According to a recent report by Wood Mackenzie, big oil producers such as Royal Dutch Shell (NYSE:RDS-A) (NYSE:RDS-B) and ExxonMobil (NYSE:XOM) could shift up to 20% of their drilling investments into renewable resources in the next two decades.

In this Industry Focus: Energy segment, two Motley Fool analysts look at how big oil companies are investing in renewable energy today, why so many oil companies gave up on their renewable projects a few years ago, what some of the heavyweights are planning to do in the renewable space in the next few decades, how big oil is handling the uncertainty of the future of the oil market in the face of growing renewable energy supply, and more.

A full transcript follows the video.

This video was recorded on June 15, 2017.

Sean O'Reilly: Very interesting report out of consulting firm Mackenzie just came out --

Taylor Muckerman: Wood Mackenzie. Big Energy.

O'Reilly: Wood Mackenzie. Everybody calls them Mackenzie. Come on.

Muckerman: Yeah, I know. It's a big energy consulting firm, a research firm.

O'Reilly: It's like Booz Allen Hamilton, everybody just calls it Booz Allen.

Muckerman: Booz.

O'Reilly: Booz. [laughs] We're not going there. They came out with a report that says Big Oil, the guys that make the carbon come out of the ground, they could shift more than a fifth of their drilling investments to renewable sources.

Muckerman: Yeah, just a few years after many of them canceled all plans to invest in renewable energy.

O'Reilly: I actually want to get to that in a second with Exxon.

Muckerman: Exxon, Chevron, BP, Shell.

O'Reilly: But, of course, basically, we're talking about, they're going to start investing in wind, solar, all kinds of good stuff, and they're saying this could happen in the next two decades. That actually seemed rather long to me, given the recent advances in solar tech. Anyway, I really wish -- Tyler Crowe, if you're listening, please call in right now, because he would of course, bring up Total S.A. right now. They're the French oil giant and they own 60% of SunPower.

Muckerman: Majority owner of SunPower, yeah.

O'Reilly: What did you think when you saw this?

Muckerman: It's the movement going forward. What we've seen is, these companies have had to write down their approved reserves over the last couple of years by double-digit percentages because of oil prices being so low.

O'Reilly: Once, again, for our listeners, we've done this in previous episodes, probably a year ago. Bottom line, proven reserves get calculated based upon how hard it is to get out of the grounds, but also the economics and the price per barrel. The SEC every year says, "You guy have to value this based upon the average price of oil last year," and it has not been high for three years.

Muckerman: No. So, since the summer of 2014, you've seen 15%, according to the Department of Energy, of proven reserves written off the books of U.S. oil.

O'Reilly: And because they're not economical.

Muckerman: Right. At the prices they were forced to assess these at. That being said, they still have access to this oil, they just can't claim it on their balance sheet as an asset. So they had to do something.

O'Reilly: Take a step back. Tell me about what these oil companies did a couple years ago. Just throwing in the towel on all this renewable stuff. What happened?

Muckerman: You saw Chevron abandon renewables in 2014. BP, in the wake of the Macondo spill, they sold off, between 2011 and 2013 --

O'Reilly: They dropped their brief moniker, "Beyond Petroleum?"

Muckerman: They did.

O'Reilly: How long did they have that? Three years? [laughs]

Muckerman: I don't know the exact time frame, but it wasn't long. And so, they sold off some of their solar, if not all, business. They pulled back on the spending almost entirely. They did keep a very big portfolio of wind farms in the United States.

O'Reilly: I was about to say, don't they have a bunch of wind farms?

Muckerman: It might be the biggest. Don't quote me. But it might be the biggest or one of the biggest in the United States, spread across multiple states. So they didn't sell that, but these companies were investing new money into renewables. Then Shell did something similar. But now a good swath of them are coming back.

O'Reilly: Thinking distinctly a couple years ago when we first started doing this show and everything, Exxon's decision to literally stop investing in all of that, and not only that but to keep that dividend going even through the downturn that we've seen for two or three years now -- I don't think I'm reaching here with this analogy; it felt a little bit like Altria Group or something. Like, we have this business, it's profitable right now, it's probably not going to be here in 100 years, we don't know.

Muckerman: If you look at the reserves, these companies only have 12 to 15 years of reserves even there, and they're not finding it at the same rate that they used to.

O'Reilly: It's like, "So, we're just going to do right by our shareholders and buy back stock or pay back in huge dividends and see how long we can keep the party going."

Muckerman: Well, Exxon is going to have to hold itself accountable now that shareholders voted for them to do a deep dive into whether or not they've been honest about climate change and its impact on the company.

O'Reilly: That's fun. It's always tricky when you're a business, because you have to make the decision of, should I return this money that we're the fiduciaries for to the shareholders, and they will invest in the renewable-energy sources? Or do we think we can get above-average returns on capital by keeping the money ourselves?

Muckerman: That's the trust you put in the company you're investing in.

O'Reilly: I don't necessarily blame Exxon for making the decision they did. Let's pretend you're an Exxon shareholder. We're both Exxon shareholders. What internal rate of return would you need with a reasonable amount of certainty from them to let them keep the money and invest in something renewable?

Muckerman: I don't have a number off the top of my head.

O'Reilly: But they don't know what they're doing, so it would have to be higher, right?

Muckerman: Also, at the time, they have the heaviest needle in oil and gas. So it takes big projects to move that needle for them, which is why they cast it aside, because at the time, solar wasn't viable, it wasn't cost-effective. Wind was really just starting to get off the ground. So it was a long-tail project, versus some of these projects in oil and gas where they can get a decent return within a few years.

O'Reilly: Let's pretend Mackenzie is right, and in 10 years, oil and gas companies are investing 20% --

Muckerman: Well, Shell says that by the end of this decade, so by 2020, they'll be investing a billion dollars per year in renewables. That pales in comparison to the $25 billion they spend every year. But going from nothing a few years ago to $1 billion by 2020, that's a pretty good move. And as you mentioned, Total, very serious about it. Statoil, big player in offshore wind, utilizing their offshore oil technology, and know how to operate in these rough environments, to then turn that into the ability to generate wind power offshore. So these companies are doing it. But having only $1 for every $5 spent on oil moved toward renewables --

O'Reilly: It seems low, doesn't it?

Muckerman: It does seem low. If they spend $350 billion over the next 20 years, what Mackenzie says is, that will get wind and solar to 6.5% of total global energy production.

O'Reilly: That's incredibly low.

Muckerman: Yeah, and they say over that same time period, they will likely spend $1.5 trillion on oil and gas.

O'Reilly: Man. I came in here wondering if there would be a time when we stop thinking of Exxon and Shell and everybody as oil and gas companies, and think of them as just energy companies. It seems to me like, with statistics like that, it's a long way off.

Muckerman: Well, then, I think they said, wind and solar only account for about 1% of total energy this year. It's 6x improvement, from 1 to 6.5.

O'Reilly: That's over a fifth of a century, though.

Muckerman: Yeah, I know. But it's only 1%, and the world has been around for Lord knows how long, so we've been producing energy from fossil fuels for quite some time. So, they have a step ahead.

Sean O'Reilly has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of ExxonMobil. The Motley Fool recommends Chevron, Statoil, and Total. The Motley Fool has a disclosure policy.