Investigation: As the power grid struggles to meet new demand, how do oil and gas companies get the clean energy they need?

For oil and gas companies, the consequence is that they now find themselves in intense competition with each other and with other sectors for the electricity they need to power new projects.

What does high electricity demand mean for the oil and gas industry?

Many oil and gas operators have sought to electrify more of their operations in recent years. According to a survey of oil and gas executives conducted by Endeavor Business Intelligence on behalf of NextEra Energy, 88% say their companies are electrifying or evaluating electrification of their operations.

Electrification has helped oil and gas operators cut costs and emissions, but competition for the clean energy needed to power operations and meet emissions reduction targets has become fierce. At least half of oil and gas executives surveyed said their companies were struggling to get the energy they needed in the U.S. West, Gulf Coast and New England regions. The Upper Midwest wasn’t far behind, with 44% struggling to get power in states like North Dakota, South Dakota and Nebraska.

If the grid is unable to meet the surge in demand, oil and gas executives will have to make tough choices:

• Slow down development plans until the network can catch up.
• Compete with other oil and gas companies and industries, including technology and manufacturing sectors, for electricity from a limited number of new production projects.
• Develop their own electricity solutions, such as on-site fossil or renewable distributed energy resources (DERs), microgrids and battery energy storage systems.

Seven Ways Oil and Gas Companies Are Sourcing Clean Energy

Nine in 10 oil and gas executives said their company has set a goal to reduce carbon emissions. Yet only 14% of respondents said their company had reduced emissions by more than 25% from a baseline, and only 25% said their company used zero-carbon energy sources for more than half of its energy needs.

Oil and gas companies still have a lot of work to do, but industry leaders have identified several creative ways to tap into new sources of clean energy.

1. Electricity network with renewable energy credits: Thirty percent of oil and gas executives surveyed said their company uses a “clean energy” option in which a utility or retail electricity provider provides grid electricity with renewable energy credits as an offset. Fifty-four percent said they are actively seeking such clean energy options. This clean energy solution relies on grid supply and is therefore not an adequate solution in the growing number of areas where grid power is limited.
2. Off-site renewable energy: Thirty percent of respondents said they use energy from offsite renewable energy projects, such as solar and wind, and 46% said they plan to do so. The limiting factor for offsite renewables is that while a renewable developer may be willing to build a solar or wind project to provide electricity to an oil and gas field, the grid can only connect and supply a certain amount of energy without costly and time-consuming transmission and distribution system upgrades. Virtual power purchase agreements (PPAs) or renewable product purchase agreements (RPPAs) can help oil and gas companies get around this barrier because they often aggregate energy from smaller renewable DERs that do not require major grid upgrades.
3. On-site renewable energy: Twenty-nine percent of oil and gas executives said their companies have developed on-site renewable DERs, while another 46% are working on them.
4. On-site battery energy storage: Lagging slightly behind the popularity of on-site renewable DERs, 27% said their company already uses on-site battery energy storage, with another 45% continuing to expand.
5. Micro-networks: Microgrids can be a combination of on-site renewable DERs, fossil fuels, and battery storage managed by intelligent control systems. The flexibility and cost savings they can generate have sparked renewed interest across industries. Nearly half of respondents said their company was evaluating microgrids, and 35% said their company was using a microgrid.
6. Software and analytics to manage equipment and energy consumption: Two-thirds of respondents said their company uses asset management software to reduce emissions. Additionally, 42% said their company uses software and analytics to optimize energy consumption. Comprehensive energy management software, such as that offered by NextEra Energy Resources, leverages energy production and consumption data across a wide range of assets to improve operational efficiency, reduce costs and save money.
7. Energy efficiency: Forty-three percent of oil and gas executives said their companies use energy and efficiency consulting services, and 44% evaluated using a consulting service such as Usource, NextEra Energy’s independent energy consulting firm. Additionally, 36% said their companies implement traditional energy efficiency measures and 42% evaluate efficiency projects.

With high demand for electricity and increasing grid challenges in meeting it, oil and gas companies are looking for innovative ways to source clean energy and use energy more efficiently.

Planning and implementing these capabilities without experience in the oil and gas and renewable energy sectors is a major challenge. In response, more than 80% of oil and gas executives said their company has entered into or is considering entering into a large-scale partnership with a clean energy provider across multiple sites for energy and energy services.

Finding the right path forward to maximize growth and meet emissions reduction targets is a complex task, but partnering with clean energy companies with the scale, experience and technology is a proven way to find effective and reliable solutions.