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Can new offshore windfarms make a profit?

Urbandreamer
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Re: Can new offshore windfarms make a profit?

#334384

Postby Urbandreamer » August 19th, 2020, 1:02 pm

I thought that I'd do my own fag packet calculation.

I claimed that using the more recent bigger turbine that 3/4 as many turbines could be used.

So I thought that I'd take the companies pre-covid predicted capital cost of £2.6bn and multiply it by 4/3.

That number comes out as £3.46bn. Remarkably close to the £3.8bn that fed into AMontford's depreciation calculation.

Ps thanks dspp for allowing Amountford to post the links. It does make the discussion a lot easier.

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Re: Can new offshore windfarms make a profit?

#334396

Postby AMontford » August 19th, 2020, 1:40 pm

Thanks for these thoughts DSPP, and for your suggestions on how to get the complex stuff posted.

The possibility of sales above the CfD strike price seems the likeliest explanation. So you could have a power purchase agreement at a higher price. Why anyone would want to pay so much more than market price eludes me though! Similarly, it has been pointed out that the penalties for walking away from the CfD are relatively small, and of course after the 15-year term of the CfD operators take the market price anyway.

So are we expecting market prices for electricity to shoot up? They have been rising steadily for 20 years, but they will need to go up quickly to avoid the rapid accumulation of losses.

Be careful of relying on backwards-looking levelised costs.

The capital costs I discussed at the start of the thread are based on the latest accounts of course. Capacity factor you can never know in advance, but the improvements in recent years have been incremental rather than revolutionary. In my levelised cost model, I've applied a very generous WACC, so as to be forward looking.

For points 4 and 5, there is a Moray West windfarm coming soon. There may be some shared infrastructure.

6. And is Moray East suffering from project specific cost overuns.

It seems to be approximately on budget (based on my "reconciliation" of the £2.6bn announced cost to where we are today).

Perhaps the more important point is that the two other forthcoming windfarms seem to have similar capital costs. East Anglia One, which has just gone live, is £3.5/MW, and Triton Knoll (going live later this year) is £3.49/MW. So Moray East is definitely not an outlier, at least in terms of capital cost.

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Re: Can new offshore windfarms make a profit?

#334414

Postby dspp » August 19th, 2020, 3:19 pm

AMontford wrote:Thanks for these thoughts DSPP, and for your suggestions on how to get the complex stuff posted.

The possibility of sales above the CfD strike price seems the likeliest explanation. So you could have a power purchase agreement at a higher price. Why anyone would want to pay so much more than market price eludes me though! Similarly, it has been pointed out that the penalties for walking away from the CfD are relatively small, and of course after the 15-year term of the CfD operators take the market price anyway.

So are we expecting market prices for electricity to shoot up? They have been rising steadily for 20 years, but they will need to go up quickly to avoid the rapid accumulation of losses.....

Perhaps the more important point is that the two other forthcoming windfarms seem to have similar capital costs. East Anglia One, which has just gone live, is £3.5/MW, and Triton Knoll (going live later this year) is £3.49/MW. So Moray East is definitely not an outlier, at least in terms of capital cost.


Funnily enough I recognise the names of all of those projects from personal involvement in their early days :)

Your CF and decay rates are together plausible. Personally I'd put CF a little lower but also decay lower, but I have been surprised by how quickly CF has been growing.

CfD is meant to provide a floor price. There is intended to be cream above that on high price days/hours. Wind is very valuable power in the dark and the cold periods :) Factor that in imho.

Your £251m income vs £271m cost is 'only' an 8% loss. My suspicion is that after you take creamy good price days into account this will shift this project into the black. Then add in the strategic value to the asset owners of staying in the game and that gets them to whatever were their hurdle investment rates.

My personal opinion is that in retrospect these will be seen as a necessary but awkward evolutionary set of projects for the industry, both in UK and in other areas (there are similar epoch projects in Germany, DK, NL). The turbines being used are not quite big enough / but the turbines are still bottom-fixed / but 20MW floaters aren't quite there yet / and all sorts of other less obvious stuff to do with both the kit and the people and the processes and the funding and etc / but everyboy and everything needs the steps in the ladder in order to be able to climb to the next rung / and this is that late-teenager-with-braces-and-spots-and-bra-but-no-boobs stage.

regards, dspp

p.s. I have long said that I cannot find good renewables investment shares that are sensible for individual shareholders to invest in. It was because I was looking over the shoulders of these (and other) projects that I have been saying that. It was only in Oct-2018 that one, and so far only one, passed my screening risk/reward threshold. That was of course TSLA. I have yet to see another, and of course the ones that got away for me were Orsted/Dong and Vestas.

