Renewed faith

The renewable energy industry is no longer a quirky kitchen industry, and for BP, with more than 30 years’ experience in the Solar market, it is certainly not one that has simply been strapped to the side of a large oil company. In fact, it is the future for most far-seeing corporations.

Sustainable technology and sound investment opportunities weren’t always obvious natural bed-fellows. Nevertheless big energy companies have been diverting large sums of investment cash towards developing renewable energy solutions for several years, especially important today as the need for more green and secure energy takes centre stage. As highly populated emerging economies develop, so does the global demand for energy. Climate change remains an important global challenge; however alternative energy sources are no longer just about being kind to the planet. Renewable energy has the potential to be highly profitable too, providing solutions – and there are many, including biofuels, solar and wind
– if executed effectively. “We don’t look at renewable energy from a different basis from big oil projects,” says Vivienne Cox firmly, CEO of BP Alternative Energy. “It’s a good business opportunity and these products need to be competitive in their own right.”

It’s also an industry that has the potential to create a large number of new jobs says Katrina Landis, COO at BP Alternative Energy. “In the short term, the debt markets have dried up, however when you look at any number of countries which are developing renewable energy, you realise what a strong future the industry has.” Landis points to wind turbine technology as an example of technical improvements that are possible not in five years time but now. “We’re taking advantage of new technology on one of our sites, where 100 older turbines have been replaced with just eight.” It’s a significant accomplishment – and an indicator of the rapid technology improvements which are feasible in this segment.

Obama means business
Much of the new seriousness about renewable energy is being led by President Obama. And this is where commitment is now met with hope. Katrina Landis attended the Obama inauguration events and says interest in alternative energy, particularly in the US, is massive as well as increasingly mainstream – a huge turnaround from just a few years ago. “There’s dramatic interest. Everyone from consumers to big industry. Obama has a spine of steel in terms of addressing environmental concerns as well as looking at energy security.” Meanwhile there are plenty of carbon targets to meet, and even exceed. Yet Cox says BP’s approach is much more than just meeting targets. “We are taking bold steps in BP to build the cost of carbon into everything we do; every project we consider, whether that be in Exploration, Refining or Retail. We now explicitly assume that carbon will be priced, so that alters the very way our products are engineered in the first place.”

But the fragile state of the global economy means some alternative energy companies will struggle, a point not lost on Cox. “The renewable energies market is still about growth, and yes, there are lots of companies going through challenging times. There will be shakeouts and consolidation. But the growth in this industry is being driven by a genuine concern about climate change, as well as concern about the security of control of energy supplies.”

A sounder planet
Despite the current economic difficulties, the future still needs to be planned for. That’s why BP’s Landis says taking the long view – where we’ll be in 2030, for example – is as important as the current short-term economic anxiety, however difficult. “Sure, in 2009-2010, the demand for energy could decline further. But you’ve got to think ahead and consider where developing nations like India and China, for example, will be by 2030. Their trajectory for growth is going to be significant. So we need to look at a proper diversified set of solutions for the future.”

So where does that leave us now in 2009? Landis says we don’t have to look too far to see really exciting energy possibilities being unearthed. “In 2005, when BP launched its Alternative Energy business, it committed to spending $8bn over a 10-year horizon. We’re well on track to meet this commitment. We’ve focused on four business areas which we believe will be winners for us. These are biofuels, carbon capture and storage, solar and wind. We’ve very excited about advanced biofuel technologies and are investing in lignocellulosic ethanol and biobutanol, both of which can be made from plant materials.”  BP has joint ventures working to commercialise these technologies. In February, they announced a joint venture with Verenium to produce lignocellulosic ethanol from non-food energy grasses, which expects to be producing ethanol in 2012 at a facility yet to be constructed in Florida.

Another partnership with DuPont is working to further develop biobutanol, a fuel molecule which can be blended into conventional fuels at a higher rate than ethanol, without requiring changes to fuel infrastructure or engines. Renewable biofuel technology will become incredibly important for just about all transport and urban mobility areas. It’s also the one that is likely to capture the public’s imagination says Cox. “It’s really about the notion of taking any kind of waste product or a biomass and breaking it down into fuel. And of course when we are choosing where to invest we are looking at options which achieve material reductions in greenhouse gas emissions when compared with conventional fuels and minimise any impacts on food production.” Cox is not making an argument for carpeting much of Europe’s countryside with corn fields or other fuel-plants. Rather, it’s about using land more effectively.

“We believe there is sufficient land available to meet society’s growing food, feed and fuel needs when managed appropriately” asserts Landis. Other solutions also suggest themselves: how about capturing the carbon emissions from a power plant and then pumping it back under ground into a declining oil field, which not only prevents the release of CO2 gasses into the atmosphere but also enhances oil recovery and extends the lifetime of the field? The sheer variety of sustainable, renewable energy options is huge.

Far greener than you think
One popular myth that needs debunking is that countries like China and India pay little attention to green technology and the environment because they’re too busy building up their industrial base. The reality, however, says BP’s Vivienne Cox, is rather different. “There is a perception that China won’t move away from fossil fuels. In fact, there’s a lot of progress being made in China working on renewable energy to combat change.” In fact, China is likely to leapfrog the West in terms of renewable energy development – and they will certainly be ahead of the West during the next decade says Vivienne Cox. The Chinese are also buying up green technology licences. So they are planning ahead. “It’s a mixture of demand, both private companies and government-supported schemes.”

So don’t underestimate the work that is being done, not just here in the West, but also in the new economies of the East. Just about everyone is committed to renewable energy. But the picture is not always obvious.

There is little doubt that any market is not immune to the difficulties and challenge as the global economy tightens. But there is a sustainably fuelled light bulb shining on the other side according to Cox and Landis. “It is less about faith when you look ahead at the alternative energy sector and more about a much deserved renewed commitment to an industry that not only makes good business sense to be in, but will also play a leading role in the world’s energy mix far into the future.”