Wave energy to catch up with wind

European Oil Majors Energy Transition highlights BP, Shell, and Total rapidly scaling renewables, wind and solar assets, hydrogen, electricity, and EV charging while cutting upstream capex, aligning with net-zero goals and utility-style energy services.

Key Points

It is the shift by BP, Shell, Total and peers toward renewables, electricity, hydrogen, and EV charging to meet net-zero goals.

✅ Offshore wind, solar, and hydrogen projects scale across Europe

✅ Capex shifts, fossil output declines, net-zero targets by 2050

✅ EV charging, utilities, and power trading become core services

Under pressure from governments and investors, including rising investor pressure at utilities that reverberates across the sector, industry leaders like BP and Shell are accelerating their production of cleaner energy.

This may turn out to be the year that oil giants, especially in Europe, started looking more like electric companies.

Late last month, Royal Dutch Shell won a deal to build a vast wind farm off the coast of the Netherlands. Earlier in the year, France’s Total, which owns a battery maker, agreed to make several large investments in solar power in Spain and a wind farm off Scotland. Total also bought an electric and natural gas utility in Spain and is joining Shell and BP in expanding its electric vehicle charging business.

At the same time, the companies are ditching plans to drill more wells as they chop back capital budgets. Shell recently said it would delay new fields in the Gulf of Mexico and in the North Sea, while BP has promised not to hunt for oil in any new countries.

Prodded by governments and investors to address climate change concerns about their products, Europe’s oil companies are accelerating their production of cleaner energy — usually electricity, sometimes hydrogen — and promoting natural gas, which they argue can be a cleaner transition fuel from coal and oil to renewables, as carbon emissions drop in power generation.

For some executives, the sudden plunge in demand for oil caused by the pandemic — and the accompanying collapse in earnings — is another warning that unless they change the composition of their businesses, they risk being dinosaurs headed for extinction.

This evolving vision is more striking because it is shared by many longtime veterans of the oil business.

“During the last six years, we had extreme volatility in the oil commodities,” said Claudio Descalzi, 65, the chief executive of Eni, who has been with that Italian company for nearly 40 years. He said he wanted to build a business increasingly based on green energy rather than oil.

“We want to stay away from the volatility and the uncertainty,” he added.

Bernard Looney, a 29-year BP veteran who became chief executive in February, recently told journalists, “What the world wants from energy is changing, and so we need to change, quite frankly, what we offer the world.”

The bet is that electricity will be the prime means of delivering cleaner energy in the future and, therefore, will grow rapidly as clean-energy investment incentives scale globally.

American giants like Exxon Mobil and Chevron have been slower than their European counterparts to commit to climate-related goals that are as far reaching, analysts say, partly because they face less government and investor pressure (although Wall Street investors are increasingly vocal of late).

“We are seeing a much bigger differentiation in corporate strategy” separating American and European oil companies “than at any point in my career,” said Jason Gammel, a veteran oil analyst at Jefferies, an investment bank.

Companies like Shell and BP are trying to position themselves for an era when they will rely much less on extracting natural resources from the earth than on providing energy as a service tailored to the needs of customers — more akin to electric utilities than to oil drillers.

They hope to take advantage of the thousands of engineers on their payrolls to manage the construction of new types of energy plants; their vast networks of retail stations to provide services like charging electric vehicles; and their trading desks, which typically buy and hedge a wide variety of energy futures, to arrange low-carbon energy supplies for cities or large companies.

All of Europe’s large oil companies have now set targets to reduce the carbon emissions that contribute to climate change. Most have set a ”net zero” ambition by 2050, a goal also embraced by governments like the European Union and Britain.

The companies plan to get there by selling more and more renewable energy and by investing in carbon-free electricity across their portfolios, and, in some cases, by offsetting emissions with so-called nature-based solutions like planting forests to soak up carbon.

Electricity is the key to most of these strategies. Hydrogen, a clean-burning gas that can store energy and generate electric power for vehicles, also plays an increasingly large role.

