Tracking the Energy Transition: ESG Profits, a Potential Win for Renewables Funding, and Technology Advances
Banks are finding more success with ESG-related bond sales than they are with fossil fuels. Renewable-energy firms may be able to combine the funding advantages of being a corporation with the tax advantages of being a partnership. Shell boosts solar in Brazil. And a new water-based, bio-based surfactant may be a game changer.
Coming at ESG From Both Sides
According to recent news reports, the banking industry is making more money from underwriting bond sales related to environmental, social, and governance (ESG) than from issuing debt from fossil fuel companies. Bloomberg reported a couple of weeks ago that the banks’ $3.6 billion in earnings thus far this year from arranging bond sales advertised as ESG-related are more than double the $1.6 billion earned from underwriting debt for fossil fuel producers. The Bloomberg data show that about $750 billion of ESG-related bonds have been issued during the first 8½ months of 2021, compared with $468 billion for all of 2020. Among the winners is JPMorgan Chase, the world’s top debt underwriter and No. 1 arranger of bond sales for the fossil fuel industry, which now earns 13% of its total bond underwriting business from ESG-related instruments compared with 5% in 2020. BNP Paribas now generates 21% of its overall debt underwriting from ESG, and Credit Agricole has generated 31% of its underwriting this year from ESG.
The other side of the coin: Société Générale (SG), one of Europe’s leading financial services groups, is one of the first global banks to announce a concrete near-term target to reduce its overall exposure to the oil and gas extraction sector by 10% by 2025. The group has decided to stop financing onshore oil and gas extraction in the US. According to SG, Australia’s Suncorp was the first insurer to announce it would no longer provide coverage for all new oil and gas production projects.
Combining Funding and Tax Advantages
If a recent Reuters news story is accurate, the White House has agreed to back a plan that would allow renewable energy firms to form the same type of tax-advantaged master limited partnerships—or MLPs—that the oil and gas industry has used for decades to combine the funding advantages of corporations with the tax advantages of partnerships. The expansion, which is included in the Democratic-backed $3.5-trillion spending legislation, would grant renewable energy long-sought access to the same structure that has been used to finance billions of dollars in pipeline and storage projects since the Reagan era. Clark Sackschewsky, tax market leader at BDO USA in Houston, was quoted as saying, “An expansion could allow retail investors to directly invest in renewable energy projects, rather than only being able to invest in companies that may deal in renewables.” President Biden has reportedly backed the House plan over a competing plan from some environmentalists that would eliminate MLPs for the fossil fuel industry. The fate of the MLP expansion is in both houses of the US Congress.
Shell Brings Renewables to Brazil
Shell has launched the Shell Energy brand in Brazil with a $565-million commitment to renewable energy investment in the country through 2025. Most of the investment will be related to solar energy projects, said Shell executives, who explained that the company has 2 GW of solar energy projects under development and expects to reach 5 GW by year-end. The announcement followed Petrobras’ exit from the wind power generation business in February and its announcement in May that it would not invest significantly in renewable energy because it doesn’t know the business well enough.
Environmental Performance Certification Moves Midstream
For the natural gas industry to truly know and improve what is happening within their operations, real-time detection of fugitive methane emissions across the supply chain is critical. To this end, Tallgrass Energy’s bidirectional Rockies Express Pipeline is expected to become the first interstate natural gas transmission pipeline in the US to receive comprehensive, independent third-party environmental assessment and certification from energy sector operational certification and real-time emissions monitoring company Project Canary.
Schlumberger Expands Energy Transition Role Through Stationary Energy Storage Agreement With EnerVenue …
Expansion of electrification is accelerating the need for large-scale stationary energy storage solutions across various sectors, and Schlumberger New Energy is getting into the rapidly emerging business through an investment and collaboration agreement with EnerVenue to deploy its nickel/hydrogen battery technology across selected global markets and across utility-scale grid storage, off-grid commercial and industrial storage, and residential sectors. EnerVenue’s president says its aerospace-proven metal/hydrogen battery technology provides an affordable alternative to lithium-ion batteries with capabilities well suited to harsh desert and remote project sites, among other applications.
… While Baker Hughes Extends Upstream Methane Emissions Monitoring and Management
Baker Hughes, through its Panametrics business, has announced that its flare.IQ flare control and digital verification platform to support upstream operators. Originally launched in 2017 as a high-impact, low-cost means of monitoring, measuring, and helping to reduce methane emissions in downstream oil and gas operations, the emissions-monitoring technology now includes a new feature to enable upstream operators to accurately monitor and measure their flare-related emissions by putting environmental flare metrics on the production floor. For downstream flare operations, flare.IQ can accurately monitor flare emissions, and advanced analytics enable operators to achieve 98% or greater flare combustion efficiency. For upstream flare operations, flare.IQ can provide accurate emissions monitoring, which is the first step toward transparent emission reporting.
Additionally, Vine Energy has agreed to use Baker Hughes’ ProductionLink Edge artificial-lift solution with advanced analytics to enhance gas production and curtail methane emissions across natural gas wells in Louisiana’s Haynesville Shale. The agreement follows a 3-month, 10-well joint pilot project in the Haynesville, in which using the artificial-lift solution increased production by 5% while unloading events decreased by 94%. According to a news release, ProductionLink Edge is an intelligent industrial internet of things (IIoT) device that, when installed at producing wells, provides a secure, flexible, and cloud-based edge-computing platform that continuously collects and analyzes data to automate artificial-lift operations and mitigate manual unloads, which are a source of methane emissions.
New Water-Based, Bio-Based Surfactant May Change the Game
TegraSurf, a renewable line of water-based, bio-based surfactants for energy, mining, agricultural, water treatment, and other industrial applications is a game-changer that performs like a synthetic with all the environmental benefits of a bio-based surfactant, says Integrity BioChem (IBC), the company that developed it. According to an announcement from IBC, mineral-oil-based TegraSurf, which is used to reduce or replace leading nonionic surfactants such as nonylphenols and alcohol ethoxylates, is produced faster and at larger volumes, with lower costs than other bio-based offerings in the market. It reports a renewable carbon index greater than 90%, is certified readily biodegradable by OECD 301B protocol, and does not exist in the environment after 90 days. With a hydrophilic/lipophilic balance tunable from 7 to 19,TegraSurf can be used in a wide variety of applications, something bio-based surfactants do not commonly have the ability to do.