If you've no account register here first time
User Name :
User Email :
Password :

Login Now

Tesla-SolarCity, Total-Saft Acquisitions: In the Race to Integrate Power Companies, Who Is Next?

Total-Saft acquisitionThese are tough times for oil giants.

They’re up against falling profits and facing threats from alternative fuels and battery technologies as global momentum shifts toward a low-carbon economy.

To overcome these challenges, global oil “supermajors” should follow in the footsteps of Total — which bought energy storage company Saft for $1 billion — and look for opportunities in energy storage, solar and distributed generation, Lux Research says.

Total’s acquisition will allow it to compete with Tesla-SolarCity, according to Superpower Darwinism: What Big Oil Can and Cannot Do About Total’s Billion-Dollar Battery Move.

Earlier this month Tesla said its planned $2.6 billion merger with the solar company would create “the world’s only vertically integrated sustainable energy company.” Both recent deals point toward a race to integrate power companies, the Lux report says.

“Worthwhile battery companies continue to gain value and build momentum with each passing day, as do other opportunities toward a distributed generation future,” said Cosmin Laslau, Lux Research senior analyst and lead author of the report. “Indeed, the recent Tesla-SolarCity merger highlights the increasingly high-stakes race to integrate the future pieces of power, which are underpinned by distributed solar and advanced energy storage.”

In addition to the Tesla-SolarCity merger and the Total-Saft acquisition, this year has seen GE Ventures invest millions of dollars into German battery storage provider Sonnen and French energy giant Engie acquire an 80 percent stake in battery storage startup Green Charge.

Last year Total and Constellation Technology Ventures, part of electricity producer Exelon, invested in energy storage startup Stem.

“A lot of companies supply disparate pieces of the [power system] puzzle, but there’s a big role for those who can integrate those pieces into a complete system,” Lux Research analyst Katrina Westerhof said in an earlier interview.

Total announced the $1 billion deal to buy French battery maker Saft in May. Three months later the $1 billion price tag looks like a bargain.

But even though good battery companies have become harder and more expensive to buy since the acquisition of Saft, the oil supermajors — BP, Chevron, ConocoPhillips, Exxon Mobil, Royal Dutch Shell and Total — have cash piles ranging from $5 billion to $30 billion each, despite shrinking profits since 2012, Lux Research says. These companies must choose among more expensive battery makers — or suffer the consequences, Laslau said. “They should still act, as waiting longer or doing nothing, would be an even worse outcome.”

Which battery companies are most likely to get gobbled up next? The report says top battery-makers such as Panasonic, Hitachi and China’s BYD might be out of reach for most oil supermajors, given that each is a larger conglomerate valued in excess of $20 billion. Samsung SDI, Toshiba and NEC are affordable targets but each will cost way more than $1 billion.

“The big 3 of the battery world are Panasonic, LG Chem, and Samsung SDI’s energy storage arms,” Laslau said. “Their revenues, capacity, technology and other metrics are head-and-shoulders above the competition, although others like BYD are catching up quickly. Compared to the Total’s billion-dollar Saft acquisition, anyone buying one of the battery “big 3” should expect to spend on the order of $10 billion or more.”

But, as the report says, it’s not just about batteries. Total’s moves are also about solar and distributed generation. In 2011 Total bought a controlling stake in SunPower. It also has made smaller plays in distributed generation through Stem, Sunverge, Powerhive and Off-Grid Electric. To make the most of the emerging opportunities, oil giants should look to solar or wind, as well as companies that are active in connective software and hardware.

Does too much integration post a business risk? Most power utilities used to be vertically integrated with generation, distribution and retail services all under one business until regulators broke them up in the 1990s. Laslau says the short answer is yes — but that’s decades down the road.

“Yes, there is a long-term concern that if a company like Tesla-SolarCity controls all aspects of the solution — from batteries to solar panels to integration software and hardware — they could become too powerful, especially if they manage to capture a dominant market share,” Laslau said. “However, neither the all-encompassing-technical-solution nor the market dominance is likely to happen over the next decade or two, since the economics of the systems remain too expensive, and since solar-plus-storage still requires support from the grid.”

Just the Facts: 8 Popular Misconceptions about LEDs & Controls
Sponsored By: Digital Lumens

  
Planning for a Sustainable Future
Sponsored By: Dakota Software

  
Practical Guide to Transforming Energy Data into Better Buildings
Sponsored By: Lucid

  
Four Key Questions to Ask Before Your Next Energy Purchase
Sponsored By: EnerNOC, Inc.

  

Leave a Comment