BP to Create BP Alternative Energy Business Unit
BP has announced that it plans to double its investment in alternative and renewable energies to create a new low-carbon power business with the growth potential to deliver revenues of around $6 billion a year within the next decade. Building on the success of BP Solar business unit, which expects to hit revenues of $1 billion in 2008, BP Alternative Energy will manage an investment program in solar, wind, hydrogen and combined cycle gas turbine (CCGT) power generation, which could amount to $8 billion over the next ten years. Readers will note that within this $8 billion are included investments in natural gas power generation which as a fossil fuel is not in my opinion a form of alternative energy and also investment in hydrogen which is a carrier of energy rather than a source. It should also be noted that the vast majority of BP's approximately $15 billion annual investment budget will remain focussed on oil and gas projects, which currently offer much higher returns.
BP chief executive Lord Browne said "We are now at a point where we have sufficient new technologies and sound commercial opportunities within our reach to build a significant and sustainable business in alternative and renewable energy."
Browne said the first phase of investment would total some $1.8 billion over the next three years, spread in broadly equal proportions between solar, wind, hydrogen and CCGT power generation.
Investment in solar over the next three years is planned to boost BP's leading position as a leading manufacturer and supplier of photovoltaic systems. In a field where technology improvements and higher productivity are causing costs to decline, BP currently has 10 percent of the global market which is growing at 30 percent a year, faster than any other form of renewable energy.
BP currently has more than 100 megawatts of solar manufacturing capacity in the US, Spain, India and Australia, with a plan to double its capacity before the end of next year. BP recently signed a strategic joint venture to access China's expanding solar market and provide local manufacturing capacity and is exploring similar opportunities elsewhere in the region.
"As the pricing of carbon develops through trading schemes and other initiatives, the market will grow rapidly as low-emission technologies displace less clean forms of power generation."
Investment projected for wind represents a significant step up in this area of power generation for BP. The company currently runs two wind farms alongside existing oil plants in the Netherlands. It also owns industrial land in open, high-wind regions of the US, away from residential areas, providing the possibility to build the first large-scale US wind farm generating up to 200 megawatts in 2007. The company has identified enough US sites to accommodate wind turbines with a total capacity of 2,000 megawatts.
Projected investment in CCGT will be spent mainly in the US where the company already has significant co-generation capacity and is currently finalizing plans for a new $400 million scheme at one of its major plants that will deliver 100 megawatts of power to the plant, and 420 megawatts to the local electricity grid.
BP's move is at odds with the views of some in the oil industry, including the world's largest private oil and gas firm, Exxon Mobil, which argues renewables are a poor use of investors' funds.
BP Alternative Energy Website