Esso turns away from renewables
by CASANDRA on MAY 31, 2005 - 0 Comments in energy

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The world’s largest publicly traded energy company is not making any bets on the environmentally friendly power sources now, and does not plan to any time soon.

Despite the growing popularity of renewable energy sources — top competitors like BP and Chevron Corp. dabble in it — Exxon Mobil Corp. has shied away from investing in solar and wind energy, arguing that the business is viable only with Uncle Sam’s help. The company says the economics of solar and wind energy don’t add up. And rather than spending on R&D to find a cost-effective solution, it plans to let others take the lead.

Exxon estimates solar and wind energy demand will grow at a 10 percent rate annually over the next 25 years, but only on the back of government subsidies and tax breaks to spur investment in cleaner, environment-friendly energy sources.

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Strip out the handouts, and investing in wind and solar energy would be nonstarters, the manager of Exxon’s energy demand and supply forecasting division told Reuters last week.

“It’s an uneconomic niche and our business is not built around the expectation of a bunch of subsidies to make a profit,” said Scott Nauman, manager of the economics and energy division at Exxon. “We want a business that is robust on its own merits.” Wind energy, for example, is constrained by several factors — wind farms can be located only in windy areas and backup coal or gas facilities must be used when it isn’t windy enough, he said.

“We spend a lot more time than you would think studying the economics of wind and the economics of solar energy,” Nauman said. “But when you go through all the economics, it is just not attractive.”

“EXXOIMAGINATION”?

The stance has made Exxon a magnet for criticism from environmental groups, many of whom lambasted the company for its lack of investment in renewable energy sources at its annual meeting last week in Dallas.

One critic took the podium to say General Electric Co.’s recent “Ecoimagination” initiative that boosts its investment in environmentally friendly technologies had made him hope for a similar “Exxoimagination” project someday. Off-Grid will offer detailed coverage of the General Electric initiative in future.

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“We want to see Exxon move from a fossil fuels company to an energy company with renewable energy sources,” said Rev. Michael Crosby from the Interfaith Center on Corporate Responsibility, which has been pushing Exxon to make changes on its stance on climate change and global warming.

Exxon says that even if the economics made sense, solar and wind energy would stand to make up only a tiny slice of a company that posted nearly $300 billion in annual revenues last year, surpassing the gross domestic product of countries like Indonesia and Austria.

That’s because solar and wind energy will together only command 1 percent of the total energy mix in 2030 despite growing at a fast clip, from a roughly 0.5 percent share now, Exxon estimates.

Oil and gas, on the other hand, will remain the dominant energy sources that keep the world running, garnering about 60 percent of total energy demand in 2030, it estimates.

So the Irving, Texas, behemoth says it would rather just focus on what it does best — pump oil and gas out of the ground, refine and sell it.

“Wind and solar energy are a very small part of the energy solution,” Nauman said. “We’re working the 60 percent piece as opposed to focusing on the part that 25 years from now may be approaching 1 percent.”

Story by Deepa Babington, REUTERS NEWS SERVICE

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