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Re: Can new offshore windfarms make a profit?

#334422

Postby AMontford » August 19th, 2020, 3:41 pm

I don't think the CfD is a floor price. It's a guaranteed price. Here's the Wiki description.

In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time (if the difference is negative, then the seller pays instead to the buyer)


The other thing to say is that the 8% loss is only 8% because I've left out interest costs. Even at a paltry 3.5%, the interest on £3.5bn (assuming 90% gearing) is £122m per year.

It's a mystery!

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Re: Can new offshore windfarms make a profit?

#334427

Postby dspp » August 19th, 2020, 4:23 pm

AMontford wrote:I don't think the CfD is a floor price. It's a guaranteed price. Here's the Wiki description.

In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time (if the difference is negative, then the seller pays instead to the buyer)


The other thing to say is that the 8% loss is only 8% because I've left out interest costs. Even at a paltry 3.5%, the interest on £3.5bn (assuming 90% gearing) is £122m per year.

It's a mystery!


My apologies, yes, you are correct.
https://www.emrsettlement.co.uk/about-e ... ifference/

Sorry, but this is not the part of these projects I was paying close attention to at the time.

Two other thoughts,
1) At high price times this gives the owners ability to meet their (energy supply) obligations to their various clients thereby freeing up their other generation assets to cream the market. So they can still win, but indirectly. I'll hazard a guess that will have a benefit. Plus there will be some other lower margin gen assets they can retire.
2) Have you plugged the indexation aspect into your LCOE model ?

If you are interested you might wish to wade through the round 4 consultation at https://www.gov.uk/government/collectio ... on-round-4

regards, dspp

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Re: Can new offshore windfarms make a profit?

#334475

Postby Sorcery » August 19th, 2020, 7:51 pm

AMontford wrote:I don't think the CfD is a floor price. It's a guaranteed price. Here's the Wiki description.

In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time (if the difference is negative, then the seller pays instead to the buyer)


The other thing to say is that the 8% loss is only 8% because I've left out interest costs. Even at a paltry 3.5%, the interest on £3.5bn (assuming 90% gearing) is £122m per year.

It's a mystery!


Maybe not so mysterious. Plenty of potential for green scams from wideboy electricity companies. One often sees offers of green electricity such as this https://www.greenenergyuk.com/OurEnergy
You have to wonder how they provide electricity when the wind isn't blowing at night. Take grid electricity call it green (even though you have no guarantee where the electricity is coming from), charge a premium (because it's green don't cha know). Everybody goes home happy with the warm glow of self righteousness apart from the vendors who are quite happy with the cash.

I have no idea whether greenernergyuk is in fact scamming. [Deleted]
Moderator Message:
Stereotyping people from one region of the world in a negative manner seems hardly fair to the vast majority of honourable people from that region and has been deleted. - Chris

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Re: Can new offshore windfarms make a profit?

#334616

Postby Sorcery » August 20th, 2020, 11:05 am

It would seem that green energy producers such as windfarms not only receive the contracted value per mwh but are also awarded a REGO certificate for each mwh produced. These can then be sold on to the customer facing green electricity suppliers. Haven't managed to find a typical price for these but it's an additional income stream for a windfarm that may make a difference to AMontford's calculations.
https://www.ofgem.gov.uk/environmental- ... -suppliers

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Re: Can new offshore windfarms make a profit?

#334827

Postby dspp » August 21st, 2020, 9:15 am

Sorcery wrote:
AMontford wrote:I don't think the CfD is a floor price. It's a guaranteed price. Here's the Wiki description.

In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time (if the difference is negative, then the seller pays instead to the buyer)


The other thing to say is that the 8% loss is only 8% because I've left out interest costs. Even at a paltry 3.5%, the interest on £3.5bn (assuming 90% gearing) is £122m per year.

It's a mystery!


Maybe not so mysterious. Plenty of potential for green scams from wideboy electricity companies. One often sees offers of green electricity such as this https://www.greenenergyuk.com/OurEnergy
You have to wonder how they provide electricity when the wind isn't blowing at night. Take grid electricity call it green (even though you have no guarantee where the electricity is coming from), charge a premium (because it's green don't cha know). Everybody goes home happy with the warm glow of self righteousness apart from the vendors who are quite happy with the cash.