The coming changes are clearest at BP. Mr. Looney said this month that he planned to increase investment in low-emission businesses like renewable energy by tenfold in the next decade to $5 billion a year, while cutting back oil and gas production by 40 percent. By 2030, BP aims to generate renewable electricity comparable to a few dozen large offshore wind farms.

Mr. Looney, though, has said oil and gas production need to be retained to generate cash to finance the company’s future.

Environmentalists and analysts described Mr. Looney’s statement that BP’s oil and gas production would decline in the future as a breakthrough that would put pressure on other companies to follow.

BP’s move “clearly differentiates them from peers,” said Andrew Grant, an analyst at Carbon Tracker, a London nonprofit. He noted that most other oil companies had so far been unwilling to confront “the prospect of producing less fossil fuels.”

While there is skepticism in both the environmental and the investment communities about whether century-old companies like BP and Shell can learn new tricks, they do bring scale and know-how to the task.

“To make a switch from a global economy that depends on fossil fuels for 80 percent of its energy to something else is a very, very big job,” said Daniel Yergin, the energy historian who has a forthcoming book, “The New Map,” on the global energy transition now occurring in energy. But he noted, “These companies are really good at big, complex engineering management that will be required for a transition of that scale.”

Financial analysts say the dreadnoughts are already changing course.

“They are doing it because management believes it is the right thing to do and also because shareholders are severely pressuring them,” said Michele Della Vigna, head of natural resources research at Goldman Sachs.

Already, he said, investments by the large oil companies in low-carbon energy have risen to as much as 15 percent of capital spending, on average, for 2020 and 2021 and around 50 percent if natural gas is included.

Oswald Clint, an analyst at Bernstein, forecast that the large oil companies would expand their renewable-energy businesses like wind, solar and hydrogen by around 25 percent or more each year over the next decade.

Shares in oil companies, once stock market stalwarts, have been marked down by investors in part because of the risk that climate change concerns will erode demand for their products. European electric companies are perceived as having done more than the oil industry to embrace the new energy era.

“It is very tricky for an investor to have confidence that they can pull this off,” Mr. Clint said, referring to the oil industry’s aspirations to change.

But, he said, he expects funds to flow back into oil stocks as the new businesses gather momentum.

At times, supplying electricity has been less profitable than drilling for oil and gas. Executives, though, figure that wind farms and solar parks are likely to produce more predictable revenue, partly because customers want to buy products labeled green.

Mr. Descalzi of Eni said converted refineries in Venice and Sicily that the company uses to make lower-carbon fuel from plant matter have produced better financial results in this difficult year than its traditional businesses.

Oil companies insist that they must continue with some oil and gas investments, not least because those earnings can finance future energy sources. “Not to make any mistake,” Patrick Pouyanné, chief executive of Total, said to analysts recently: Low-cost oil projects will be a part of the future.

During the pandemic, BP, Total and Shell have all scrutinized their portfolios, partly to determine if climate change pressures and lingering effects from the pandemic mean that petroleum reserves on their books — developed for perhaps billions of dollars, when oil was at the center of their business — might never be produced or earn less than previously expected. These exercises have led to tens of billions of dollars of write-offs for the second quarter, and there are likely to be more as companies recalibrate their plans.

“We haven’t seen the last of these,” said Luke Parker, vice president for corporate analysis at Wood Mackenzie, a market research firm. “There will be more to come as the realities of the energy transition bite.”

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Goreway Power Station Overbilling exposed by Ontario Energy Board shows IESO oversight failures, GCG gaming, and $100M in inappropriate payments at the Brampton natural gas plant, penalized with fines and repayments impacting Ontario ratepayers.

Key Points

Goreway exploited IESO GCG flaws, causing about $100M in improper payouts and fines.

✅ OEB probe flagged $89M in ineligible start-up O&M charges

✅ IESO fined Goreway $10M; majority of excess costs recovered

✅ Audit found $200M in overbilling across nine generators

Hydro customers shelled out about $100 million in "inappropriate" payments to a natural gas plant that exploited flaws in how Ontario manages its private electricity generators, according to the Ontario Energy Board.

