Oil and Tech Companies Invest in Low-Carbon Technologies – 11/28/16

As more governments and customers begin to worry about climate change, companies are stepping up investment in low-carbon technologies. Around 60% of Fortune 100 companies have renewable-electricity or climate change policies, according to Bloomberg New Energy Finance (BNEF).

Companies tend to invest in renewable energy in one of three ways: long-term agreements with wind and solar projects; buying stakes in green power projects; or buying renewable-energy credits. Long-term agreements have become the preferred way to invest in clean energy. By locking in electricity prices for up to 15 years, the deals let companies hedge against natural gas and coal price volatility by reserving renewable power.

Since 2008, U.S. companies have signed agreements to purchase 10GW of solar and wind power. BNEF expects that pace to increase over the next decade, with an additional 22GW in long-term agreements. For these sorts of deals, the largest buyers tend to be technology companies like Amazon.

Oil companies are also investing in low-carbon technologies, though in a very different way.

As part of the Oil and Gas Climate Initiative, ten of the world’s biggest oil companies, including Saudi Arabian Oil Co., Royal Dutch Shell PLC and BP PLC, plan to invest an average of $100 million annually over the next 10 years as part of an initiative to boost low-carbon technologies.

The announcement came on the same day that a climate treaty negotiated in Paris to cap emissions and curb global warming comes into force.

The investments will focus on carbon capture and storage technology and efforts to reduce methane emissions from the oil-and-gas industry. The consortium said the joint fund will come in addition to individual investments in alternative energy and lower-emission technology.

French oil super major, Total SA, owns one of the largest solar companies in the world and earlier this year bought French battery maker Saft Group SA. Shell Oil has created a “new energies” division to invest in renewables and low carbon power, and Saudi Arabia is developing solar power within the Kingdom.

The Initiative was created in 2014 with UN backing to find ways the industry can support efforts to tackle climate change without abandoning their oil reserves.

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