BP: In Praise Of (But Question) Their Alternative Energy Plans

A truck enters a BP chemical plant near Hitchcock, Texas
Pat Sullivan
A truck enters a BP chemical plant near Hitchcock, Texas

This post is from CNBC.com features writer Ken Stier.

I'm back to praise what is there is to praise--and to question as well--BP's latest Sustainability Report issued earlier this week. My previous blog was on how the report points to an inherent contradiction.

On Tuesday, a wire service reporttouted BP’s $8 billion investment in renewables over 10 years as if it were news. But this commitment was actually announced when the company formed BP Alternative Energy, based in Houston, in November 2005.

That puts it far ahead of--and really in a league of its own--other Big Oil companies. But make no mistake about it, that is overwhelmingly what BP remains; a Big Oil company despite its ‘Beyond Petroleum’ sheepskin.

BP is “sort of the [oil industry] valedictorian but unfortunately the valedictorian of a remedial class when it comes to developing alternatives,” says Deron Lovaas, the Vehicles Campaign director for the Natural Resources Defense Council.

But for its renewables commitment BP really deserves due credit, as does its earnest engagement in shaping what they acknowledge is a ‘carbon-constrained world.’ That's a phrase this reporter first heard more than three years ago from Jim Rogers, when he was CEO of Cinergy, before it merged with Duke Power .

Those commitments are developing momentum. The company spent $1.5 billion in 2006-7 but is now on course to spend that amount again this year. They are beginning to show more for these efforts. With manufacturing plants in five countries, BP is already one of the largest solar cell producers: now 228 megawatts with plans to grow this to 800 megawatts.

Growth in wind is even more impressive. From 32 MW in two farms in the Netherlands two years ago BP now has 340 MW capacities. Through acquisitions and partnerships BP is now involved (although it is not entirely clear how) in developing 15,000 MW of wind, which is a little less than the total wind capacity installed in the U.S. (18,000 MW).

For this investment in renewables, Michael Eckhart, president of the American Council On Renewable Energy (ACORE), praises BP as a company that “gets it. That this is the growth energy business of the 21st century” --now worth $100 billion a year. “To others, like ExxonMobil, who prefer to live in the 20th century, well, we offer our condolences. They will be out of business in 30 years,” he adds.

But the problem with these investments is that they do not address BP’s central challenge; how to replace oil as the transportation fuel. In the U.S., oil accounts for a small--three percent by one reckoning--of our electricity generation, which is where wind and solar energy goes.

To be fair, BP has also begun to make investments in this area as well although much more recently, without yielding any tangible benefits yet. Particularly laudatory is the $500 million BP has ponied up for R&D into next generation biofuels at the Energy Biosciences Institute.

They also have a demonstration project, with DuPont , to produce biobutonal, which may prove superior to ethanol because of its higher energy value and that it could be developed from non-food cellulosic materials.

“What we’d like is for the whole industry to follow through on all the rhetoric we hear – the idea that we are not just oil companies, we are energy companies - but when you look at their budget - no, they are oil companies with a few side businesses, that are really marginal,” says Lovaas.

But when that changes, BP looks set to be in the lead of these new businesses.

Questions? Comments? energysource@cnbc.com