The company operating the Goreway Power Station in Brampton "gamed" the system for at least three years, according to an investigation by the provincial energy regulator. 

The investigation also delivers stinging criticism of the provincial government's Independent Electricity System Operator (IESO), slamming it for a lack of oversight. The probe by the Ontario Energy Board's market surveillance panel was completed nearly a year ago, but was only made public in November because it was buried on its website without a news release. CBC News is the first media outlet to report on the investigation.  

The excess payments to Goreway Power Station included:

• $89 million in ineligible expenses billed as the costs of firing up power production. 
• $5.6 million paid in three months from a flaw in how IESO calculated top-ups for the company committing to generate power a day in advance.   
• Of $11.2 million paid to compensate the company for IESO ordering it to start or stop generating power, the investigation concluded "a substantial portion ... was the result of gaming."  

Most privately-owned natural gas-fired plants in the province do not generate electricity constantly, but start and stop production in response to fluctuating market demand, even as the energy minister has requested an halt to natural gas generation across the grid.  IESO pays them a premium for the costs of firing up production, through what it calls "generation cost guarantee" programs. 

But the investigation found IESO did little checking into the details of Goreway Power Station's billings. 

Goreway Power Station, located near Highway 407 in Brampton, Ont., is an 875 megawatt natural gas power plant. (Goreway)

"Conservatively, at least $89 million of Goreway's submissions were clearly ineligible by any reasonable measure," concludes the report.

"Goreway routinely submitted what were obviously inappropriate expenses to be reimbursed by the IESO, and ultimately borne by Ontario ratepayers,"

The investigation panel found an "extraordinary pattern" to these billings by Goreway Power Station, suggesting the IESO should have caught on sooner. The company submitted more than $100 million in start-up operating and maintenance costs during the three-year period investigated — more than all other gas-fired generators in the province combined. The company's costs per start-up were more than double the next most expensive power generator. 

"Goreway repeatedly exploited defects in the GCG (generation cost guarantee) program, and in doing so received at least $89 million in gamed GCG payments." 

Company fined $10M

The investigation covered a three-year period from when Goreway Power Station began generating power in June 2009. Investigators said that delays in releasing documents slowed down their probe, and they only obtained all the records they needed in April 2016.

The investigating panel does not have the power to impose penalties on companies it found broke the rules. 

The IESO fined Goreway Power Station $10 million. The company has also repaid IESO "a substantial portion" of the excess payments it received during its first six years of operating, but the exact figure is blacked out in the investigation report that was made public. 

The control room from which the provincial government's Independent Electricity System Operator manages Ontario's power supply. The agency is also responsible for managing contracts with private power producers.(IESO)

"Goreway does not agree with many of the draft report's findings and conclusions, including any suggestion that Goreway engaged in gaming or that it deliberately misled the IESO," writes lawyer George Vegh on behalf of the company in a response to the investigation report, dated Aug. 1.

"Goreway has implemented initiatives designed to ensure that compliance is a chief operating principle."     

The power station, located near Highway 407 in Brampton, is a joint venture between Toyota Tsusho Corp. and JERA Co. Inc. During the period under scrutiny, the project was run by Toyota Tsusho and Chubu Electric Power Inc., both headquartered in Japan. 

Investigators fear 'same situation' exists today

The report blames the provincially-controlled IESO for creating a system with defects that allowed the over-billing. 

"Goreway was able to — and repeatedly did — exploit these defects," says the investigation report. It goes on to explain the flaws "have created opportunities for exploitation, to the serious financial disadvantage of Ontario's ratepayers," even as greening Ontario's grid could entail massive costs.

The investigation suggests IESO hasn't made adequate changes to ensure it won't happen again, at a time when an analysis of a dirtier grid is raising concerns.   

"Goreway stands as a clear example of how generators are able to exploit the generation costs guarantee regime," says the report.

"The Panel is concerned that the same situation remains in place today." 

