AltEnToday

In my previous post, I broke down some of the financial facts of big oil - specifically their market capitalization, revenues, and of importance - their profits. This second part will take a much closer look at what these companies are doing to invest in the alternative energy technologies of tomorrow.

Exxon Mobil

Exxon is the most profitable company on the list, with estimated profits of $40 billion dollars. Exxon has posted an interesting whitepaper on their website titled Tomorrow’s Energy (PDF link), which takes a look at their corporate outlook for energy throughout the globe in the next quarter century. Of note are some of their speculative comments:

• By 2030, global energy demand will increase almost 50% from the 2005 level
• About 80% of growing energy demand will occur in developing countries (note: I expect China and India are included in this forecast, but the details are not included)
• Oil, gas, and coal remain the predominant energy sources, maintaining about an 80% share of total energy demand through 2030
• Biofuels, wind and solar will grow rapidly as sources of energy, contributing about 2% of total energy supply by 2030

Of worthwhile note is an expectation listed on page 5 of their report, which states “Wind and solar energy will likely average about 11% growth per year”, but it reiterates, “wind and solar will contribute only 1% of total energy by 2030″. Taking a look at Exxon’s financial statements, they report $814 million dollars in research and development costs - but nothing specifically about emerging technologies or renewable energy sources… The predominant message Exxon is providing is that their objective is in developing more petroleum sources, and improving energy efficiency. Internally, Exxon appears to be a company dedicated to the continuation of oil until that avenue of income becomes less than spectacular to shareholders. Externally, however, many investors have sought to reduce the power of top management and shift profits to investments in renewable energy technologies.

Shell

Shell is the 2nd most profitable oil company on the list, and provides additional information about their ambitions for renewable and alternative energy. Shell has invested in a pilot program to produce 2nd generation cellulose biofuels and has partnered with Canadian firm Iogen and US firm Codexis. On the solar front, Shell has stated an investment in CIS (Copper Indium Diselenide) thin-film solar technology by working with venture partner construction firm Saint Gobain. Essentially all the projects are European-based.

On the wind front, Shell has become involved in “11 wind projects spread across the US and Europe” bringing a future capacity of 1,100 megawatts online in the future. Again, these are joint venture projects - including working with Nuon energy company and NedPower. Not everything is as bright as they might propose - in light of certain over-statements of power capabilities…

Perhaps most interestingly, Shell has developed a subsidiary company called Shell Hydrogen to continue the research and development of hydrogen technologies - including fuel cells.

So what do all these investments mean in terms of financials? Essentially all that I can conjure up is that the Shell company has a 50% stake in the Mount Storm / NedPower wind project, which amounts to roughly a $150 million investment. Outside of that, it has obviously made some significant investments in to hydrogen technology, but the investment figures are obscured or unavailable.

BP

BP has established a separate organization - BP Alternative Energy - to provide growth in low-carbon and no-carbon energy development. They’ve invested in solar, wind, hydrogen, and natural gas - including 750 MW of wind in Texas, a hydrogen energy proposal for Abu Dhabi, and the completion of a 300 MW wind facility in Cedar Creed Colorado.

Similar to Shell’s corporate website - there just isn’t enough meat in the financial side of things to identify just how much the company is investing in their alternative energy subsidiaries. On a press release, I found a figure that stated that BP solar invests $10 million annually to photovoltaic research and development - but again there’s no clear cut financial statement about the shape of any of their standalone alternative energy businesses.

Chevron

More than perhaps any of the other companies listed here - Chevron has made a financial case for their investments in renewable technologies (and made it very straightforward). For instance, Chevron has pledged $2.5 billion in developing renewable energy technologies between 2007 and 2009 (even spread across the three years, that still amounts to nearly a billion dollars annually). They have made significant investments in both distributed and concentrated solar. The company states that it is the “largest private producer of geothermal energy in the world“, producing over 1,200 megawatts of energy throughout the pacific rim via geothermal sources.

Chevron has also made an investment in to hydrogen and fuel cell technology - again reinforced on their website by citing specific projects that the company is involved in (including facilities in California, Florida, and Michigan), and they’ve installed a fuel cell for their San Ramon, CA headquarters.

Summary and Takeaways

Overall, with Exxon being the significant exception, it appears that these “big oil” companies are starting to make inroads to alternative and “clean” energy technologies. However, just like any other financial decision that these large multinationals must make, the investment must provide a worthwhile return. Ultimately, this is the shortfall between the marketing message that we might see on TV and the reality of what these companies are doing. At this point, compared to their returns in oil operations, renewable energy just doesn’t provide fiscal justification beyond merely doing “enough” to provide positive marketing benefits.

In the near term, especially with record-high gas and fuel prices - this is likely to remain. However, in the long run, these large integrated oil companies may become the best bet for the creation of hydrogen fueling stations (since, after all, these companies already have the infrastructure to do everything from upstream development of large-scale facilities to downstream development of distribution centers). The question becomes not so much an issue of if these companies become involved in alternative energy, but rather when. When will these technologies make better financial sense that continuing to dig deeper and farther across the globe to unearth petroleum fuels?