I have no idea whether greenernergyuk is in fact scamming. [Deleted]
Moderator Message:
Stereotyping people from one region of the world in a negative manner seems hardly fair to the vast majority of honourable people from that region and has been deleted. - Chris


Sorcery,

You appear quite happy to suggest that Greenenergy is scamming, but then go on to say that you have no idea and no evidence of this. Since there are plenty of ways to produce renewable energy at night, which take, oh, about 5-seconds to give a few examples of (hydro, biogas, storage, plus of course the wind does in fact blow quite frequently at night which is a fact that is contrary to your assertion), then perhaps you would like to apologise to Greenenergy.

- dspp

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Re: Can new offshore windfarms make a profit?

#334980

Postby Sorcery » August 21st, 2020, 8:17 pm

dspp wrote:
Sorcery wrote:
AMontford wrote:I don't think the CfD is a floor price. It's a guaranteed price. Here's the Wiki description.



The other thing to say is that the 8% loss is only 8% because I've left out interest costs. Even at a paltry 3.5%, the interest on £3.5bn (assuming 90% gearing) is £122m per year.

It's a mystery!


Maybe not so mysterious. Plenty of potential for green scams from wideboy electricity companies. One often sees offers of green electricity such as this https://www.greenenergyuk.com/OurEnergy
You have to wonder how they provide electricity when the wind isn't blowing at night. Take grid electricity call it green (even though you have no guarantee where the electricity is coming from), charge a premium (because it's green don't cha know). Everybody goes home happy with the warm glow of self righteousness apart from the vendors who are quite happy with the cash.

I have no idea whether greenernergyuk is in fact scamming. [Deleted]
Moderator Message:
Stereotyping people from one region of the world in a negative manner seems hardly fair to the vast majority of honourable people from that region and has been deleted. - Chris


Sorcery,

You appear quite happy to suggest that Greenenergy is scamming, but then go on to say that you have no idea and no evidence of this. Since there are plenty of ways to produce renewable energy at night, which take, oh, about 5-seconds to give a few examples of (hydro, biogas, storage, plus of course the wind does in fact blow quite frequently at night which is a fact that is contrary to your assertion), then perhaps you would like to apologise to Greenenergy.

- dspp


dssp,

My reference to a happy east asian family photograph on Greenenergy's website (now deleted from my post) was a hint that perhaps the company and website originated in China with all the loose corporate governance, IP stealing, mercantilism that tends to prevail with Chinese companies and the CCP. It is a slightly odd photograph for UK consumption don't you think? No stereotyping of Chinese people intended, stereotyping of the CCP and Chinese companies was intended.

In my second follow up post I may have linked to the wrong article from OFGEM. I did see one that implied that buying REGO certficates for all your electricity supplied to customers was insufficient to be "green".

Scamming is easy when our government is throwing money around aka subsidies. How does the consumer check that sufficient REGO's have been purchased by a supposedly benign green company perhaps as Greenenergy is, as you imply? How does a consumer check that the additional cost of Green energy from a company reflects the cost of REGO certificates?

Can't really apologise to Greenenergy for what I said, I am more in auditing mode, just asking questions of them mainly because their website was so poor on detail and it was the first one I looked at. If you know better regards Greenenergy then am happy to listen to you. There is a lot I don't know and which is obscured by subsidies such as, Is more energy used in the manufacture and installation and maintenance of wind turbines than they ever produce in their lifetime? If true, then that's antigreen but could still be profitable. Are windfarms "farming" wind or "farming" subsidies?

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Re: Can new offshore windfarms make a profit?

#334986

Postby Sorcery » August 21st, 2020, 10:02 pm

dssp,
Forgot to address your comment "(hydro, biogas, storage, plus of course the wind does in fact blow quite frequently at night which is a fact that is contrary to your assertion)"

I did say when the wind isn't blowing which it frequently does not. Doesn't look as if hydro, biomass and storage are particularly useful other than as peak demand smoothers https://gridwatch.co.uk/
They are the tiniest contributors to energy supply.
Of course this changes over the day but right now it's dark and windy, it will be different midday tomorrow of course.

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Re: Can new offshore windfarms make a profit?

#335033

Postby dspp » August 22nd, 2020, 10:50 am

Sorcery wrote:There is a lot I don't know and which is obscured by subsidies such as, Is more energy used in the manufacture and installation and maintenance of wind turbines than they ever produce in their lifetime? If true, then that's antigreen but could still be profitable. Are windfarms "farming" wind or "farming" subsidies?