PC energy critic Todd Smith raised CBC News' report on the Goreway Power Station in Tuesday's question period. (Ontario Legislature)

After CBC News broke the story Tuesday, the provincial government was forced to respond in question period, amid a broader push for new gas plants to boost electricity production. 

"Here we have yet another gas plant scandal in Peel region that's costing electricity customers over $100 million," said PC energy critic Todd Smith. He slammed "the incompetence of a government that once again failed to look out for electricity customers." 

Economic Development Minister Brad Duguid said: "There is no excuse for any company in this province to ever game the system."

Nine companies overbilled $200M: audit 

The IESO found out about the overbilling "some time ago," said Duguid.

"They fully investigated, they've recovered most of the cost, they delivered a $10 million fine — the biggest fine on record."

The program that Goreway exploited became the subject of an audit that the IESO launched in 2011. The agency uncovered $200 million in ineligible billings by nine power producers, wrote the IESO vice president for policy Terry Young in an email to CBC News.

The IESO has recovered up to 85 per cent of those ineligible costs, Young noted.

Reforms to the design of the the program have removed the potential for overpayments and made it more efficient, he said, even as Ontario weighs embracing clean power more broadly. Last year, its total annual costs dropped to $23 million, down from $61 million in 2014.

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Rural Electrification Poverty Impact examines energy access, grid connections, and reliability, testing economic development claims via randomized trials; findings show minimal gains without appliances, reliable supply, and complementary services like education and job creation initiatives.

Key Points

Study of household grid connections showing modest poverty impact without reliable power and appliances.

✅ Randomized grid connections showed no short-term income gains.

✅ Low reliability and few appliances limited electricity use.

✅ Complementary investments in jobs, education, health may be needed.

The head of Swedfund, the development finance group, recently summarized a widely-held belief: “Access to reliable electricity drives development and is essential for job creation, women’s empowerment and combating poverty.” This view has been the driving force behind a number of efforts to provide electricity to the 1.1 billion people around the world living in energy poverty, such as India's village electrification initiatives in recent years.

But does electricity really help lift households out of poverty? My co-authors and I set out to answer this question. We designed an experiment in which we first identified a sample of “under grid” households in Western Kenya—structures that were located close to but not connected to a grid. These households were then randomly divided into treatment and control groups. In the treatment group, we worked closely with the rural electrification agency to connect the households to the grid for free or at various discounts. In the control group, we made no changes. After eighteen months, we surveyed people from both groups and collected data on an assortment of outcomes, including whether they were employed outside of subsistence agriculture (the most common type of work in the region) and how many assets they owned. We even gave children basic tests, as a frequent assertion is that electricity helps children perform better in school since they are able to study at night.

When we analyzed the data, we found no differences between the treatment and control groups. The rural electrification agency had spent more than $1,000 to connect each household. Yet eighteen months later, the households we connected seemed to be no better off. Even the children’s test scores were more or less the same. The results of our experiment were discouraging, and at odds with the popular view that supplying households with access to electricity will drive economic development. Lifting people out of poverty may require a more comprehensive approach to ensure that electricity is not only affordable (with some evidence that EV growth can benefit all customers in mature markets), but is also reliable, useable, and available to the whole community, paired with other important investments.

For instance, in many low-income countries, the grid has frequent blackouts and maintenance problems, making electricity unreliable, as seen in Nigeria's electricity crisis in recent years. Even if the grid were reliable, poor households may not be able to afford the appliances that would allow for more than just lighting and cell phone charging. In our data, households barely bought any appliances and they used just 3 kilowatt-hours per month. Compare that to the U.S. average of 900 kilowatt-hours per month, a figure that could rise as EV adoption increases electricity demand over time.

There are also other factors to consider. After all, correlation does not equal causation. There is no doubt that the 1.1 billion people without power are the world’s poorest citizens. But this is not the only challenge they face. The poor may also lack running water, basic sanitation, consistent food supplies, quality education, sufficient health care, political influence, and a host of other factors that may be harder to measure but are no less important to well-being. Prioritizing investments in some of these other factors may lead to higher immediate returns. Previous work by one of my co-authors, for example, shows substantial economic gains from government spending on treatment for intestinal worms in children.

