Big oil companies turn to offshore wind

By RP Siegel — Despite what we might expect to see soon, in the form of furious efforts on the part of a handful of politicians to reverse the inevitable, the tide has already turned against the century-old dominance of fossil fuels. Perhaps there is no better proof of this than the fact that a number of major oil and gas companies are now making significant investments in renewable energy.

 

As recently reported in the Wall Street Journal, a consortium led by Royal Dutch Shell won a bid to build and run a portion of what is expected to be the world’s largest offshore wind project. The massive Borssele wind project will be located in the North Sea off the Netherlands coast. The Shell portion alone will produce enough electricity to power a million homes at a rate of $56.95 per megawatt hour.

 

This compares favorably with even the cheapest forms of conventional energy generation. According to the most recent Lazard report on the Levelized Cost of Energy, only the very cheapest natural gas combined cycle plants, which produced power in the range of $48-78 could compete with this. The Borssele installation, in fact, falls at the upper end of the price scale for wind, which currently runs between $32-62, with offshore installations at the upper end.

 

The cost factor certainly did not go unnoticed. Dorine Bosman, the manager developing Shell’s wind business said, “Right now the offshore wind project is competitive with any power source.”

 

Until recently, Shell had shown little interest in offshore wind, but changed direction rather abruptly, earlier this year with the formation of a “New Energies Unit.”

 

The plunging renewable prices seem to be pulling in everything around them, much as a sinkhole draws in houses, cars, and trees.

 

The projects themselves are engineering marvels with building-sized towers driven into seabeds, anchoring propellers with wingspans longer than the largest Airbus.

 

Unsurprisingly, it’s the European energy companies that are primarily at the forefront of this. Norway’s Statoil ASA already has three wind farms in the Baltic Sea, and is currently developing a floating wind farm off the east coast of Scotland. Since 2010, Statoil has invested $2.1 billion in offshore wind.

 

Denmark’s state-owned Dong Energy AS, which partnered with Statoil as part of the renowned Kalundborg Symbiosis, has sold off a large portion of its fossil-fuels business and is now the biggest player in the offshore wind market with 29% of global capacity. One reason wind is doing so well is that once a wind farm is built, prices stay essentially the same. Not so with oil or gas fields.

 

Closer to US shores, the Block Island wind farm, recently came online off Rhode Island, the first in the American waters. Developer Deepwater Wind has said that the landscape is going to be tougher here due to “bureaucratic hurdles and fewer incentives.”

 

Even Exxon-Mobil, who has long resisted involvement in renewables, is dabbling in wind. The once mighty oil giant, which has slipped from being the world’s largest company, down to 9th place behind a bunch of Chinese banks and Apple, and which the president-elect is apparently determined to “make great again,” is now investigating the use of floating wind turbines to power their oil and gas platforms.

 

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