Big Oil Is Learning to Love Solar Power

(Image Credit: Chevron)

Chevron (NYSE: CVX  ) is currently claiming to be one of the largest solar installers for educational institutions in the U.S. -- an honorable statement, however difficult it may be to actually prove, especially for an oil company .

Cynicism aside, Chevron is behind one of the more intriguing solar projects I've come across lately. Project Brightfield is the company's conversion of an old refinery site into a solar power testing ground . Chevron is currently experimenting with a variety of solar panels on eight arrays spread across the facility.

Brightfield is a play on brownfield, the term used to describe former industrial sites, the refurbishment of which is usually complicated by the presence of contaminants. This is actually a brilliant repurposing, and it will be interesting to see if other energy companies follow suit, especially on the East Coast where numerous refineries have closed in recent years.

Other players
Of course, Chevron is not the only member of big oil to embrace solar power. Italy's Eni has had a partnership with the Massachusetts Institute of Technology since 2008, which resulted in the founding of the Solar Frontiers Center in 2010. The center promotes solar research ranging from materials development to hydrogen production .

And then you have France's Total (NYSE: TOT  ) , which owns a 66% stake in SunPower (NASDAQ: SPWR  ) . SunPower has quickly grown into a force to be reckoned with in the solar industry, and a hard-to-ignore opportunity in the investing world. The company recently trounced its own second quarter earnings expectations on revenue, gross margin, adjusted EBITDA, and earnings per share. Total also owns 20% of the world's largest operating solar power plant, the Shams 1 facility in Abu Dhabi.

Despite this, solar remains an elective at most of these companies, Chevron included, and does not feature prominently on any big oil income statements. Total buries it in its marketing and services business segment under a tiny bullet labeled "New Energies". And why not? It's been a money-loser for the last two years, though the loss has narrowed considerably in 2013 .

In fact, some members of big oil have decided to bury solar altogether. At the very end of 2011, BP (NYSE: BP  ) announced that after 40 years, it was dropping its solar initiative .

The obvious problem with big oil's participation in the solar industry is that they are not solar companies, they are oil companies. They know how to increase shareholder value with oil, so while companies like SolarCity (NASDAQ: SCTY  ) are delighting investors with a 200% pop in share price year to date , it will be some time before big oil makes money the same way, if ever. Like SunPower, SolarCity is another pure-play solar investment that investors are giving a lot of consideration of late. In the second quarter of this year, megawatts deployed were up 144% year over year, and contracted payments rose 15% over the same period. These companies are proving it is possible to succeed in solar, which is likely why big oil is even bothering to participate.

Bottom line
The outcome of Chevron's solar initiative really remains to be seen at this point, and you can look at the company's leadership position in geothermal energy as proof. Chevron has one of the oldest geothermal operations, beginning in California in the 1960s, but despite fifty years in the game, geothermal operations do not make up a meaningful part of the company's revenue.

Only time will tell if the company's solar initiative follows a similar path. Nevertheless, the investments the company is making in both solar and energy efficiency are important, and should be followed closely. After all, past performance is no guarantee of future returns.

Chevron is thinking ahead, and so should we, especially when it comes to retirement. The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.


Read/Post Comments (6) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 23, 2013, at 7:22 PM, JadedFoolalex wrote:

    Solar will succeed when someone invents a highly efficient solar panel (95% +) and a room temperature super conductor to transmit the power collected. Until then, These companies are just money pits.

  • Report this Comment On August 24, 2013, at 4:19 AM, ershler wrote:

    JadedFoolalex,

    Why do you need a 95% efficient solar panel? ICE are 30% efficient and the best power plants are only 60% efficient. They are only transferring the energy from fuel into mechanical or electrical power. Solar cells have to harvest the energy from the sun and convert it into electricity, If fossil fuels were judged using similar standards their efficiencies would be even lower.

    Assuming we just have 95% effecient panels why do we need room temperature super conductors? Most people would stay connected to the current grid and mount enough panels to supply most of their power. The companies stuck between a rock and a hard place would be utility companies forced to maintain an aging electrical grid with diminishing usage.

  • Report this Comment On August 24, 2013, at 9:49 AM, sevenheart wrote:

    You can get 95%+ efficient natural gas furnaces and water heaters.

    Solar electricity production from photovoltaics diminishes each day until the panel is depleted in about 25 years with steadily declining efficiency, so unlike coal fired electric facilities which can be modernized and refitted numerous times, expired solar panels become waste and will be a disposal problem.

    I think the article misses the elementary fact that solar, geothermal, etc are not economic, that is the only reason oil companies are backing off. If they could be profitable energy companies would continue to pour intellectual and financial resources into it.

    Alternative energy will be limited by pure physics to small scale success. Dominating the energy industry and powering the grid will not be a reality.

    One final point, alternative energy does nothing to address the biggest contribution of oil and gas, and that is the chemical feedstock that comes from oil and gas which accounts for more than 50% of petroleum consumption.

    I have been a proponent of solar energy since the 1970's, so please don't assume I am some shill for big oil. The truth can't be manipulated.

  • Report this Comment On August 24, 2013, at 3:49 PM, MotleyFoolStinks wrote:

    ershler, you apparently are not an engineer

  • Report this Comment On August 26, 2013, at 4:43 AM, JeffParrel wrote:

    Solar energy is safe (no need for Fukushima kind waste solutions) and polution free.

    According to U.N. 50% of the electricity will be powered by Solar in 2050.

    Germany today generates 25% of its electricity from Solar.

    * J.P. Morgan

    ** I Know First algorithmic system

    are also positive on the Solar Energy sector.

    Good Luck!

  • Report this Comment On September 05, 2013, at 6:53 AM, ershler wrote:

    MotleyFoolStinks,

    I am sorry for the late reply but I have been overseas starting up a project and have been busy. I have a bachelors in Mechanical Engineering and have worked as a field engineer, mechanical engineer and process engineer for two multinational companies. What specifically do you disagree with in my comments? I would really appreciate your reply.

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