It’s possible that our results don’t generalize. They certainly don’t apply to enhancing electricity services for non-residential customers, like factories, hospitals, and schools, and electric utilities adapting to new load patterns. Perhaps the households we studied in Western Kenya are particularly poor (although measures of well-being suggest they are comparable to rural households across Sub-Saharan Africa) or politically disenfranchised. Perhaps if we had waited longer, or if we had electrified an entire region, the household impacts we measured would have been much greater. But others who have studied this question have found similar results. One study, also conducted in Western Kenya, found that subsidizing solar lamps helped families save on kerosene, but did not lead children to study more. Another study found that installing solar-powered microgrids in Indian villages resulted in no socioeconomic benefits.

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Wall Street Fossil Fuel Pivot signals banks reassessing ESG, net-zero, and decarbonization goals, reviving oil, gas, and coal financing while recalibrating clean energy exposure amid policy shifts, regulatory rollbacks, and investment risk realignment.

Key Points

A shift as major U.S. banks ease ESG limits to fund oil, gas, coal while rebalancing alongside renewables.

✅ Banks revisit lending to oil, gas, and coal after policy shifts.

✅ ESG and net-zero commitments face reassessment amid returns.

✅ Renewables compete for capital as risk models are updated.

The global energy finance sector, worth a staggering $1.4 trillion, is undergoing a significant transformation, largely due to former President Donald Trump's renewed support for the oil, gas, and coal industries. Wall Street, which had previously aligned itself with global climate initiatives and the energy transition and net-zero goals, is now reassessing its strategy and pivoting toward a more fossil-fuel-friendly stance.

This shift represents a major change from the earlier stance, where many of the largest U.S. banks and financial institutions took a firm stance on decarbonization push, including limiting their exposure to fossil-fuel projects. Just a few years ago, these institutions were vocal supporters of the global push for a sustainable future, with many committing to support clean energy solutions and abandon investments in high-carbon energy sources.

However, with the change in administration and the resurgence of support for traditional energy sectors under Trump’s policies, these same banks are now rethinking their strategies. Financial institutions are increasingly discussing the possibility of lifting long-standing restrictions that limited their investments in controversial fossil-fuel projects, including coal mining, where emissions drop as coal declines, and offshore drilling. The change reflects a broader realignment within the energy finance sector, with Wall Street reexamining its role in shaping the future of energy.

One of the most significant developments is the Biden administration’s policy reversal, which emphasized reducing the U.S. carbon footprint in favor of carbon-free electricity strategies. Under Trump, however, there has been a renewed focus on supporting the traditional energy sectors. His administration has pushed to reduce regulatory burdens on fossil-fuel companies, particularly oil and gas, while simultaneously reintroducing favorable tax incentives for the coal and gas industries. This is a stark contrast to the Biden administration's efforts to incentivize the transition toward renewable energy and zero-emissions goals.

Trump's policies have, in effect, sent a strong signal to financial markets that the fossil-fuel industry could see a resurgence. U.S. banks, which had previously distanced themselves from financing oil and gas ventures due to the pressure from environmental activists and ESG (Environmental, Social, and Governance) investors, as seen in investor pressure on Duke Energy, are now reconsidering their positions. Major players like JPMorgan Chase and Goldman Sachs are reportedly having internal discussions about revisiting financing for energy projects that involve high carbon emissions, including controversial oil extraction and gas drilling initiatives.

The implications of this shift are far-reaching. In the past, a growing number of institutional investors had embraced ESG principles, with the goal of supporting the transition to renewable energy sources. However, Trump’s pro-fossil fuel stance appears to be emboldening Wall Street’s biggest players to rethink their commitment to green investing. Some are now advocating for a “balanced approach” that would allow for continued investment in traditional energy sectors, while also acknowledging the growing importance of renewable energy investments, a trend echoed by European oil majors going electric in recent years.

