Total lights up power market with bid to seduce industry giants
French energy giant Total has revealed plans to supply electricity to large industrial customers in a major Australian expansion.
French energy giant Total has revealed plans to supply electricity to large industrial customers in a major Australian expansion pitting it against Shell and the nation’s big three power retailers.
Total — valued at $135bn and owner of stakes in Australia’s GLNG and Ichthys LNG projects — has applied for a licence to sell electricity from June 1, with a focus on big users rather than household accounts, according to filings lodged with the Australian Energy Regulator. It marks the latest move by some of the world’s biggest energy names to target the country’s power and renewables industries as part of an investment shift away from their oil and gas strongholds to less polluting and cheaper power sources.
Total is expected to build up its retail clients to help underpin further investments in wholesale renewables and gas-powered generation.
Given its existing footprint, diversification into the power sector made sense, according to consultancy Wood Mackenzie, amid the worst oil crash in a generation.
“Electricity is a fast-growing sector in the world today and many companies, including upstream oil and gas companies, are looking to enter this segment,” Wood Mac Asia-Pacific head of markets and transitions Prakash Sharma said.
“They have huge targets towards climate change obligations so in that sense it diversifies their traditional oil and gas business and also secures some of the future cash flows by building growth in an area that is less uncertain at the moment.”
Total holds a 27.5 per cent stake in the $US18.5bn ($31.5bn) GLNG project in Queensland operated by Santos and owns a quarter of Inpex’s Ichthys gas export project in Darwin, which cost $US45bn to build and started shipping supplies in late 2018.
It already sells electricity to the GLNG plant and has also traded electricity derivatives since 2014. It holds a half stake in solar installer Sunpower, along with an investment in Victoria’s Kiamal solar farm. But it harbours ambitions to boost its power business, with plans to invest $US2bn a year in low-carbon energy and boost its generation tenfold to 25 gigawatts by 2025.
Shell, best known in Australia for its LNG projects in Queensland and Western Australia, has also mounted an aggressive push into the electricity sector on the east coast, including a $620m takeover of Trevor St Baker’s ERM Power last August. ERM is the fourth-largest retailer in the national electricity market due to its focus on providing power to mid-sized and big customers, an area in which Total and Shell will now compete head to head.
“It is Total’s objective to grow the Australian electricity business through expanding its electricity retail position to very large industrial and commercial customers,” Total said in its application. AGL, Origin and EnergyAustralia hold large retail market shares in many states and control more than 60 per cent of capacity in NSW, Victoria and South Australia.