Environmentalists have long been pushing for a transition from fossil fuels to clean and renewable energies. Elon Musk, CEO of Tesla and SpaceX, has said that people are running “the dumbest experiment in history” by continuing to burn oil, coal and gas. He argues that even if we find new ways to extract oil in tar sands or in the ocean, fossil fuel must come to an end either when they have done too much damage to the earth or when their supplies inevitably run dry. Big oil companies, such as British Petroleum, Chevron and ExxonMobil, think that they have heard the message loud and clear. But have they?

With President Donald Trump in office, the United States is projected to change direction from the Obama Administration’s push for solar and wind energy to a focus on strong national oil production. A cursory search through most news outlets would paint the picture that the ancient oil magnates are not adapting to the renewable revolution and that only the exciting, technology-based companies of the future pioneer innovative energy solutions. There is a clear gap in the news that is reported. This is leaving many wondering if there are any startups that are making an impact in petrochemicals or, more importantly, if these oil magnates are doing any work to adapt to the changing energy landscape.

Even though BP, Chevron and Exxon continue to generate most of their revenue from nonrenewable sources, all three have put effort into research and investment in various forms of renewable energy. While these companies recognize the unsustainability of oil in the long-run, as an overview of their clean energy capabilities will make clear, they are not doing nearly enough to transition their own business models to account for the advent and feasibility of cleaner fuel alternatives.
In terms of renewable capabilities, BP, the world’s sixth-largest oil company, used to be one of the world’s leading solar energy companies. BP Solar, its solar subsidiary founded in 1981, had been the largest solar panel manufacturer in the world for over a decade, according to Forbes. After a 40-year run, however, BP Solar was unable to compete in the tough market and then closed in December 2011. This was accompanied by an announcement that BP would not continue to pursue ventures in solar energy.

Even with a troubled green past, BP’s renewable energy interests currently focus on biofuels and onshore wind. In 2015, BP used sugar cane to produce five million barrels of ethanol equivalent of biofuels, which seems like a sizeable amount but is, in reality, a little less than half a percent of the amount of oil it produces each year. In addition, BP holds interests in 16 onshore wind farms in the U.S., which could provide enough power for all the homes in a city the size of Dallas and save 2.7 million tons of carbon dioxide annually. With these two investments, BP has one of the largest renewable energy businesses among the oil giants. Yet, BP continues to produce more than 3.3 million barrels a day (which equates to over one trillion barrels of oil annually), and the sum of BP’s renewable efforts pale in comparison to their nonrenewable capabilities. Without a doubt the message has been heard loud and clear: “Yeah, right!”

What is more unsettling is that BP is the exception, not the rule. Chevron, the world’s ninth-largest oil company, is much more like the norm. While it has more diverse investments in renewable energy, it does not have the depth of capability that BP has established. In 2011, Chevron said it was aiming to be one of the world’s leading producers in geothermal energy, heat energy generated by and stored in the Earth. With projects in Indonesia and the Philippines, Chevron uses geothermal energy to “meet the needs of millions of people,” while saving more than 650,000 metric tons of carbon dioxide emissions annually. The company has also assisted in the development of a geothermal power plant in the Salton Sea of California, which is estimated to have a 49.9-megawatt capacity. Additionally, Chevron has money in two solar energy projects in New Mexico and California, one wind farm in Wyoming, and research interests in sugar-based biofuels. Regardless of its myriad renewable capabilities, Chevron’s carbon dioxide savings from geothermal, solar and wind energy are insignificant.

While most oil companies are at least embracing the clean energy revolution, ExxonMobil has a different outlook. ExxonMobil’s main initiative for renewable energy stems from its “Outlook for Energy” project, which studies energy demand and supply and helps ensure that “the world has access to affordable and reliable energy supplies while reducing emissions to address the risk of climate change.” The explicit exclusion of whether the energy is renewable or not is no mistake. Exxon predicts that in 2040, oil will still comprise 32 percent of the world’s energy, and that natural gas, which emits less carbon dioxide than oil, will make up 25 percent of the world’s energy. Reflecting these insights, ExxonMobil has made a big bet on natural gas with XTO Energy Inc., a natural gas company it acquired in 2010. According to Forbes, ExxonMobil produced 9.8 billion cubic feet per day of natural gas in 2016, making it the second largest natural gas producer in the world. As for other investments in renewable energy, ExxonMobil funds research in algae and cellulosic biofuels, which they hope to one day deliver due to their environmental benefits. With this sole research investment, ExxonMobil has fewer renewable energy interests than the rest of the industry.