This reversal has led to confusion among investors and analysts, who are now grappling with how to navigate a rapidly changing landscape. Wall Street's newfound support for the fossil-fuel industry comes amid a backdrop of global concerns about climate change. Many investors, who had previously embraced policies aimed at curbing the effects of global warming, are now finding it harder to reconcile their environmental commitments with the shift toward fossil-fuel-heavy portfolios. The reemergence of fossil-fuel-friendly policies is forcing institutional investors to rethink their long-term strategies.

The consequences of this policy shift are also being felt by renewable energy companies, which now face increased competition for investment dollars from traditional energy sectors. The shift towards oil and gas projects has made it more challenging for renewable energy companies to attract the same level of financial backing, even as demand for clean energy continues to rise and as doubling electricity investment becomes a key policy call. This could result in a deceleration of renewable energy projects, potentially delaying the progress needed to meet the world’s climate targets.

Despite this, some analysts remain optimistic that the long-term shift toward green energy is inevitable, even if fossil-fuel investments gain a temporary boost. As the world continues to grapple with the effects of climate change, and as technological advancements in clean energy continue to reduce costs, the transition to renewables is likely to persist, regardless of the political climate.

The shift in Wall Street’s approach to energy investments, spurred by Trump’s pro-fossil fuel policies, is reshaping the $1.4 trillion global energy finance market. While the pivot towards fossil fuels may offer short-term gains, the long-term trajectory for energy markets remains firmly in the direction of renewables. The next few years will be crucial in determining whether financial institutions can balance the demand for short-term profitability with their long-term environmental responsibilities.

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Texas Deep Freeze Energy Crisis strains grids as polar vortex triggers rolling blackouts, record natural gas and electricity prices, refinery shutdowns, WTI gains, and scarcity pricing across Texas, Oklahoma, SPP, and Mexico.

Key Points

A polar vortex slamming Texas energy: outages, record power prices, gas spikes, and reduced oil output.

✅ Record gas trades near $500/mmBtu; power hits $6,000/MWh

✅ WTI tops $60 as Texas shuts in ~1 million bpd

✅ Rolling blackouts across SPP; ERCOT scarcity pricing

A deep freeze is roiling electricity markets in more than a dozen U.S. states, leading to record-setting prices for electricity and natural gas, knocking oil production off line and shutting down some of North America’s largest refineries.

“It’s freakishly cold,” said Eric Fell, a senior natural gas analyst with Wood Mackenzie in Houston, where record cold temperatures and snow have blanketed the city, caused rolling power outages, shut down refineries and sent both natural gas and electricity prices soaring.

'It’s freakishly cold': Deep freeze slams North American energy sector

The polar vortex has led to freezing temperatures in every county in Texas, the largest energy-producing state in the U.S., and caused massive disruptions across the North American energy complex, triggering Texas power outages as far south as Mexico.

As the plunge in temperatures forced oil companies to shut in an estimated one million barrels of oil production in Texas on Monday, the West Texas Intermediate benchmark price rose above the US$60 per barrel threshold for the first time in a year to settle up 1 per cent, or US65 cents, at US$60.12 per barrel.

President Joe Biden declared an emergency on Monday, unlocking federal assistance to Texas.

People carry groceries from a local gas station on Monday in Austin, Texas. Winter storm Uri has brought historic cold weather to Texas, causing traffic delays and power outages. 

Frozen wind farms are just a small piece of Texas’s power grid woes right now.

Fell said regional natural gas and electricity prices in Oklahoma and Texas broke U.S. records over the weekend.

On Friday, Oklahoma gas transmission prices averaged US$350 per million British thermal units and Fell said one trade went as high as US$600 per mmBtu. In parts of the Texas panhandle and elsewhere, prices jumped to US$200, “all of which individually would have been new records,” Fell said, noting the previous record was US$160.

