Wind energy: a hedge against peaks in oil demand?

Stockholm (NordSIP) – Statoil, the Norwegian majority state-owned oil giant, is committing to increase its investment in renewables to between 15% and 20% of total spending by 2030, up from 5% today, the Wall Street Journal reports.

The notable increase in commitments to alternatives to fossil fuel energy is buttressed by the view that the global demand for oil will eventually peak, according to statements made by Statoil Chief Executive Eldar Saetre at the CERAWeek conference in Houston Monday.

“One day, there will be a peak in oil demand,” Mr Saetre said. “There is a debate about when that will happen. At some point, it will be a shrinking business.”

Oil demand is projected to rise over the next five years, hitting 104 bpd by 2022, according to the Paris-based International Energy Agency, but is expected to taper off at some point within that decade. As such, long-term concerns over the demand for oil and gas has motivated investments in alternatives, as these can provide a hedge against volatility in the former sector, depending as it does on commodity prices. Such a hedge against cyclical downturns is important to Statoil, Mr Saetre said, with its concentrated exposure to price swings.

“To have a portfolio that also has elements that are independent and doesn’t follow oil and gas is useful in tough times,” Mr Saetre said, adding the company’s renewables projects have a rate of return of around 10%, by comparison to the 20% returns from oil and gas projects when prices are $50 a barrel.

As such, Statoil’s new $200 million venture capital fund has announced an investment of $3 million, its first, in United Wind, a U.S. company which provides distributed wind energy leasing solutions, according to CNBC.

“Statoil is committed to wind energy, as demonstrated by our strong position in offshore wind,” Gareth Burns, managing director of Statoil Energy Ventures, explained in a press release. The United Wind investment “secures early entry in the company driving the growth of the distributed wind market in the United States.”

“Rural property owners throughout the U.S. have a massive opportunity to save on electricity costs by using distributed wind energy technology,” United Wind founder and CEO Russell Tencer said. “This financing, coupled with our recent closing of additional project capital, enables United Wind to deliver on the promise of an affordable and sustainable energy future in these rural communities.”

Statoil Energy Ventures will have a seat on the board of United Wind.

“Wind energy is developing towards a mainstream, competitive and reliable power technology,” according to the IEA.

 

Picture (c): Thorben-Wengert_pixelio.de