Exxon has inked a 12-year deal with Danish renewable energy company Orsted to buy 500 MW of electricity produced by solar and wind farms to power its oil production in the Permian, Bloomberg reports.
Under 12 yr agreements with Denmark’s Orsted A/S, Exxon will buy 500 MW of wind and solar power in the Permian Basin, the fastest growing U.S. oil field. Although the terms of the contract remained undisclosed, it is the largest such contract featuring an oil company as a party,
Bloomberg new Energy Finance commented. Exxon, which was sued by investors who alleged the company downplayed risks of global warming, is turning to clean energy as it becomes cheap enough to compete with fossil fuels.
“We frequently evaluate opportunities to diversify our power supply and ensure competitive costs,” Exxon spokeswoman Julie King told Bloomberg in a statement.
Half the power Exxon will buy will come from the Sage Draw wind farm, which Orsted plans to finish building in 2020, according to a slide from an investor presentation Wednesday.
The company has been the target of a lot of criticism and lawsuits regarding its attitude to climate change and renewable energy use. Yet now that solar and wind power is becoming cheaper and demand for the commodity in the Permian is soaring, the time is apparently right for Exxon to start changing.
The electricity Exxon will be buying from Orsted will be produced at two farms, one solar and one wind both which are still under construction. The Sage Draw wind farm will be completed in 2020 and the Permian Solar farm will be launched in 2021.
The Permian is the shale play where production is growing the fastest and with it demand for electricity is growing, too. Bloomberg reports that just one part of the Permian, the Delaware Basin, consumed 350 MW of electricity this summer, which was triple the consumption three years ago.
This amount is enough to power almost 300,000 households and it is set for another triple increase, according to utilities, in the next four years. Bloomberg earlier this year reported that Exxon was looking to seal a deal for the purchase of electricity produced from renewable sources.
At the time, a source close to the company said it was looking for long-term contracts of 12, 15, or even 20 years, for the supply of at least 100 MW. Exxon Mobil Corp has been looking to buy renewable energy for delivery in Texas, according to people familiar with the matter.
The largest U.S. “We frequently evaluate opportunities to diversify our power supply and ensure competitive costs,” Julie King, a spokeswoman for the Irving, Texas-based oil producer, said in an email.
Oil company sent out a request for proposals with a June 8 deadline, inviting solar or wind power suppliers to pitch contracts that would last 12, 15 or 20 years, according to a document obtained by Bloomberg and people with knowledge who asked not to be named discussing confidential matters.
Exxon, based in Irving, Texas, is seeking at least 100 megawatts and would consider proposals for more than 250 megawatts. It’s not clear whether Exxon has reached an agreement with any supplier to buy this power, nor whether it was seeking the electricity for its own use.
“I have never seen an oil and gas company doing a corporate PPA anywhere near that size,” said Kyle Harrison, a New York-based analyst at Bloomberg NEF, referring to the power-purchase agreements used to buy electricity.
“If you’re seeing the biggest oil and gas companies going out and making investments in clean energy, it shows that renewables are cost-competitive. This can be a way for them to show a commitment to sustainability without suffering economically.”
If a deal is reached, it could more than double the 84 megawatts that other oil and gas companies have lined up through long-term power-purchase agreements, according to BNEF.
“We continually evaluate opportunities to supply power for our facilities,” Exxon spokesman Scott Silvestri said by email. Exxon has been slow to follow Big Oil rivals such as Royal Dutch Shell Plc and BP Plc into renewable energy technologies.
While Chief Executive Officer Darren Woods acknowledges the “risk of climate change” and is testing whether biofuel made from algae can work on an industrial scale, he said earlier this year that the company’s investment dollars will follow oil magnate John D. Rockefeller’s bet-on-what-you-know mantra.
Texas is the biggest wind-producing U.S. state, with power prices occasionally going negative on windy days, and solar power is cheaper than coal in many parts of the world. The number of companies contracting to buy renewables continues to expand.
Excluding utilities, companies and agencies agreed to buy 7.2 gigawatts of clean energy worldwide through July, shattering the record of 5.4 gigawatts for all of 2017, according to BNEF.
“Good to see them dipping their toe in the water, but we’ll have to wait to see if they put their foot in the water,” said Amy Myers Jaffe, a senior fellow for energy and the environment at the Council of Foreign Relations in New York.
But as the price of renewable power declines, the company may see the value in consuming wind or solar, even if it eschews producing that kind of energy. In August, Exxon was said to be seeking renewable energy under long-term contracts from a group of potential developers.