On Monday, natural gas for physical delivery in the U.S. was trading for as much as US$500 per mmBtu as demand for the heating and power plant fuel soared.  Spot gas has been trading for hundreds of dollars across the central U.S. since Thursday with a surge in heating demand triggering widespread blackouts and sending electricity prices soaring. The fuel normally trades in the region for less than US$3 per mmBtu.

Similarly, electricity prices in Texas surged to US$6,000 per megawatt hour on Monday, as U.S. power companies grapple with supply-chain constraints, which Fell said is “100 times the normal price.”

“You’re seeing scarcity pricing in power and gas. The only thing that’s different this time is it’s staying there – it’s not just an hour or two hours, it’s the whole day,” he said.

The blast of Arctic cold, which has blanketed Canada and much of the U.S., has created a massive draw on natural gas supplies, used both for home heating and industrial uses like electricity generation.

Little Rock, Ark.-based Southwest Power Pool, which coordinates electricity distribution for parts of 14 states including Oklahoma Kansas, Nebraska and even as far north as North Dakota, announced rolling blackouts across its network on Monday as a result of the power outages.

“In our history as a grid operator, this is an unprecedented event and marks the first time SPP has ever had to call for controlled interruptions of service” SPP’s executive vice-president and chief operating officer Lanny Nickell said in a release, adding the move was “a last resort” to “prevent circumstances from getting worse.”

The frigid conditions have led to a surge in natural gas prices across the continent, including in Alberta where the AECO benchmark price jumped to a seven-year high of $6.36 per thousand cubic feet last week, a price not seen since 2014.

Energy systems in Texas and Oklahoma, which are major energy exporters to other U.S. states, are built to withstand severe heat – not extreme cold. The result is a disruption to the gas supply at exactly the time the U.S. energy system is demanding those molecules.

“Given how far south it’s gone into Texas, this is where you have a lot of gas production that isn’t properly winterized,” said Jeremy McCrea, an analyst with Raymond James covering the natural gas industry.

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Space solar power promises wireless energy from orbital solar satellites via microwave or laser power beaming, using photovoltaics and rectennas. NRL and AFRL advances hint at 24-7 renewable power delivery to Earth and airborne drones.

Key Points

Space solar power beams orbital solar energy to Earth via microwaves or lasers, enabling continuous wireless electricity.

✅ Harvests sunlight in orbit and transmits via microwaves or lasers

✅ Provides 24-7 renewable power, independent of weather or night

✅ Enables wireless power for remote sites, grids, and drones

Earlier this year, a small group of spectators gathered in David Taylor Model Basin, the Navy’s cavernous indoor wave pool in Maryland, to watch something they couldn’t see. At each end of the facility there was a 13-foot pole with a small cube perched on top. A powerful infrared laser beam shot out of one of the cubes, striking an array of photovoltaic cells inside the opposite cube. To the naked eye, however, it looked like a whole lot of nothing. The only evidence that anything was happening came from a small coffee maker nearby, which was churning out “laser lattes” using only the power generated by the system as ambitions for cheap abundant electricity gain momentum worldwide.

The laser setup managed to transmit 400 watts of power—enough for several small household appliances—through hundreds of meters of air without moving any mass. The Naval Research Lab, which ran the project, hopes to use the system to send power to drones during flight. But NRL electronics engineer Paul Jaffe has his sights set on an even more ambitious problem: beaming solar power to Earth from space. For decades the idea had been reserved for The Future, but a series of technological breakthroughs and a massive new government research program suggest that faraway day may have finally arrived as interest in space-based solar broadens across industry and government.

Since the idea for space solar power first cropped up in Isaac Asimov’s science fiction in the early 1940s, scientists and engineers have floated dozens of proposals to bring the concept to life, including inflatable solar arrays and robotic self-assembly. But the basic idea is always the same: A giant satellite in orbit harvests energy from the sun and converts it to microwaves or lasers for transmission to Earth, where it is converted into electricity. The sun never sets in space, so a space solar power system could supply renewable power to anywhere on the planet, day or night, as recent tests show we can generate electricity from the night sky as well, rain or shine.

