October 6, 2020 — Industry Trends
Data can help IPPs succeed in a land of giants
IPPs can use data to help them thrive even as oil and gas firms enter renewables.
If you can’t beat ‘em, join ‘em.
We all know the saying, and it neatly captures the attitude of oil and gas giants to renewables. Over the last two years, these companies have been hit by slumping demand, more calls for climate action, and stronger economics of wind and solar. Now they are responding by making big public commitments to renewables.
We’ve seen a series of announcements in the last month.
BP set out the details of its plan to reach net zero carbon emissions by 2050, and teamed up with Equinor to expand in offshore wind. Meanwhile, Shell unveiled its plan on 30th September to accelerate its investments in low-carbon infrastructure; and, on the same day, Total set a course for 35GW installed renewables by 2025.
These plans all show that global oil and gas companies are taking investments in renewable energy more seriously than ever. This could have a huge impact on the utilities and the independent power producers (IPPs) already in this market.
However, we believe that data can give smaller players a competitive edge. It can help them to be Davids even as more Goliaths enter the market.
Competing with oil and gas giants may at first look formidable for IPPs. These global behemoths have market caps that dwarf those of even the largest utilities in today’s renewables market. They have balance sheets and access to capital that have the power to reshape the market. Their impact in the years ahead could be huge.
Yet these giants often lack the agility of smaller IPPs. We know that the data these IPPs can access on the performance of the assets helps them to boost production, improve their returns, and change their strategy more quickly than their lumbering rivals. This can also assist IPPs to unlock investment from pension funds.
Partly this is down to attitude. Most IPPs have lean teams, and understand it makes sense to work with experts in data-driven O&M.
For example, offshore wind developer Parkwind uses our Greenbyte Platform – and particularly our Taxonomy add-on – to optimize the performance of its offshore wind turbines and thrive as an IPP in a sector dominated by utilities. Read more about Parkwind here and for further details on Greenbyte Taxonomy add-on, click here.
By working with external data experts, IPPs can access the latest advances in O&M technology. These give more visibility over future costs and cashflow, and help them achieve low costs of capital. IPPs are also rarely weighed down by legacy systems.
You can find out more about the benefits open to new IPPs in this case study with Skyline Renewables, which has established a strong reputation in US wind despite being only three years old.
By contrast, oil and gas giants tend to be similar to the utilities, which have far larger teams and often look to in-house solutions. The result is many rely on systems that were developed internally – some of which still run on Excel! – but without reference to the latest data advances. Either that or they rely on figures from service providers.
The result is many larger firms don’t make data improvements that help their returns. For an example of our latest thinking, check out this ebook by Pramod Bangalore about how artificial intelligence will underpin a data revolution in renewable energy.
And finally, we’re also bullish on the prospects for IPPs because they aren’t weighed down by the toxic fossil fuel assets that blight the portfolios of oil and gas giants, and many utilities too. BP, Shell and Total will face major challenges getting out of those legacy assets and into renewables, while keeping their shareholders happy. We see no coincidence that BP’s share price has recently reached a 25-year low.
Yet we see their commitments to renewables as a great step. There’s no doubt oil and gas giants can reshape renewables, and we’re excited about the transformative impact these cash-rich players could have.
More attention, more capital and more talented people in the renewables space is all for the good and may give us all a fighting chance to fight climate change.