Could France's Total Reinvent the Grid?

For the last five years, the French oil company Total SA has pursued a strategy distinct from other supermajors that sell most of the world's oil.  It spent $1.3 billion to buy the United States' biggest maker of solar panels and just spent a billion more to buy a big battery company.

Oil companies have made forays into producing renewable and low-carbon electricity before, mostly ad hoc and with disappointing results.  But the seriousness of Total's effort sets it apart.

The company has spent $8 billion — more than any oil company ever — on renewable and clean energy since 2011, according to Bloomberg New Energy Finance.  It has tied the compensation of its CEO, Patrick Pouyanné, partly to his performance on low-carbon initiatives.

Pouyanné recently declared investments targeting greenhouse gases "a cornerstone of our strategic vision."  He says the company's investments are keeping with the global consensus goal of limiting temperatures from rising more than 2 degrees Celsius, though that might cause its core oil business to shrink.  The company's new growth, it says, will come partly from having 20 percent of its assets in renewables by 2035, up from 3 percent today.

It is a vision that stands in stark contrast to the approach being taken by other giant oil companies.  In recent years, BP PLC, Chevron Corp. and Royal Dutch Shell PLC divested their renewables portfolios (EnergyWire, Oct. 3, 2014).  Today, Exxon Mobil Corp. and BP say they're confident that oil demand will continue to grow for decades.

In the company of Tesla
To get there, Total appears to be patiently assembling the pieces of what could become an integrated offering of solar, storage and "grid edge" solutions that could turn the century-old electric grid on its head.

The U.S. portion of that offering may come through Total's American subsidiary, SunPower Corp., which "recently introduced a new service that includes onsite solar energy production for facility needs and is also planning to expand into smart energy management, storage and distribution to the grid," Total said in a report.

Disrupting the grid with a single, end-to-end solution is the dream of many clean energy companies, but almost none have the will or resources to make it happen.  Total, a century-old French oil company, just might.  That would put it in the rare company of Tesla Motors Inc., the Silicon Valley juggernaut that is attempting to bypass the traditional electric grid with an offering of electric cars, batteries and solar power.

"They and Tesla will be the first two to envision, 'What does this product actually look like?'" said Cosmin Laslau, an analyst with Lux Research.

Laslau took an informed guess at Total's strategy in a recent report where he looked at Total's battery strategy.  Along the way, he and his team assembled a graphic of Total's clean-energy acquisitions and noticed a pattern.

"It wasn't until we put them all on the same figure that we saw the logic of it," he said.

In addition to Total's 2011 acquisition of SunPower and its $1 billion purchase of battery maker Saft Groupe SA in May, it has taken smaller venture stakes in companies that work at the interplay of solar, storage and the grid.

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