Like fusion energy, space-based solar power seemed doomed to become a technology that was always 30 years away. Technical problems kept cropping up, cost estimates remained stratospheric, and as solar cells became cheaper and more efficient, and storage improved with cheap batteries, the case for space-based solar seemed to be shrinking.

That didn’t stop government research agencies from trying. In 1975, after partnering with the Department of Energy on a series of space solar power feasibility studies, NASA beamed 30 kilowatts of power over a mile using a giant microwave dish. Beamed energy is a crucial aspect of space solar power, but this test remains the most powerful demonstration of the technology to date. “The fact that it’s been almost 45 years since NASA’s demonstration, and it remains the high-water mark, speaks for itself,” Jaffe says. “Space solar wasn’t a national imperative, and so a lot of this technology didn’t meaningfully progress.”

John Mankins, a former physicist at NASA and director of Solar Space Technologies, witnessed how government bureaucracy killed space solar power development firsthand. In the late 1990s, Mankins authored a report for NASA that concluded it was again time to take space solar power seriously and led a project to do design studies on a satellite system. Despite some promising results, the agency ended up abandoning it.

In 2005, Mankins left NASA to work as a consultant, but he couldn’t shake the idea of space solar power. He did some modest space solar power experiments himself and even got a grant from NASA’s Innovative Advanced Concepts program in 2011. The result was SPS-ALPHA, which Mankins called “the first practical solar power satellite.” The idea, says Mankins, was “to build a large solar-powered satellite out of thousands of small pieces.” His modular design brought the cost of hardware down significantly, at least in principle.

Jaffe, who was just starting to work on hardware for space solar power at the Naval Research Lab, got excited about Mankins’ concept. At the time he was developing a “sandwich module” consisting of a small solar panel on one side and a microwave transmitter on the other. His electronic sandwich demonstrated all the elements of an actual space solar power system and, perhaps most important, it was modular. It could work beautifully with something like Mankins' concept, he figured. All they were missing was the financial support to bring the idea from the laboratory into space.

Jaffe invited Mankins to join a small team of researchers entering a Defense Department competition, in which they were planning to pitch a space solar power concept based on SPS-ALPHA. In 2016, the team presented the idea to top Defense officials and ended up winning four out of the seven award categories. Both Jaffe and Mankins described it as a crucial moment for reviving the US government’s interest in space solar power.

They might be right. In October, the Air Force Research Lab announced a $100 million program to develop hardware for a solar power satellite. It’s an important first step toward the first demonstration of space solar power in orbit, and Mankins says it could help solve what he sees as space solar power’s biggest problem: public perception. The technology has always seemed like a pie-in-the-sky idea, and the cost of setting up a solar array on Earth is plummeting, as proposals like a tenfold U.S. solar expansion signal rapid growth; but space solar power has unique benefits, chief among them the availability of solar energy around the clock regardless of the weather or time of day.

It can also provide renewable energy to remote locations, such as forward operating bases for the military, which has deployed its first floating solar array to bolster resilience. And at a time when wildfires have forced the utility PG&E to kill power for thousands of California residents on multiple occasions, having a way to provide renewable energy through the clouds and smoke doesn’t seem like such a bad idea. (Ironically enough, PG&E entered a first-of-its-kind agreement to buy space solar power from a company called Solaren back in 2009; the system was supposed to start operating in 2016 but never came to fruition.)

“If space solar power does work, it is hard to overstate what the geopolitical implications would be,” Jaffe says. “With GPS, we sort of take it for granted that no matter where we are on this planet, we can get precise navigation information. If the same thing could be done for energy, especially as peer-to-peer energy sharing matures, it would be revolutionary.”

Indeed, there seems to be an emerging race to become the first to harness this technology. Earlier this year China announced its intention to become the first country to build a solar power station in space, and for more than a decade Japan has considered the development of a space solar power station to be a national priority. Now that the US military has joined in with a $100 million hardware development program, it may only be a matter of time before there’s a solar farm in the solar system.

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