Although BP, Chevron and ExxonMobil all have some renewable energy capabilities, it seems that their primary focus remains on oil with only minor preparations for the eventual clean energy revolution. These companies have and will continue to pale in comparison to new environmental companies that are all-in on green energy. Even with BP, which once had a large share of the solar energy market, the trend seems to be that oil companies fail at producing large amounts of renewable energy in the long-run and that their stints in cleaner forms of energy may be more for marketing purposes than for real transitions into diverse energy businesses. There is no reason to take energy out of your portfolio just yet — the oil giants still tower over the developing green energy companies. However, it seems that even with large capital reserves and expert engineers, big oil giants cannot and will not be the leading renewable energy companies of the future.

Germany’s plan for “energy revolution” finds its roots as an anti-nuclear rally cry following Chernobyl, when radioactive fallout fell across German soil. In the days following the disaster, radiation levels spiked across the country. Children had to remain indoors, certain agricultural products became inedible and livestock were poisoned.

Generating safer renewable energy became central to Germany’s future goals, and the Energiewende, the so-called “Energy Revolution,” was born.

Now, in 2015, Germany is taking a hard look at its renewable energy initiative, of which is beginning to feel substantial positive effects. The cornerstone of Germany’s Energiewende is their Renewable Energy Act (EEG) first adopted in 2000, which has morphed over the years through a savvy blend of policy, regulation, market-based instruments and financial incentives into the preeminent pathway to renewable energy that we see today in 2015.

As this Energiewende evolves from its early stages, it is attracting global attention. Numerous countries have expressed their interest at following the Energiewende blueprint as their future energy plan. The Germans have expressed their faith that Energiewende is indeed working as planned, and so the signs are promising.

So what is the initiative exactly? Energiewende is Germany’s plan to comprise its energy portfolio entirely of renewable energy and sustainable development enterprises. It is a brazen move set out to tackle climate change and domestic energy security. If all goes as planned Energiewende would abolish any dependency on coal, fossil fuels or foreign energy.

The plans dictate that by 2050, there will be an unprecedented 80 to 95 percent domestic greenhouse gas reductions, a 60 percent market share for renewables in the energy marketplace and a jump in electric efficiency by 50 percent.

Compared to the less ambitious and politically tentative emission reduction agreements by China and the US, Energiewende is a “get-it-done” initiative. But there is risk involved in such dramatic steps. Energiewende takes Europe’s largest thriving economy from its conventional nuclear and fossil fuel energy system to an efficient renewable-based system over a remarkably short timeline.

Any project of this magnitude has its challenges. But unlike many projects, it has the unwavering support of a resolved German people. Historically, economic development has trumped environmental concerns both in terms of policy and political priority, but despite the fiscal concerns, Energiewende seems to be working at the 2015 checkpoint stage. Aside from its more noble goals, Germans want a first-to-market advantage where high value technologies are stamped “Made in Germany” as the world moves towards renewable energy.

At the epicenter of the Energiewende is Germany’s Renewable Energy Act (EEG). EEG is predicated on three principles to bring about the energy transformation. The first is a “feed-in tariff” that guarantees a fixed price per kilowatt hour (kWh) and priority access to the grid for renewable firms, removing the investment risk in renewable energy. The tariff is funded by the second element, an EEG surcharge (currently set down at 6.17 cents per kWh). The third element is capping the tariff, which provides for a steady reduction in the feed-in tariff over a 20-year lifespan, established to reflect the anticipated economies of scale and numerous cost-saving technological improvements.

