On August 6, Reuters reported energy giant BP is preparing to sell a large chunk of its oil and gas assets in order to finance investment in renewable energy. BP is formerly British Petroleum and dates back to the Anglo-Persian Oil Company formed in 1908. It is one of the world’s seven oil and gas “supermajors”, characterized by vertical integration touching all parts of the traditional oil and gas chain from exploration and production to petrochemicals, refined product distribution, and even power generation. Who’s next? Exxon?

This all leads to the age-old adage of “follow the money”, and in the context of investing if you “follow the money” you will typically find the future. There is a reason FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks have performed so well over the last decade, and why the top 10 companies in the S&P 500 are dominated by tech, worth $8 trillion, and represent 29% of the index. The world is changing.

Source: Wall Street Journal

It’s our view that smaller, more nimble companies typically lead the way forward. When a supermajor like BP starts diverting investment dollars away from its core competency it makes you think. Large companies with large bureaucracies are like aircraft carriers when it comes to strategy, it can take a long time to turn the boat. So, we think it’s safe to say that if BP (and other supermajors) are investing in clean energy that renewables investing has reached the mainstream.

Source: Goldman Sachs

Renewable energy investment is an accelerating trend, but it’s not a new one. As per the below chart from Goldman Sachs, renewable energy capex as a percent of total energy capex is set to reach roughly 25% in 2021. For the first year in history, spending on renewable power supply will surpass spending in upstream oil and gas. This is a remarkable milestone for an industry that until recently has been largely considered niche. The moment for meshing Main Street desires and Wall Street capital allocation is now and underpins our enthusiasm for this multi-decade megatrend.

Source: Goldman Sachs

Renewables Roundup

“Goldman Sachs says renewable-energy spending will surpass oil and gas for the first time ever in 2021 — and sees total investment spiking to $16 trillion over the next decade” … https://markets.businessinsider.com/news/stocks/renewable-energy-trillion-investment-opportunity-surpass-oil-first-time-goldman-2020-6-1029318482#:~:text=to%20BI%20Prime-,Goldman%20Sachs%20says%20renewable%2Denergy%20spending%20will%20surpass%20oil%20and,trillion%20over%20the%20next%20decade

“FERC staff to Congress: HV transmission essential to reducing carbon, deploying renewables” … https://www.utilitydive.com/news/ferc-staff-to-congress-hv-transmission-essential-to-reducing-carbon-deplo/583177/

“Facebook Expanding Renewables Footprint With Big Solar, Wind Buy” … https://www.datacenterknowledge.com/facebook/facebook-expanding-renewables-footprint-big-solar-wind-buy

“Plummeting Renewable Energy, Battery Prices Mean China Could Hit 62% Clean Power And Cut Costs 11% By 2030” … https://www.forbes.com/sites/energyinnovation/2020/08/10/plummeting-renewable-energy-battery-prices-mean-china-could-hit-62-clean-power-and-cut-costs-11-by-2030/#37e45c3f1519

“Renewable Energy Is Now The Least-Cost Option In The Power Sector” https://www.evwind.es/2020/08/09/renewable-energy-is-now-the-least-cost-option-in-the-power-sector/76372

“Phillips 66 Is Building The World’s Largest Renewable Fuels Plant In San Francisco”

“Wind, Solar Share In Indian Electricity Market Rose To 10% In 1H2020”

“Your Next Cold Bud Could Be Delivered In A Renewable Energy Semi”

“2023 Is Supposed To Be The Year Of The Electric Vehicle. Now Is the Time To Invest.”

“Wind And Solar Make New Milestone During COVID-19”

“European Battery Makers Power Up For A Green Recovery”

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