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By Deepa Babington
It's the economics, stupid. Or so says Exxon Mobil.
The economics of solar and wind energy
are why 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 - major competitors such as BP and Chevron
dabble in it - Exxon has shied away from investing in
solar and wind energy, arguing that they are viable only
with government help.
Exxon estimates solar and wind energy
demand will grow 10 per cent annually over the next 25
years, but only on the back of government subsidies and
tax breaks to spur investment in cleaner, environmentally
friendly energy sources.
Strip out the subsidies and investing
in wind and solar energy would be non-starters, said Exxon's
energy demand and supply forecasting division manager,
Scott Nauman.
"It's an uneconomic niche and our
business is not built around the expectation of a bunch
of subsidies to make a profit," he said.
"We want a business that is robust
on its own merits."
Wind energy is constrained by several
factors, not least that windfarms can only be located
in windy areas and back-up power facilities have to be
used when it is not windy enough.
"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."
The strategy has worked well for Exxon
investors, who have seen the company generate strong profits,
particularly in recent months, as oil and gas prices hover
round record levels.
But the stance has made Exxon a magnet
for criticism from environmental groups, many of whom
have lambasted the company for its lack of investment
in renewable energy sources.
One critic said General Electric's recent
"Eco-imagination" initiative, which boosts its
investment in environmentally friendly technologies, had
made him hope for a similar Exxo-imagination project.
"We want to see Exxon move from a fossil fuels company
to an energy company with renewable energy sources,"
said Michael Crosby, of the Interfaith Centre 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 US$300
billion ($420 billion) in annual revenue last year, surpassing
the gross domestic product of countries such as Indonesia
and Austria.
Solar and wind energy will together command
just 1 per cent of the total energy mix in 2030 despite
growing at a fast rate, from a roughly 0.5 per cent share
now, Exxon estimates.
Oil and gas, on the other hand, will
remain the dominant energy sources, garnering about 60
per cent of total energy demand in 2030.
So the Texas-based behemoth said it would
rather focus on what it does best - pump oil and gas out
of the ground, refine and sell it.
"Wind and solar energy are a small
part of the energy solution," Nauman said. "We're
working the 60 per cent piece as opposed to focusing on
the part that 25 years from now may be approaching 1 per
cent."
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