The effects are more widespread than earlier proponents had hoped for. Since 2000 the price of electricity from an installed photovoltaic (PV) system has fallen on average 13 percent per year. During that time, Germany’s demand attracted Chinese manufacturers, driving down the initial investment and making households not only consumers but also producers. As a result, there was a shift from centralized large-company oligopolistic energy producers to highly efficient distributed production of grid power. Japanese leaders have also expressed a great interest in using the German Energiewende model for its own energy transition.

While many countries were moving towards renewables by requiring utility companies to produce more green power under quota system style policies, Germany’s feed-in tariff system afforded virtually any worthwhile project to go up quickly and as a result the ownership of power production transfers to the citizenry. It has often been referred to as the “democratization” of power. Today, more than half the investment in renewable are in the hands of small investors, greatly strengthening small and mid-sided business, while providing jobs and tax revenues from empowered local communities generating their own renewable energy. This ruralization of energy has strengthened the German economy, improved its energy security and is stabilizing the cost of power, as it is unfettered by fluctuating commodity costs.

The feed-in approach has significantly impacted Germany’s place in renewable energy, but they pale in comparison to their implications for international markets, especially developing nations. Over the past few years they have inked deals with India, Morocco, Bangladesh, Nigeria, Montenegro and Vietnam, among others. Many of these deals involve loans ranging from the hundreds of millions to several billion in euros, all in the interest of implementing more renewable and efficient means of creating power.

In developing countries, the switch from a large-scale power plant to a large number of smaller generators, where the citizens and community get involved, holds the greatest promise. In countries like India, almost half the household population is off the grid and without electricity. There is increasing evidence that decentralized renewable energy is the only practical measure to ensure that all its people, particularly in more remote villages, have access to reliable power and at affordable rates.

In the States we are just beginning to realize how affordable this new brand of renewables can be. The technological advances and economies of scale found in Germany have drawn attention from US domestic power companies. Texas utility Austin Energy recently signed a deal where it now purchases electricity from Sun Edison under a 25 year deal for record setting 5 cents a kilowatt-hour. According to Austin Energy the move is expected to lower rates for customers, as solar rate compares to averages of 7 cents for gas on the low end, and to 13 cents for nuclear on the upper end. The deal was originally devised to purchase 50 megawatts, but was bumped to 150 megawatts for obvious reasons. Austin is currently breaking the 25 percent renewable energy mark and plans to reach 35 percent by 2016. Areas like Texas are in an excellent position to leverage solar power given the abundance of sunshine, especially when compared to Germany whose position is similar to the Pacific Northwest and Alaska.

Energiewende still faces challenges, and experts and policy makers are watching it closely. In spite of all that has been accomplished, a wholesale adoption of Germany’s blueprint leaves some questions unanswered. Revisions to the EEG were enacted in 2014 to address developments within the plan with unforeseen consequences. But as the German’s have shown time and again, such obstacles can be overcome. This initiative is transforming energy investments, accessibility to renewables and most importantly, capturing global attention and inspiring similar projects.

Where can the U.S. and China collaborate in renewable energy? With the state of competition between the two countries both in the Olympics and in other arenas, areas for collaboration may seem dim, but actually there are possible areas for doing so.

Definitely there is a need for collaboration to make renewables reach grid parity, meaning that renewable sources become just as cheap as fossil fuel based sources. Feed-in-Tariffs, or fixed prices per kilowatt-hour that have been preset in order to attract investors in solar and wind have been under attack in many countries. This despite the fact that external impacts for coal and fossil fuel power plants (such as public health respiratory impacts ) have not been captured in their energy pricing, and their subsidies remain untouchable at the moment.  For example, ask coal plant investors about the health impact of emissions and the handling of byproducts such as coal ash, and many will say it is not their concern. A carbon tax should capture these fossil fuel external impacts, but as public opposition in Australia shows, implementing a carbon tax is not a cake walk.

Publicly funded government research institutes, such as the Department of Energy Sandia and Lawrence Livermore laboratories are probably not high on the list for collaboration venues. Unwarranted collaboration is one ticket for scientists to be charged with improper handling of classified information, such as what happened in the case of Dr. Wen Ho Lee, who was eventually cleared by the courts. Anything is possible of course. Nixon did fly to China in the seventies for his pingpong diplomacy, but surprises like that are either fodder for films or novels. If it happens, it happens, but don’t count on secret American or Chinese government labs suddenly ushering in a new spirit of cooperation.

