In contrast to ExxonMobil (whom I’ve ripped in a previous post), BP recently announced a significant increase in commitment — meaning, capital investment — in alternative energy.
In forming the new business unit BP Alternative Energy, BP CEO Lord Browne also indicated an expected $1.8 billion of investment over the next 3 years, spread across solar, wind, hydrogen and gas-fired power generation. This is not a trivial move on BP’s part, and further separates them from the rest of the energy incumbents.
Clearly, a firm such as BP is able to afford such a strategy because of the enormous profits that it is generating in a $60/bbl and $10/mcf world. But, then again, ExxonMobil, Chevron, ConocoPhillips and others are also making huge profits, without the same degree of interest and involvement in alternative energy. Let’s tip our hat to BP, and apply some peer pressure to the others.
And, while we’re at it, we’d like to see an electric utility take more decisive and significant action to boost alternative energy. In the past few years, utilities have rushed like lemmings back to the core businesses and abandoned any novel business growth idea. Perhaps this is supportable short-term thinking to shore up balance sheets in the face of Wall Street pressure, but utilities run the risk of abdicating their long-term future to players like BP who see an opportunity and aren’t afraid to stake out favorable positions.
As Lord Browne stated in a speech reinforcing the formation of BP Alternative Energy, its strategy is “focused on the power sector, and that is deliberate.” Sounds like a shot across the bow to me.