Total explains move into renewable energy, biofuels and EV charging

Matthew Farmer 1 October 2020 (Last Updated October 1st, 2020 17:34)

Total executives have outlined their vision of how the former oil and gas company will move into new markets at its investors’ day.

Total explains move into renewable energy, biofuels and EV charging
Total’s La Mède refinery was its first to convert to using biofuels, but other wil follow. Credit: François Lacour/Total.

Total executives have outlined their vision of how the former oil and gas company will move into new markets at its investors’ day.

A company statement said it will focus on growing its liquefied natural gas (LNG) and electricity businesses. The company plans to use these sources equally, aiming to generate another one million barrels of oil equivalent per day (Mboe/d) by 2030.

It will also increase its renewable investment to $3bn, making up 20% of Total’s capital investment.

The statement summarised: “In the next decade, oil products sales from Total will diminish by almost 30% and Total’s sales mix will become 30% oil products, 5% biofuels, 50% gases, 15% electrons.”

Solar and wind: Total learns from previous renewable ventures

Total aims to have 35GW of renewable generation active in 2025, predominantly solar photovoltaic power.

The company currently owns the majority stake in Sunpower, a North American solar retail business. In August, Sunpower spun-off Maxeon Solar Technologies, where Total owns a 36% stake.

In 2021, Total will start production at its first large-scale solar farm. The 800MW solar plant in Qatar cost $500m for two million solar modules, covered by a 25-year power purchase agreement.

Solar panel clean
One of Total’s solar plants in Japan. Credit: Total.

In India, the company has developed 2GW of solar generation in partnership with Adani Green Energy. The companies aim to expand this to 175GW by 2022.

Total’s president and gas, renewables and power Phillipe Sauquet said the company had been ‘a bit shy’ of developing offshore wind technology. However, he said they had learnt from its previous ventures. He continued: “We decided to partner with Ørsted to bid on a French offshore wind farm. While we lost the bid, we learnt that we were able to make a profitable bid, for electricity costs of less than €50 per MW.

“Our first big step will be the Seagreen project. We have a controlling interest and a good partner in SSE. Only 70% is covered by PPAs, but we have some good options upcoming to further de-risk the project, and we are already satisfied with the profitability.”

Total currently has two floating wind projects in development, in the UK and South Korea. Sauquet said it will announce another project in October. He told investors: “The challenge is to reduce the cost, and we intend to leverage the technologies we have developed through oil and gas. We have given our research and development teams $20m per year to develop this.

“With this ambition, I think we will be among the global leaders in this industry.”

Biofuels: Total scales up renewable fuels for decarbonising airlines

Total came to prominence as an oil and gas company. It expects transport will still require some oil products in 2050, predominantly in emerging markets. But from 2024, it plans to expand its business into the biofuels sector.

The company’s models show that the large majority of biofuel business will come from biogasoline and biodiesel. However, refining and chemicals president Bernard Pinatel said the low barrier to entry for these markets made profit margins small.

Biofuel refinery
The La Mède refinery will produce 500,000t per year when scaled up. Credits: François Lacour/Total.

Instead, he said Total would focus on renewable diesel. Pinatel said: “We have hydrogenation technology that would help us in this market. We also believe there is a lot of potential because renewable diesel can be used by aeroplanes. At the moment, it is the only option for airlines wanting to make large cuts to their emissions.

“We have in front of a use a brand new nascent market, and it’s pretty attractive. On the supply side, there is a clear need for additional capacity to meet demand. We expect the market will stay tight, and that will support profit margins for years to come.”

Total will aim to become a market leader in renewable diesel, with a 15% share of the biofuel market. The company has already converted one refinery to produce biofuels, aiming to ramp up production to 300,000t in 2020. Eventually, this will increase to 500,000t, and the company plans to convert another French refinery to operate from 2024.

Otherwise, the company aims to make 300,000t per year from co-processing biofuels with other products. Additionally, it will use its existing infrastructure to develop projects producing 500,000t per year.

EV charging: focusing on cities

Marketing and services president Alexis Vovk said: “Mobility is about to change drastically. It has already started, and we have integrated that into our strategy.”

Total subsidiary Saft currently works with Tianneng on a joint venture in China. The venture has become the country’s leading two-wheel electric vehicle (EV) manufacturer, and Total wants to scale up production to 5.5GWh by 2025.

In Europe, Saft has formed a joint venture with Opel. This venture will open a pilot production line for vehicle batteries in 2020, and the companies will make a final investment decision on a full-scale European plant in 2021. Eventually, this will develop into ‘gigafactories’ in France and Germany.

Vovk said Total needs to ‘rethink our relationship with customers’. As part of this, the company will partner with city planners to install fast EV charging infrastructure. It has already partnered with Amsterdam to install and operate 5,000 charge points, aiming to increase this to 20,000 by 2024.

Elsewhere, Vovk announced Total’s acquisition of the majority stake in BluePoint London. The company has contracts with 23 of the city’s boroughs, aiming to install 4,000 by 2025. These two cities will form approximately half of Total’s 50,000 charge point target, and Vovk said the company was “well on track” for this.

He continued: “Next five years are key for this market because in this time we expect the market to grow by eight times. We are aiming to achieve 10% market share in B2G and B2B, with $300m in capital expenditure and $300m in leased assets over the next five years.

“This business will bring $50m of cash flow per year by 2025 in Europe. We are also on the move in China.”

Ørsted sells B2B customers to Total

On Thursday, wind farm operator Ørsted announced it will sell its UK business customers to Total. A company announcement said this meant the transfer of 3,00 natural gas customers and 2,200 power customers, with a contracted volume of 28TWh. Ørsted will retain ‘a small number’ of clients, such as those it sells risk management products to.

Ørsted Sales UK managing director Ashley Phillips said the divestment was “in line with Ørsted’s strategic plan, refocusing on key activities for the group in the future”.

Total gas and power general manager Dave Cranfield said: “We believe that by continuing to develop our product range as well as offer excellent service, we are well placed to supply all customers – large and small – with their current and future energy needs.”

The companies expect to close the transaction this winter, subject to regulatory approval.