Nevertheless, research however in public and private universities like Tsinghua and Dartmouth should be strengthened. Jointly authored journal papers in technology areas like solar, wind, hydro, biomass, energy efficiency and other energy topics are probably the most basic way of encouraging some type of collaboration. The exchange of scientific ideas should be unfettered in order to march forward – a brilliant and breakthrough idea can now come from anywhere in the world. For example, the efficiency of polysilicon based solar photovoltaic panels are now hovering just above the 20% range. Breakthroughs in making solar photovoltaics more efficient, such as combining photovoltaic technology with the Seebeck effect on the same wafer, are possible areas that scientists can collaborate on.

Source: http://www.flickr.com/photos/ethankan/263721136/

Standards are another area of collaboration. In the semiconductor industry for example, many chip companies realized early in the ballgame that it does not make sense for wafer sizes to be different, as the resulting lack of standardized deposition tools will simply redound to unwarranted expense for all. So standards result in equipment and materials that can be marketed to different companies, resulting in cost savings across the entire sector. At the moment, the situation in the solar photovoltaic sector is that some companies still resort to custom built manufacturing equipment, which is basically what made the early days of the chip industry uncompetitive.

Then there is of course private company research, both in core technologies owned by the company and technologies that reside in its key suppliers. Microsoft, Intel and other Fortune 500 companies have their own R&D labs in China, employing Chinese scientists who work closely with their American counterparts. Collaborative research in this framework is determined to a large extent by corporate strategy, including access to markets. Collaboration within companies in the same sector, such as solar, will probably happen to a larger scale in the future in the same manner that American chip companies banded through the SEMATECH alliance to improve their competitiveness. However, there is a very low likelihood that this sort of cooperation will happen between the U.S. and China, except perhaps for a couple of non-core business and technology areas.

Related to this is the global supply chain for renewables. Some materials, like polysilicon, are important for the manufacture of solar panels. While the cost of this commodity item is driven by supply and demand, and made efficient by the many decades it has been there and by the number of companies who use it, nevertheless any opportunity to lessen its cost should be examined, if at all this is still a concern. Having reliable strategic suppliers to the wind and solar sector, or a framework for developing these suppliers, can be a good area for collaboration.

Manufacturing research, both in the U.S. and China, need to be coordinated – if not shared. While asking for sharing may be difficult as there are intellectual property issues to contend with, a certain framework that allows different creative minds to dance to the same tune will always be helpful. For example, manufacturing cost savings developed by Chinese manufacturers will not help if new American technologies will not be manufacturable using those new technologies. Again, having industry standards that companies actually comply with is key.

Access to markets, in order for renewable energy companies to grow, is important. No one will pay a corporate research scientist any money to do research if there is no business. Therefore, one area of collaboration for both China and the U.S. is unfettered access to markets. This is easier said than done of course – the new U.S. tariffs on Chinese wind turbines, and earlier on solar panels, undermines access to markets.

Finally, there should be common support for the Green Fund by both the U.S. and China. Most of this Fund will be used to pay for capital expenditures in renewable technologies like wind, solar and others. By having this money available, it can jumpstart a market that will signal to renewable energy companies, be it in China or the U.S., that the slack from the slowdown in Carbon Development Mechanism (CDM or “carbon credit”) funds will be taken over by the Green Fund. Once economies of scale have taken over – with demand for renewables coming from many parts of the globe, the current opposition to renewables determined mostly by its current cost should go away, and ensure healthy growth for all renewable energy sectors such as solar and wind in the years to come.

Dennis Posadas is an international fellow (based in the Philippines) of the Climate Institute Center for Environment Leadership Training (CELT) and a former engineer/analyst for a leading U.S. semiconductor firm. He is also the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009) and Rice & Chips: Technopreneurship and Innovation in Asia (Singapore: Pearson Prentice Hall, 2007)