Total’s €950m Saft buy will help storage push


May 13, 2016

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There has been no shortage of merger news in wind in the last 12 months. Siemens and Gamesa; GE, Alstom and Adwen; Nordex and Acciona; and SunEdison and pretty much everyone.

But one of the most interesting involves a French oil giant and a French battery maker.

This week, Total has paid €950m for Saft Group, to step up its push into renewables. These may not be names that regularly grace these newsletters, but there is a lot in this deal that should interest those involved in renewable energy investment.

Total is Europe’s second-largest oil and gas company, and like other oil giants has spent the last two years working out how to thrive in an era of low oil prices. Oil prices still stand at around $40 a barrel, compared with $110 a barrel two years ago, which is causing pain across the sector. This has pushed Total to cut its capital investment in areas including oil exploration and re-focus elsewhere, including a new focus on renewable energy.

In September, the company made a pledge to invest €500m a year in renewables. Yes, it only represents 2% of the €24bn that Total invested overall last year, but it is still better having that investment and knowledge coming into renewables. And, if the oil price slump carries on for the next few years, then we could see that figure rise.

Total followed that last month by announcing that it would create a gas, renewables and power trading unit to enable it to diversify away from volatile oil prices. The buyout of Saft is key to this.

Saft makes industrial batteries for use by companies in sectors including telecoms, rail and aerospace, and Total says that it sees the potential to use that expertise in renewables too. This can only be good news for those in the wind sector as it could lead to some potentially game-changing energy storage innovations.

It is far too early to pin our hopes on this deal leading to any breakthrough, of course, but what it represents is still exciting.

The intermittent production of energy from wind farms is widely regarded as one of the major technical challenges that the sector needs an answer to in the next decade. Investment from the likes of Total and Saft can only help with that.

And the other positive aspect of this deal is that it shows how wind, and renewable energy in particular, could benefit from the oil price slump. The slump has pushed Total to diversify from fossil fuels by investing more in renewables, and others will do so too.

For example, Shell last month called on the Dutch government to set a target for 10GW of offshore wind by 2030 in a manifesto ahead of next year’s election. This is a major shift for a company that has until recently focused almost exclusively on oil and gas.

Total and Shell are not trailblazers, of course. We have utilities like Dong Energy, RWE, SSE, Statkraft, Statoil and Vattenfall investing in wind alongside their investments in fossil fuels. But the fact is that the oil price slump is forcing more oil and gas giants to spend time and money looking at sectors including wind and storage.

And when investment in research grows then the chance of big breakthroughs must too.

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