Sorcery,

Please don't keep peddling the utter nonsense of wind farms not paying back on either energy or carbon terms. It is plain false and there have been enough links given both in TLF and in TMF over the very-many-years for anybody around here who is not brain dead to have realised the actual facts, i.e. windfarms typically payback after between 6m - 18m of a 20-25 year lifecycle. Just search on "energy payback of wind turbines" or 'carbon' or 'CO2' if in any doubt. This is a board for rational debate, not falsehoods, please respect that.

https://www.treehugger.com/energy-paypa ... 0operation.

In the middle of the night it takes very little electricity to keep the UK ticking over. Renewables and storage can do it by the time they will need to do it, provided the correct decisions are made. For the time being the UK has a surplus of old power stations of one sort or another that are desperate for some load.

regards, dspp

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Re: Can new offshore windfarms make a profit?

#335172

Postby Sorcery » August 22nd, 2020, 8:26 pm

dspp wrote:
Sorcery wrote:There is a lot I don't know and which is obscured by subsidies such as, Is more energy used in the manufacture and installation and maintenance of wind turbines than they ever produce in their lifetime? If true, then that's antigreen but could still be profitable. Are windfarms "farming" wind or "farming" subsidies?


Sorcery,

Please don't keep peddling the utter nonsense of wind farms not paying back on either energy or carbon terms. It is plain false and there have been enough links given both in TLF and in TMF over the very-many-years for anybody around here who is not brain dead to have realised the actual facts, i.e. windfarms typically payback after between 6m - 18m of a 20-25 year lifecycle. Just search on "energy payback of wind turbines" or 'carbon' or 'CO2' if in any doubt. This is a board for rational debate, not falsehoods, please respect that.

https://www.treehugger.com/energy-paypa ... 0operation.

In the middle of the night it takes very little electricity to keep the UK ticking over. Renewables and storage can do it by the time they will need to do it, provided the correct decisions are made. For the time being the UK has a surplus of old power stations of one sort or another that are desperate for some load.

regards, dspp


dssp,

I am not aware of peddling falsehoods, regarding wind farms. I was merely asking questions, I genuinely did not know whether windfarms had a sensible payback time. The calculations are extremely complex, you would not only need to account for energy usage in manufacture and installation to include all the concrete, you would have to know the energy usage in manufacture of all the components and the manufacture of machines involved directly in the manufacture of the components. It's a pyramid of energy usage. Quite a lot of work there to find out. Not sure an article from treehugger covers it really.

Anyway on to the next falsehood "In the middle of the night it takes very little electricity to keep the UK ticking over." Thought this was your field but perhaps not. Let's take a look at https://gridwatch.co.uk/ again. Look at the graph for yesterday's energy usage, a normal working day. Minimum energy usage 19.263 GW, Maximum usage 29.54GW. The maximum is roughly 150% of the minimum. That's hardly very little electricity at the minimum.

Which brings us back to the main argument, if you think you are buying "green" electricity you are not, unless you choose to have none at some times. There is no solar at night, there is sometimes no wind in the dead of winter (high atmospheric pressure scenarios). There is no availability of other green electricity production that can cover it (the minimum) in the UK.

I am sure it would help if you could stop assuming everyone else is stupid that has an opinion that's different from yours.

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Re: Can new offshore windfarms make a profit?

#335174

Postby johnhemming » August 22nd, 2020, 8:40 pm

What about hydroelectric? The rivers flow at night.

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Re: Can new offshore windfarms make a profit?

#335179

Postby Sorcery » August 22nd, 2020, 9:01 pm

johnhemming wrote:What about hydroelectric? The rivers flow at night.


Not much of it, if you look at the gridwatch link. For other countries it might work a bit to a lot better. Norway does very well with it. Icleand could but then it's got abundant geothermal.

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Re: Can new offshore windfarms make a profit?

#335228

Postby dspp » August 23rd, 2020, 11:21 am

Sorcery wrote:
dspp wrote:
Sorcery wrote:There is a lot I don't know and which is obscured by subsidies such as, Is more energy used in the manufacture and installation and maintenance of wind turbines than they ever produce in their lifetime? If true, then that's antigreen but could still be profitable. Are windfarms "farming" wind or "farming" subsidies?


