Yesterday Tony Hayward announced that he is stepping down and Bob Dudley will be the new CEO from October. It's a perfect moment to reinvent BP and invest in renewables and "Beyond Petroleum", the initiative started by Lord Browne.

Bob Dudley has some background experience in solar and wind, so the appointment could be promising.  

Even though the Gulf of Mexico leak has stopped (more or less), BP's woes have only started. The estimate of costs is about £20bn and the company is already planning to sell assets worth about that amount in the next year to prop up its balance sheet. With record losses, suspended dividends and uncertainty about its future, there's the additional Damocles sword of a huge appetite for litigation in the sourthern states, where many industries have suffered immense losses. BP can face lawsuits for loss of earnings from people from all walks of life, and until legislators draw a line and cap its liabilities, there will be huge uncertainty about the future of the company and the market is unlikely to react positively to that.

It's unfortunate that BP has been the punchbag of American politicians in the eve of the primaries in November, and Tony Hayward the "ass-to-kick" of choice of president Obama.

A company under such pressure is going to find it much more difficult to turn to the more challenging industry of renewable energy, and is more likely to stay firmly focused on oil and gas, its more profitable area of operation. Now it plans to exploit Canada's tar sands, a massively damaging operation from the environmental point of view, as this operation will result in approximately 3 times the amount of GHG per barrel of oil extracted than by conventional means. It should be deterred from pursuing this and other forms of risky exploitation.

BP briefly flirted with Beyond Petroleum with Lord Browne, but it has only invested £2.6bn in renewables since 2005, and Tony Hayward's reign was characterised by a return to oil, so the company has been firmly anchored in its traditional remit more than ever. BP's own forecast of expenditure in renewables is a mere £5bn by 2015, which is less than 25% of what the Gulf of Mexico spill will cost.

The figures are quite discouraging, but there is room for fundamental change. A turn to renewables will be a good PR coup for BP in the United States and it is likely to help it to cap its oil spill liabilities. BP can take the initiative to spend a further £10bn in renewables by 2015 in exchange of a deal with American legislators to massively reduce the oil spill bill and cap its liabilities vis-a-vis civil lawsuits and the like. The environment would benefit, and it would be a good solution for the company and for the US.

Mikel Susperregi

mikel@carbonica.org

Earlier this month the government announced a £100bn plan to boost wind power to an unprecedented scale. The Crown Estate confirmed the latest round of
leasing of UK waters for offshore farms, which will add 25 GW of electricity generation (to the existing 8GW); this will be enough to power every household in the UK.

Additional plans for offshore wind farms in Scotland could bring the total capacity to about 40GW.

This is all very impressive. Construction is planned to begin 2013-2015. I was at parliamentary seminar on energy policy earlier this week where the shadow
minister for Energy Charles Hendry rightly commented on these plans en passant "we have a shortage of ships, skills, engineers, manufacturing capacity, and absolutely
no money, but other than that everything is going fine". It's a typical "Yes Minister" moment, and probably spot on, but there're reasons to be optimistic.

There is a huge challenge in delivering the necessary volume to build these offshore farms and the cost involved, especially at a time when Britain is
risking a rating downgrade and needs to keep a lid on printing money, but I have no doubt that we will rise to the challenge. It also beside the point
that in all likelihood all this technology will be sourced from abroad.

The concerns about the unreliability of windpower are unjustified. If there's wind for a net 50% of the time during the year, and we need to resort to burning coal and gas for the
remainder to make up for the shortfall, that is a 50% cut in emissions already. There is no objective need to expect that any one renewable source will produce electricity
at a continuous level 24/7. The key is to diversify the energy mix and securing that the main elements of the mix delivering the lion's share of the demand are low carbon.

The same applies at a micro-generation or household level. Solar panels can be a great investment because the excess production can be sold to the National
Grid. The limited number of hours of daylight means that a household needs to buy back from the grid part of the time. However the net balance
is that an average set up with an initial outlay of £30000  can bring dividends of about 5-7% p.a. by selling the electricity, which is more than one would get from
putting the money in a savings account, plus there's the added advantage that the household becomes a carbon negative contributor to reducing emissions.

This is far from a trivial point. Micro-generation and energy efficiency can play a crucial role in decreasing demand that would otherwise spiral out of control.  

Mikel Susperregi