The oil majors have had a love-hate relationship with renewable energy over the past decade. Some (BP (NYSE: BP)) once saw it as a key to their future, only to divest from the business, and others (Total (NYSE: TOT)) have been slowly wading into renewables without taking any big risks. But it's become clear that renewable energy isn't going anywhere, and it might be the biggest threat facing the oil business long-term.
Not only is renewable energy eating away at traditional fossil fuel consumption at utilities, it's becoming a fuel for transportation as millions of electric vehicles hit the road around the world. Royal Dutch Shell plc (NYSE: RDS-A)(NYSE: RDS-B) is the latest to realize it needs a foot in the renewable energy business, buying a 44% stake in renewable energy developer Silicon Ranch for up to $217 million in cash. And Shell may still be getting started building out its renewables strategy.
Shell joins the renewables business
Silicon Ranch is a solar developer that has about 880 MW of projects under contract in the U.S. with a 1 GW pipeline of projects. It's not the biggest developer in the country, but it has a growing footprint and can leverage Shell's capital to grow. In 2021, Shell can increase the ownership stake beyond 44%.
Shell also acquired MP2 Energy last year, an owner of natural gas and distributed solar assets like demand-response and solar.
While these two deals don't make Shell a leader in renewable energy just yet, it could show a shifting attitude to renewable energy, a transition other companies have already gone through. And if Shell pushes both companies to grow it could build a sizable renewables business.
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