From Pet Project to Partner: O&G Investment in Solar

When I began my career 37 years ago, the main use of solar panels was on satellites — almost no one on Earth used solar energy. Oddly enough, the best place to be a solar engineer in the 1970s was at a large O&G company. I started out at Atlantic Ridgefield (ARCO), where I saw firsthand the progress solar was able to make under the wings of energy giants. It was a time when many large O&G companies were just beginning to invest in solar research and development (R&D), and their big balance sheets and generosity allowed me and my colleagues to do wonderful things. We were able to spend years making solar technology cheaper and more efficient so that it could someday bring renewable energy to people around the globe.

Big Balance Sheets: Solar in the ’70s and ’80s

Through their investments in R&D, ARCO, ExxonMobil, BP and other big O&G companies played a major role in slashing the price per watt of solar modules throughout the ’70s and ’80s. Working for ARCO, and later Siemens and Shell, one of my team’s most exciting projects was adapting the reliability standards for solar modules that had been used in satellites to solar modules on earth. Our goal was to give earthbound solar modules a long-term reliability stamp — a 25-year warranty. All the data was there to support the longer warranty — but data is not a guarantee and extending a warranty is inherently risky. Only a company with a large balance sheet and diversified assets could have taken this risk — a small company would not have had the resources.

The solar engineers I worked with at these companies shared my vision of bringing solar into the mainstream — a goal that often felt like a distant dream. The large O&G companies gave us a rare freedom to experiment, invent, and validate our early-stage PV technology. This opportunity laid the groundwork for the high-efficiency, highly durable cells that exist today.

Proven and Profitable: A New Wave of O&G Investment in Solar

Oil and gas companies are fundamentally oil and gas companies. They did not see solar as part of their core business, and when companies revisited their spending priorities over time, solar R&D investment declined. Despite drop-off in solar R&D investment from large O&G companies, a recent wave of investment suggests that a new relationship may be developing.

Today, the solar industry is breaking records each year, with falling costs and a growing base of installed solar. Innovation was key in decades past, but the role for oil companies in advancing R&D is no longer obvious. What is pushing O&G companies to invest in solar today?

The solar industry in 2016 is more mature than it was when oil companies first began investing. Solar is proven, and it is profitable; and O&G companies can make real money for their shareholders when they invest in solar companies. Whereas in the 1970s, my colleagues and I worked hard to prove that solar panels could function for 10 or 20 years, today 25-year warranties are a given. The cost of solar modules plunged to $0.57 per watt in 2015 and continues to fall. They are in demand on every continent, and the number of U.S. solar jobs recently surpassed jobs in the oil industry. Now is a great time for O&G companies to leverage some of their resources and infrastructure through renewable energy partnerships.

Furthermore, as the risks of climate change become more serious to the international community, traditional energy companies are beginning to diversify. Solar is growing fast, and O&G can’t ignore it.

Not all have seen the light. Many dipped a toe in wind and solar when costs first plunged in the mid-2000s, but they have since retreated (BP ended its solar business in 2011; Chevron ended its renewable energy engagements in 2014; and despite early engagement in solar R&D, ExxonMobil is now barely involved in renewable energy at all). But the bottom line is that now that solar is a mature asset class in energy, some O&G giants are finding ways to make low carbon investments that reduce long-term risk for their shareholders — and for the planet.

One example is French supermajor Total SA. Recently, Total’s CEO announced that the company will invest 20 percent of its assets in low-carbon business over the next 20 years. Total is already demonstrating a commitment to solar with its majority ownership of SunPower, where its big balance sheet and strong business relationships have helped SunPower break into new markets. The two companies are collaborating on projects in Chile, Japan, the Middle East and North Africa.

Another example is Canadian pipeline operator Enbridge Inc., which made headlines for investing nearly a billion dollars in offshore wind. Like solar, wind increasingly offers great pricing and secure, long-term contracts. Project costs are declining with each new wind or solar farm that is built.

Over my 37 years in the industry, much has changed — but the value of unlikely partnerships remains undeniable. Forward-thinking oil, gas and energy companies are making strategic investments in renewable energy, and I believe the solar industry is becoming more open to the opportunities they offer. Investment in low carbon technologies is profitable — and will help solar reach the kind of scale I and other engineers imagined when we chose to work in the this industry.

Terry Jester was a finalist for the 2015 Power Generation Woman of the Year Award. Do you know an outstanding woman in the power industry? Click here to nominate her to be the 2016 Power Generation Woman of the Year.

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Terry Jester is Chairman and Chief Executive Officer of Silicor Materials. She is a 30-year veteran of the solar industry with extensive leadership experience in the manufacturing and engineering of photovoltaics. She was one of the first female engineers in the solar industry in the late 1970s, and continues to further technical advances in the industry today. Ms. Jester joined Silicor Materials in 2010 following her active involvement in the company as entrepreneur in residence at Hudson Clean Energy. She has managed large solar operations and held engineering positions for SoloPower, SunPower, SolarWorld, Siemens, Arco and Shell. Ms. Jester holds a degree in Mechanical Engineering from California State University Northridge.

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