Big Oil and Renewable Energy

In response to my post Replacing Every Watt of Earth’s Power Consumption with Renewable Energy, frequent commenter Roger Priddle writes:

It seems to me that conserving energy is going to be like wearing seatbelts – at first, obvious as prices rise and alternatives become more accessible and “easy,” then mandated. The first adopters will be those who like the “cool” factor – my lights stay on when a winter storm takes down the wires in my neighborhood.

The second (and much larger group) are those who get frustrated by the increasing cost vis-à-vis the cost of conservation and distributed renewable generation. I get to irritate my co-workers by bragging about how much I DIDN’T pay for energy, either because I got more insulation or more efficient appliances or my own solar panels or whatever.

The third group will be those whom society helps because they couldn’t afford to be in the second group.

The fourth and final group (I call them the “dinosaurs”) will be those who insist ’till the end in their inalienable right to burn expensive, smelly and increasingly scarce fossil fuels. They’ll keep Exxon afloat for a bit – but in the dark of night, they already know they’re doomed. So is Exxon.

If I were an Exxon shareholder, I’d be screaming for the company to diversify into renewables and conservation – it’s the only hope for long-term profitability. Too bad Exxon management isn’t into planning for the long term. (But not surprising – their bonuses come from this quarter’s figures, not this decade’s.)

This is astute as always, Roger, thanks. I’m with you all the way.

Re: “If I were an Exxon shareholder, I’d be screaming for the company to diversify into renewables and conservation,” I would say:

I think you mean “efficiency” rather than “conservation”; unless I’m mistaken there are no business models (unfortunately) that foster/implement conservation.

More importantly, regarding diversification into renewables, you’re absolutely right that they don’t have the motivation—in the short- or the long-term. Another problem is this: I’ve thought about this, and I think you’re asking for the impossible. Exxon has a very deep but narrow core competency, i.e., exploring for, extracting, transporting, refining and selling oil and gas. They don’t have the equipment (the IP, the manufacturing capacity, or the supply chain) to get into entirely new lines of business. The fact that both fossil fuels and solar PV are both energy doesn’t mean they’re similar in terms of the business surrounding them.

I remember my 7th Grade Latin teacher who used to warn us of “false cognates,” i.e., words that are spelled or pronounced similarly in both English and Latin but are not related. E.g., the Spanish word “tuna” is not a fish; it’s a prickly pear—or a good time (believe it or not).

Thanks again for this excellent comment.