Sorcery,

Please don't keep peddling the utter nonsense of wind farms not paying back on either energy or carbon terms. It is plain false and there have been enough links given both in TLF and in TMF over the very-many-years for anybody around here who is not brain dead to have realised the actual facts, i.e. windfarms typically payback after between 6m - 18m of a 20-25 year lifecycle. Just search on "energy payback of wind turbines" or 'carbon' or 'CO2' if in any doubt. This is a board for rational debate, not falsehoods, please respect that.

https://www.treehugger.com/energy-paypa ... 0operation.

regards, dspp


dssp,

I am not aware of peddling falsehoods, regarding wind farms. I was merely asking questions, I genuinely did not know whether windfarms had a sensible payback time. The calculations are extremely complex, you would not only need to account for energy usage in manufacture and installation to include all the concrete, you would have to know the energy usage in manufacture of all the components and the manufacture of machines involved directly in the manufacture of the components. It's a pyramid of energy usage. Quite a lot of work there to find out. Not sure an article from treehugger covers it really.

I am sure it would help if you could stop assuming everyone else is stupid that has an opinion that's different from yours.


It is not a matter of opinion. If you want stuff that is more sophisticated than treehugger then use the search function on google and you will find enough academic studies to sink a battleship. They take into account all the stuff you mention, and much more besides. They all reach much the same conclusions, which tend to be paybacks (for all the different items: energy, CO2, etc) in the 6m-18m range. I recall being involved in one back in 2010 or so, and I have seen the methodology in use since before 2000 (e used to call it "well to wheels"), so this is not a new subject. That is why I am very disappointed that you - and anybody else that is clearly not paying attention - keeps on raising it.

As to midnight energy I have not time right now but will get back on that in due course.

- dspp

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Re: Can new offshore windfarms make a profit?

#335335

Postby Sorcery » August 23rd, 2020, 9:22 pm

dspp wrote:It is not a matter of opinion. If you want stuff that is more sophisticated than treehugger then use the search function on google and you will find enough academic studies to sink a battleship. They take into account all the stuff you mention, and much more besides. They all reach much the same conclusions, which tend to be paybacks (for all the different items: energy, CO2, etc) in the 6m-18m range. I recall being involved in one back in 2010 or so, and I have seen the methodology in use since before 2000 (e used to call it "well to wheels"), so this is not a new subject. That is why I am very disappointed that you - and anybody else that is clearly not paying attention - keeps on raising it.

As to midnight energy I have not time right now but will get back on that in due course.

- dspp


Thanks for the information. I didn't know when writing my last post that the feed in tariffs (FITs) have been removed since April 2019 for new projects and limited to a further(?) 20 years on old ones. It might be 20 years from the date of old installations, Wiki isn't clear.
https://en.wikipedia.org/wiki/Feed-in_t ... ed_Kingdom
That's going to make a difference to payback and much else besides. FITs were the main reason I used to object to green energy with company electricity costs around £20k per annum. I would guess the East Moray windfarm managed to get started before FITs ended but there is a hint in the wiki article that FITs were limited to <5mw installations. Everything about green energy is just so complicated ...

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Re: Can new offshore windfarms make a profit?

#340555

Postby thehaggistrap » September 16th, 2020, 8:45 am

dspp wrote:p.s. I have long said that I cannot find good renewables investment shares that are sensible for individual shareholders to invest in. It was because I was looking over the shoulders of these (and other) projects that I have been saying that. It was only in Oct-2018 that one, and so far only one, passed my screening risk/reward threshold. That was of course TSLA. I have yet to see another, and of course the ones that got away for me were Orsted/Dong and Vestas.


This comment about Oersted interested me.
Was also investigating renewable stocks that could be worth investing in the future.
Oersted looks to me like it might still have long way to go over next 5 years ?

In many ways it is an extreme example / success story of what BP are trying to do over longer period of time.
Basically an oil and gas company that shifted into renewable.


- Oersted share price has been slowly rising since 2017 (... apart from Covid dip in March).
- Company has well documented plans, and opportunity, to double its output by expanding to USA and UK.
- There is massive incentive for governments to make green energy work.
- Feed in tarrifs will be set to ensure companies like Oersted can be profitable. Market leader in sector that is sure to attract good will.
- Sustainable trusts and funds will want to invest in Oersted as demand for green investing grows.
- As worlds largest producer of electricity from wind they have important economies of scale.
- Danish government hold 50% of company until 2025.

Taking longer term view could Oersted be the first renewable super-major ?
Thoughts appreciated. It is on my watch list ;-)

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Re: Can new offshore windfarms make a profit?

