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Business financial make money capital trading The oil major BP is set to become a solar giant that rivals the world’s largest operators. How’s how it plans to get there — and still generate double-digit returns.


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Business financial make money capital trading The oil major BP is set to become a solar giant that rivals the world’s largest operators. How’s how it plans to get there — and still generate double-digit returns.

Lightsource BP’s floating installation at the Queen Elizabeth II Reservoir, Britain Lightsource BP/Handout via Reuters This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Major oil company BP is set to become among the largest solar-power owners in the world as it shifts away from oil and gas. …

Business  financial  make money  capital  trading The oil major BP is set to become a solar giant that rivals the world’s largest operators. How’s how it plans to get there — and still generate double-digit returns.

Business financial make money capital trading

business  financial  make money  capital  trading Lightsource BPbusiness  financial  make money  capital  trading Lightsource BP

Lightsource BP’s floating installation at the Queen Elizabeth II Reservoir, Britain

Lightsource BP/Handout via Reuters


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Become an Insider and start reading now.

  • Major oil company BP is set to become among the largest solar-power owners in the world as it shifts away from oil and gas. 
  • The company’s foray into solar is part of its broader strategy, first announced in August, to become an integrated energy company.
  • BP will develop solar through Lightsource BP, a joint venture formed in 2018 between BP and Lightsource Renewable Energy.
  • The venture has 16 gigawatts of solar in the pipeline, up from about 10 gigawatts this time last year. 
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As part of BP’s transformation from an oil giant to an integrated energy company, the London-based firm is set to dominate the solar energy industry. 

Data revealed this week in a series of investor presentations show BP has 16 gigawatts of solar in its pipeline through Lightsource BP, a joint venture formed in 2018 between BP and Lightsource Renewable Energy.

That’s enough to rival some of the largest solar developers like China’s State Power Investment Corp., the world’s biggest solar operator, in total solar capacity, according to Bloomberg News. State Power Investment has about 17 gigawatts of installed solar capacity, according to the data firm BloombergNEF. 

“Wind and solar are already the most competitive new builds in most energy markets,” Dev Sanyal, EVP for gas and low carbon energy at BP, said on a call with investors Tuesday. “This includes fossil fuel markets. We are leading in and planning to build material renewables businesses with an ambition to have developed 50 gigawatts by 2030. “

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BP’s push into solar energy is part of a broader strategy overhaul, first announced in August. By 2030, the company said it will spend $5 billion a year on low-carbon energy and by 2050 it plans to be a net-zero emissions company. 

Total, Shell, and other major oil companies have announced similar commitments but have yet to provide the level of detail BP shared with investors this week. 

business  financial  make money  capital  trading BP clean energy

In February, BP’s chief executive, Bernard Looney, declared that the oil giant would become a net-zero emissions company by 2020.

Daniel Leal-Olivas/AFP via Getty Images


Business financial make money capital trading How BP will deliver a massive amount of solar energy

Today, BP has about 20 gigawatts of renewable energy in some stage of development and most of that is solar, Bernard Looney, BP’s CEO, told investors. (For perspective, the entire US added a total of about 13 gigawatts of solar energy last year.)

“How will we be able to do that? Well, we do that through Lightsource BP,” Looney said. “They move at lightning speed.” 

In 2018, the joint venture had less than 2 gigawatts of capacity in the pipeline and operated in just 5 countries. Now it has 16 gigawatts in development and operates in 13 countries including Australia, he said. 

Solar is unique among energy projects, Sanyal said, because developers can move from concept to construction in as few as 18 months. 

“This sector is characterized by fast cycle times, which allows us to grow our pipeline rapidly in the next 5 years,” he said. 

business  financial  make money  capital  trading 2020 04 01T085902Z_757856705_RC2KVF9WF3WJ_RTRMADP_3_HEALTH CORONAVIRUS BP CAPEX.JPG

BP CEO Bernard Looney

REUTERS/Toby Melville


Business financial make money capital trading The key ingredients to BP’s solar growth

Lightsource BP says it has five “key ingredients” that drive its growth including “decisions at speed” and “cutting-edge tech.” 

“We are an early adopter of new technology,” Kareen Boutonnat, a cofounder of Lightsource BP, told investors. 

The company began designing plants with bifacial technology this year, for example, which allows solar panels to produce power from both sides. 

Boutonnat also said the company is able to move quickly on potential deals, giving them an advantage, and raise debt for projects “at rapid levels.” 

business  financial  make money  capital  trading Lightsource BP

A Lightsource BP solar array in Cambridgeshire, Britain

Lightsource BP/Handout via Reuters


Business financial make money capital trading Renewables can yield higher returns than fossil fuels when oil is cheap

A big question among investors is whether renewable-energy projects will be able to yield double-digit returns on par with oil-and-gas projects. 

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When crude prices are around $60 a barrel, oil-and-gas projects yielded, on average, about 20% returns on investment, according to Valentina Kretzschmar, an analyst at Wood Mackenzie.

But that percentage is far lower at today’s prices, which are hovering around $40 a barrel. (At $35 a barrel, returns for fossil-fuel projects would be about 6%, she said.)

“Can we deliver the 8% to 10% returns from renewables? The answer is very simply, yes,” Looney said. “We actually believe we can do better, and these returns could turn out to be conservative.”

Lightsource BP has seen returns within that range already, he said. 

This story was updated with BloombergNEF data on State Power Investment’s total installed solar capacity. The original figure this story included, which came from State Power Investment’s English website, was outdated.

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