Investors worried about falling returns when oil companies commit to moving away from fossil fuels into renewable energy should fret less. The oil and gas industry is actually not that profitable and investors should gain by the switch to renewables.
This is the result of an analysis of the financial performance of 7 oil and gas majors (BP, Shell, Total, Repsol, ENI, Equinor and Exxon) and 6 pureplay renewable quoted renewable businesses (Greencoat Wind, Orsted, Bluefield Solar, TRIG, Nextenergy and Foresight Solar) from 2014 to 2019. Over these 6 years the return on capital in the renewable energy sector was 4.9% compared to 4.7% for oil and gas. However the return on equity in renewables has been nearly double that of oil and gas, 8.6% compared to 4.5%.