Two oil giants plunge into the wind business

Shell, BP intend to play major role

Some environmentalists oppose wind farms, such as this one in the Mojave Desert in California, because they consider the projects to be eyesores planted on near-pristine landscapes. (Toby Melville/Reuters)

By John Donnelly, Globe Staff | March 2, 2007

WASHINGTON -- Two of the world's leading oil producers have almost overnight joined some of the biggest players in wind power in the United States, accelerating a trend of large corporations investing in the rapidly growing alternative-energy field.

As global warming and clean fuels have gained more attention, Shell Oil Co. and BP have accumulated impressive credentials. Shell is one of the nation's top five generators of wind power, while BP's Alternative Energy group -- launched 16 months ago -- aims to develop projects that produce 550 megawatts of electricity this year, one-sixth of the projected US wind energy output in 2007.

"Shell and BP see wind as an increasingly important part of the energy industry. They are looking to continue to grow," said Randall Swisher , executive director of the American Wind Energy Association , a Washington-based industry group. "They want to look for new opportunities, and wind is clearly in their sights."

The oil companies bring enormous cash reserves, years of experience in large projects, and a can-do spirit to an alternative-fuels industry that has largely been driven by speculators, small developers, and utilities. Though environmentalists largely praise the interests of the two oil giants, they harbor suspicions of whether the energy giants are adding renewable sources to their portfolios as a way to enhance their reputations with consumers rather than to combat global warming.

BP and Shell executives acknowledged that their investments in wind -- and to a lesser extent solar power -- may enhance their public images, but said their primary goal is to make money and reduce their companies' carbon outputs, if only slightly. Scientists have identified carbon dioxide gases as the leading contributor to global warming, a phenomenon that threatens to progressively increase the temperature of the planet.

Graeme Sweeney , Shell's executive vice president for renewables, hydrogen, and CO{-2} , said most forecasts predict that by 2050, renewable energy will make up a third of the world's power sources.

"We need to take a position on whether you wait to see what happens or whether you play. We'd like to play," Sweeney said in an interview. "We see a clear opportunity in the wind business. "

The United States is third in the world in wind power production behind Germany and Spain, the historic leaders, although in 2006 the United States created the most wind power in the world: 2,454 megawatts, enough electricity to power nearly 700,000 homes.

Robert Lukefahr , president of BP Alternative Energy North America , said all trends point toward a "more carbon-constrained world. The concerns about climate control are rising. Energy security issues will cause many communities to seek indigenous supplies of energy."

With 41 percent of US carbon dioxide emissions coming from power plants -- coal-fired plants by far produce the most greenhouse gases -- renewable energy must become a larger part of the power mix, Lukefahr said.

"All the stars are aligning in a way that supports alternative energy," he said.

Some environmentalists oppose wind power, concerned that the clusters of giant turbines used to produce it could threaten birds and bats. They also consider wind farms to be eyesores planted on near-pristine landscapes.

Opponents of the Cape Wind project -- a plan to build several 417-foot-high turbines off the coast of Cape Cod -- as well as projects planned for the tall-grass prairies in Kansas and the ridgetops of Vermont and New Hampshire, cite aesthetics as one of the major drawbacks of wind power.

Tom Natan , research director of the National Environmental Trust , a Washington-based advocacy group, said he believes that wind power's benefits outweigh the negatives and that the involvement of heavyweights such as BP and Shell -- regardless of their motives -- is necessary to accelerate development of wind power.

"Some people fear it will be used to green-wash [the oil companies'] reputation," Natan said. But if the demand for electricity substantially increases in the coming years, especially with more hybrid gasoline-electric vehicles, Natan said, "it's not a huge stretch of imagination to see why these companies are going into renewable energies."

Swisher, who has been head of the wind power association since 1989, said the industry has changed dramatically in recent years. At this year's annual meeting in June, he expects 6,000 people to attend and 300 companies to have exhibits.

"I remember at my first annual meeting we were in a seedy hotel in San Francisco with 10 tabletop exhibits, maybe 300 people, and there were more ponytails than I had seen in a long time," Swisher said. "But we're talking suits at this annual meeting. It's serious business."

In his meetings with BP and Shell -- he traveled to Texas to meet representatives of both companies last month -- Swisher said that "sitting in a room with some of these people and talking about where the industry is going, you sense the excitement they have in what they are doing. You can tell they are not doing this for show. They are looking to do a significant amount of business."

The largest US wind power investor is Florida Power & Light , including many projects far from the state. Other big investors include JPMorgan Chase and Babcock & Brown , and some power companies are creating their own alternative energy units as well as investing in existing ones.

The big issues facing the industry are whether the federal government will extend clean-energy tax credits beyond 2008 -- the industry wants at least a five-year extension -- and whether Congress will pass a bill to mandate that 15 percent of the nation's power comes from renewable sources such as wind and solar by 2020. Senator Jeff Bingaman , a New Mexico Democrat and chairman of the Senate Energy and Natural Resources Committee, is the bill's chief sponsor.

Swisher said he believes the larger companies such as BP and Shell are poised to make much larger investments in wind, especially with those incentives.

"If you are serious about wind, the only way to get there is to rely on companies that have significant access to capital and industrial capability," he said.

Shell's Sweeney said he believes the concerns over global warming will be the biggest impetus for wind power investment. "We need to remember that fossil fuels are not going away. They will be with us for most of this century," he said. "We need to meet the energy challenge and do it an environmentally responsible way."

John Donnelly can be reached at donnelly@globe.com.