European oil majors and utilities are snapping up huge volumes of solar projects so far this year, with France's Total leading the way.

Total confirmed Tuesday that it will add another 2 gigawatts of capacity in Spain, including a development pipeline of 1.2 gigawatts and a 65 percent stake in a joint venture with Powertis for another 800 megawatts. Last week Total bought a 50 percent share in a 2-gigawatt pipeline with Adani in India for $510 million.

According to project data tracked by Wood Mackenzie Power & Renewables, more than 6 gigawatts' worth of solar deals have been transacted barely six weeks into Q1, not counting the 800-megawatt joint venture between Total and Powertis. The comparable figure for Q1 2019 was 10.5 gigawatts, but 6 gigawatts of that figure came from one deal: the acquisition of Tradewind’s assets by Enel Green Power. The first six weeks of this year are already ahead of all of Q1 2018 and Q1 2017.

There are two main drivers behind the recent rush of activity. One is the increased interest from utilities and oil and gas players. The other is market dynamics in Spain, where the government is attempting to hit 40 gigawatts of PV by 2040 from a base of 10.6 gigawatts at the start of this year.

“We're seeing so many transactions in Spain because it's extremely difficult now to do greenfield project developments [there],” Tom Heggarty, principal analyst at Wood Mackenzie’s energy transition practice, told GTM. “All of the grid connection points [are] more or less saturated, either with existing assets in operation or those under development. Effectively that means that if you want to develop and own assets in Spain, and you're not in the market already with grid connection in place, then you need to go into the secondary market.”

A wider trend in place in markets in Spain and beyond is the increased activity of oil and gas majors and utility firms in developing and acquiring their own assets.

“When everything was done under feed-in tariffs, green certificates or even by auction regimes, that allowed smaller, locally focused [independent power producers] to do pretty well. But now things are moving more toward merchant business models in many markets,” said Heggarty.

“That really requires a different set of capabilities, particularly around risk management, around power trading, around [power-purchase agreement] origination. The...large utilities are very well equipped to manage or to mitigate the risks that those kinds of investments bring," Heggarty noted. "Then there are the oil and gas majors coming in."

This pattern is likely to continue in developed markets where either there are no auctions or support mechanisms, or those instruments aren’t sufficiently stable to attract investors, Heggarty said.

Total "the largest solar player" among energy majors

Total’s entry into Spain is spearheaded by the acquisition of a 1.2-gigawatt development pipeline spread across Andalusia, Aragon and Castile-La Mancha. The 65/35 joint venture with solar developer Powertis will initially look to develop a pipeline of 800 megawatts.  

The first projects could be operational by the end of the year, with Total aiming to have all of them up and running by the end of 2023.

Heggarty said Total had now “cemented its place as the largest solar player among the energy majors.”

So far this year, Portuguese oil firm Galp Energia bought 2.9 gigawatts of Spanish solar from ACS, a construction firm and renewable energy developer. PV equipment manufacturer Hanwha Q Cells has also acquired 1 gigawatt of capacity this year, also in Spain.

Other oil supermajors have been co-developing PV pipelines. BP expects to have a 50 percent share of 10 gigawatts of solar by 2023 via its Lightsource BP joint venture.

Shell has a major stake in U.S. developer Silicon Ranch and interests in a number of commercial and industrial players in Australia and India; it is also developing a 120-megawatt plant for one of its own gas facilities in Australia.

Italian oil major Eni has a 49 percent stake in Falck Renewables’ U.S. portfolio, with plans to develop 1 gigawatt of solar.