BP invests $200 million in solar developer Lightsource

Shutterstock Kostenko Maxim
Is the U.K. oil company hedging its risk against the "carbon bubble"?

Remember 2011? Back in those ancient days of the green economy, BP decided to cut its losses and exit the solar market, writing down billions when its Photovoltaic (PV) panel business struggled with competition from China. This was a full three decades after first establishing BP Solar in 1981, and only a year after discharging 4.9 million barrels of oil into the Atlantic Ocean at Deepwater Horizon.

Yet fast forward just six years, and the oil giant is once again joining the fray, announcing a $200 million investment in U.K. solar developer Lightsource, purportedly Europe's largest. BP, it seems, is once again seeing the light. What's changed?

Well, a great deal. 2011 also saw Carbon Tracker first posit its "carbon bubble" theory, warning of vast stranded assets in fossil fuel industries if global temperatures are to remain "well below" 2 degrees Celsius. Since then, oil prices have plummeted, just as the global green economy has surged, with solar and wind power becoming some of the cheapest sources of energy around, and electric vehicles and batteries are now hot property for investors.

Indeed, rival oil and gas firm Total already holds a majority stake in U.S. solar PV developer SunPower, and Shell has been steadily wading into the EV market for some time.

Clearly, the business case for clean energy is too great for BP to ignore. As the U.K. firm noted in its announcement, global installed solar generating capacity more than tripled in the past four years and grew by over 30 percent in 2016 alone. BP's own annual Energy Outlook analysis sees solar as likely to generate around a third of the world's total renewable power and up to 10 percent of total global power by 2035. 

Bob Dudley, BP group chief executive, said he was excited to be coming back to solar "but in a new and very different way."

"While our history in the solar industry was centered on manufacturing panels, Lightsource BP will instead grow value through developing and managing major solar projects around the world," he added.

Yet the establishment of Lightsource BP on Dec. 15 is not merely a significant vote of confidence in solar and British industry, but a reflection of the wider winds of change across the global fossil fuel sector — winds blowing stronger than ever.

BP and fellow oil and gas companies Shell, ExxonMobil, Chevron, ConocoPhillips, Statoil, Total Eni and Imperial Oil — and many more besides — were named on a hit list of the 100 biggest greenhouse gas emitters being challenged by 225 major investors to up their game on climate action and risk disclosure. With a combined heft of $26.3 trillion of assets under management behind it, the Climate Action 100+ initiative is an unprecedented application of pressure on fossil fuel industries and clearly demonstrates that investors no longer will put up with those ignoring climate risk.

Even ExxonMobil — forever the villain in environmentalists' eyes and recently the subject of investigations over what it may or may not have known about climate change as back as the 1970s — succumbed to boardroom pressure, agreeing to report more thoroughly on the risks posed to its business by the low carbon transition. Moreover, those treehuggers at the World Bank announced — and not before time — it no longer would finance upstream oil and gas after 2019.

At the One Planet Summit in Paris that same day — exactly two years after the Paris Agreement was struck — Bank of England Governor and FSB chair Mark Carney made a telling observation. "You now have the mass of the financial sector saying, 'We want to distinguish between those who can see the opportunities, those who can manage the risk and a group of companies that just don't know the answer to these questions,'" he said. "It's going to be more awkward to be in that last group."

Of course, it is worth stressing that $200 million is still a drop in the ocean for BP, which has reportedly invested around $17 billion in 2017 so far and is the world's 12th largest company based on revenue according to Forbes.

Yet coming off the back of such a big week for the green economy, BP's move back into solar does suggest that, like several of its rivals, it may be finally choosing the former, rather than the latter of Carney's two groups.

There may be a long way to go, but with investors breathing down their necks, the signs are growing that fossil fuel companies are beginning to see the light.

This story first appeared on: