Unlikely Allies


UNLIKELY ALLIES : Oil and gas companies embrace renewables and battery storage to meet global climate commitments

By Danielle Garbien , Steven Lorch and Jared Berg Bracewell LLP
RENEWABLE ENERGY HAS TAKEN CENTER STAGE in the national energy discussion . Technology and innovation are continuing to progress in the energy sector , and traditional oil and gas companies are embracing clean energy alternatives to assist in powering O & G operations . The potential alliances between O & G players and renewable developers across sectors along with innovative technology creates an exciting time to be immersed in this industry .
With emerging partnership opportunities , the anticipated growth in the battery storage sector and clean energy tax credits available under the Inflation Reduction Act of 2022 , there is greater optimism than ever that clean energy and reliability goals will be met across multiple sectors of the energy industry . O & G companies are committed to reducing their greenhouse gas emissions and making progress toward global corporate sustainability goals , as well as finding reliable sources of clean energy to power their increasingly electrified operations . This article provides a backdrop of how these common goals are bringing different sectors of the industry together .
STRATEGIC PARTNERSHIPS Hydrocarbon-based polymers and other products made from crude oil are integral to the renewables supply chain .
In its 2022 World Oil Outlook , OPEC maintained that world demand for oil will plateau after 2035 . Other experts have shorter-term predictions , but the fact remains that these operations are needed for the future of renewables . The industry is here to stay , but investors are demanding environmental , social and governance stewardship . There is no dispute that renewable energy can help O & G companies meet ESG standards through a number of products .
Virtual power purchase agreements : In contrast to a traditional power purchase agreement , a virtual PPA — or VPPA — does not involve the sale of the physical electricity . Instead , a buyer agrees to pay a fixed price for the electricity and the developer sells the physical energy to the market . The contract settles based on the difference between the agreed upon fixed price and floating price settled with the market . The incentive to enter into VPPAs for corporate buyers is the renewable energy credits . While the corporate buyer does not take title to the physical energy , it does receive the renewable energy credit associated with the generation of the physical energy from the renewable facility . Revenues from these VPPAs can help finance the construction of renewable generation facilities , and associated RECs can be retired to offset reportable emissions or monetized by the buyer .
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