No oil major has done more to build a renewable energy business than Total (NYSE:TOT). It owns two-thirds of solar manufacturer SunPower (NASDAQ:SPWR), bought battery maker Saft last year for $1.1 billion, and it's begun developing and owning renewable energy power plants around the world.
Last week, it made two more moves that will give it an even bigger presence in renewable energy, and the future may be looking a lot cleaner at Total.
Total's growing bet on renewables
Last week, Total acquired a 23% stake in developer EREN Renewable Energy for $284.9 million, and it has the option to buy the rest of the company in five years. EREN has 650 MW of installed wind, solar, and hydro capacity and a goal of installing 3 GW in the next five years. Total has said the move will "allow us to accelerate our growth in solar energy and move us into the wind power market."
It also acquired energy efficiency company GreenFlex, which "combines data intelligence and equipment management and financing to help clients manage their energy consumption efficiently." The acquisition is a move toward smart energy products that are becoming increasingly important as consumers try to reduce costs and grid operators manage intermittent energy sources like wind and solar.
This is a big shift for Total
It's very interesting that an oil major like Total would make billions of dollars of investment in areas of energy that go beyond supplying its traditional markets. In fact, producing or controlling electricity has never been a big part of Total's business.
The strategic shift shows just how seriously Total is taking the ongoing shift away from oil to clean energy and electric vehicles. Management knows that if they don't do something, there could be a business demise on the horizon.
What is Total's renewables plan long term?
While it's clear that Total is putting billions into renewable energy and other advanced energy businesses, we don't know exactly what its end goal is. It will be interesting to see if Total begins bringing its business together in a more meaningful way. EREN is a project developer of solar projects, and it could lean toward SunPower modules and components when choosing what suppliers to use. Saft could play a role in SunPower's residential and commercial energy storage plans, and Total could be the financing arm behind it all. It's possible Total will nudge these companies to work together more, even if they aren't fully integrated together.
But it also makes a lot of sense for these companies to operate independently, for now. Rather than trying to build a vertically integrated renewable energy business, Total can let the market evolve and acquire and expand the businesses that end up being the winners in the market long term. And with exposure to solar, wind, energy efficiency, and energy storage, it has the portfolio to be a big player no matter what kind of energy is the long-term winner.
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