Aug 16

Total Agrees to 5 Billion Euro Battery Venture As Oil Majors Turn Electric

Stephen Bierman
Sep 14, 2020

Image: Saft

Total, the Paris, France-based energy major, along with automaker PSA Groupe and battery producer Saft have agreed to form a venture to produce high-performance batteries for the auto industry.

The project, dubbed the Automotive Cells Company (ACC),will benefit from 1.3 billion euros in support from the French and German governments as they seek to ensure industrial independence in Europe for battery production. Overall the group plans to mobilise more than 5 billion euros in investment, according to a press release from Total.

Global transport is turning increasingly to battery-powered cars due to their ability to harness renewable or carbon-free energy in the fight against climate change. As governments prepare additional regulations on carbon, U.S.-based Tesla has taken investment markets by storm with its development of electric cars and battery production in so-called gigafactories.

Total, a traditional oil producer, is adapting to the carbon-free future with its move into batteries. That involves defending its position as energy provider to Europe’s auto industry, including with the PSA Groupe, the producer of the popular car brands Peugeot, Citroën, DS, Opel and Vauxhall.

“The creation of ACC illustrates Total’s commitment to meet the challenge of climate change and to develop as a broad energy company, a major player in the energy transition, by continuing to provide affordable, reliable, and cleaner energy,” Total Chairman and CEO Patrick Pouyanné said in the release.

The deal comes amid a trend among oil majors to transition to more eco-friendly energy resources. British BP unveiled a surprise strategy last month that will see the company step back from oil and gas and into renewables generation, as well as the development of other clean energy sources like hydrogen. Total’s own strategy day is set for later this month and will be a subject of interest following the BP move.

The R&D centre for the ACC project in Bordeaux and the pilot site in Nersac, France have already launched operations to develop the new high-performance lithium-ion batteries. After the development stage, mass production will be launched in two gigafactories in Douvrin, France and Kaiserslautern, Germany.

The group estimates that growth in demand for electric vehicles in the European market will reach 400 GWh by 2030, or 15 times the current market demand. And it has now marked out a spot for itself as one of the leading potential suppliers.

The endeavour sees an initial capacity of 8 GWh, reaching a cumulative capacity of 48 GWh on both sites by 2030. This will represent 1 million electric vehicles produced per year, or more than 10% of the European market, according to Total. The ACC sees the development and manufacture of high-performance batteries for the automotive industry starting from 2023.

Total’s participation in a battery project like this one underscores the idea that alternative energy sources are the future, and they are coming in scale. International oil majors have the choice to get on board or get out for the way, as governments in Paris, London and Washington D.C. inceasingly subsidize non-carbon industry and infrastructure.

With oil demand weak and profit expectations bleak, there isn’t much leverage in arguing the issue. On the other hand, there is cash to be made in joining up with automakers to prepare for the coming green energy wave. So for Total, and BP before it, the motto appears to be: “If you can’t beat them, join them” — especially if you are already in it together anyways.

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1


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