compete in the energy mix in the future.

Experts at the forum pointed to recent moves by a handful of major natural-gas producers to invest in renewable power sources.

“We’ve already seen huge billion-dollar plays by some of the oil majors to get into renewables — Shell has done that, Total, ENI, BP and many others,” said Morgan Bazilian, executive director of the Payne Institute at the Colorado School of Mines.

Bazilian expects new technologies will help integrate natural-gas-fired power generation closely with renewable energy sources, so that in the near future, the business case would be stronger for gas companies to participate directly in the renewable power market.

“Every company in the gas space is looking at it — they’re not naive about this,” he said.

At this point however, it’s unclear whether the smaller and mid-sized gas producers that dominate much of the Canadian sector will be able to make the same moves, given tight margins for natural-gas production and large upfront capital investments in power generation.

“It’s hard to see the smaller players that don’t already have an interest in electricity,” said Grant Arnold, president and CEO of Calgary-based Bluearth Renewables Inc., adding he is seeing big investments in renewable energy from larger oil companies and funds with oil and gas holdings.

“We’re already seeing a lot of capital coming into the renewables space from pension companies and lifecos. A lot of them also have interests in gas companies or mid-stream companies or oil companies, but certainly the long-term trend has been the multinational companies, the integrateds and the midstream companies having an interest in electricity,” Arnold said.

BRIAN THOMPSON / POSTMEDIA NEWS Costs for solar power have fallen by 90 per cent while wind power costs have fallen by half, oil executives and major oil and gas investors were told Wednesday.