#340735

Postby thehaggistrap » September 16th, 2020, 8:06 pm

ReallyVeryFoolish wrote:It would not surprise me in the slightest to see one of the supermajor energy companies merge with Orsted as a way of building critical mass in the new energy landscape.


Maybe - though any suitors would need to pay a premium with Danish government holding 51% controlling stake?
More likely the Danes want to build a renewable version of Statoil / Equinor ?

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Re: Can new offshore windfarms make a profit?

#340855

Postby dspp » September 17th, 2020, 10:24 am

ReallyVeryFoolish wrote:
thehaggistrap wrote:
ReallyVeryFoolish wrote:It would not surprise me in the slightest to see one of the supermajor energy companies merge with Orsted as a way of building critical mass in the new energy landscape.


Maybe - though any suitors would need to pay a premium with Danish government holding 51% controlling stake?
More likely the Danes want to build a renewable version of Statoil / Equinor ?

Equinor is already doing a pretty good job of that itself. Didn't know about government stake in Orsted. Nonetheless, major consolidation within the new energy sector looks inevitable to me.

RVF


This is one example of the thought process that led to Rolls-Royce not entering the wind turbine business. Their view was that "we can always buy our way in later". Result was that Vestas market cap of €25bn now exceeds Rolls-Royce market cap of £3.7bn, and their turnovers are going in dramatically different directions. So not only does it become impossible for Rolls-Royce to buy Vestas, but there is no reason for Vestas to buy Rolls-Royce, and all the engineers I know who want a long term career would far rather work for Vestas than Rolls-Royce.

The solar companies do not need that level of capital to be very serious global manufacturers. Hanwha mkt cap is €2.4bn, SunPower is $1.8bn. Overall solar is adding approximately as much capacity each year as wind, but the viable manufacturing/commercial unit is apparently a much smaller one than in wind. So where will Shell or BP add value by (say) lobbing a few $bn into solar manufacturing ?

Another example of the thinking is that the Shells and BPs think that only they can do scale. The typical market caps of major utilities are Eon, €26bn; RWE, €19bn; SSE £12bn; PGE $19bn and they have shown that they can take on GW-scale offshore wind farms without needing to turn to the 'expertise' of the Shells and BPs of the world with their mkt caps of $105bn and £51bn. Where is the added value in bringing Shell or BP into the very lean processes involved in wind - in fact the last thing I would want to do is include the overheads of an oil major in my offshore wind project unless I could ringfence their overheads away from it. That is why Shell is having to buy its way into the game with e.g. the Eolfi and Eneco acquisitions, and the risk is that Shell will drag them down in competitiveness terms. The actual discretionary mkt cap that BP or Shell can lob into wind projects is not that great because of what it takes to keep the legacy oil even only ticking over, and RWE etc can access that scale of funding just through normal finance mechanisms.

It is rare that a €bn company can do a segment switch successfully. Dong > Orsted have managed this, going from €15bn to €48bn market cap in the process. Other examples are vanishingly rare.

In managed decline consolidation amongst the legacy incumbents lumbering towards the graveyard is common, and can sometimes be profitable. It is happening in the oil shale patch, it is happening in dino-juice automotive. But it is not obvious that acquisition of pretty new go-faster brides ("lemon tarts") by rich oldies with one foot in the grave leads to anything more than a faster coronary.

Another aspect is that correctly identifying the valuable places to be in the new energy landscape, and seizing them early at the relevant scale so as to be able to control them and defend then long term, needs a single-minded purpose that I am not seeing in the legacy world. That is why Tesla has a $411bn mkt cap, dwarfing everybody else I have just noted - and in some ways TSLA justifies it. If Shell were to be now announcing a 5-year program to put minimum 10 x 250kW chargers on all 44,000 of its retail sites (viewtopic.php?p=335808#p335808) vs the 2,000 Tesla sites then I would begin to think that Shell is getting the speed required to seize those heights, and to do the same thing in storage, and in solar and in wind, and in critical network infrastructure, at the appropriate scale to succeed. But reality is that I do not see that level of urgency in their thinking or indeed in any of the legacy oil majors (if any of them give me a call I'll give a boot up their [expletive deleted] for free). Looking at the BP webcasts what I really saw was a bunch of corpses going through the motions with a lemon tart on the arm as eye candy. By the way, except arguably for Volkwagen group (VAG), I see the same issue in automotive.

I hope I am wrong. But as my GF says, maybe I should do some managed decline on my own BP and Shell holdings.

regards, dspp


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