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Our Insights 9 Feb 2011

Ventures in Energy Technology

By Jeff Erikson

A few days ago, ConocoPhillips, NRG Energy and GE Capital announced a new joint venture. The three companies are putting up $300 million into a fund called Energy Technology Ventures which will “invest in, and offer commercial collaboration opportunities to, venture and growth-stage energy technology companies,” according to a statement.

While the announcement is intriguing – and hopeful for those of us who want to accelerate the shift to a low-carbon economy – it is not the first time in recent years that a major oil company has linked up with unexpected partners:

  • In 2008, BP and DuPont created a partnership to develop and commercialize bio-butanol, a biofuel which has significantly greater energy density (and consequently results in better fuel mileage) than other existing biofuels.
  • Also in 2008, Chevron and Weyerhaeuser established a joint venture to research and develop technology for converting cellulose-based biomass into low-carbon biofuels.
  • A year and a half ago, ExxonMobil announced that they were planning to invest $600 million in a joint venture with Synthetic Genomics, run by Craig Venter, to develop new road fuels using photosynthetic algae.

The Conoco/NRG/GE link-up is, however, different from the other partnerships in one significant way. While the others focused on different ways to make liquid fuels, this one is expanding beyond liquid fuels into cleaner ways to generate electricity, at least in some of their investments (the venture is also investing in biofuels and coal-to-methane companies).

So do these link-ups represent a significant shift away from fossil fuels to renewables? Well, not really. As BP made clear in last week’s press release accompanying its quarterly earnings report, the focus of the industry remains on exploring for, producing and refining oil and gas. That is really what most of its shareholders care about, and it is important for them to demonstrate that they understand this.

But the dip into alternatives by a growing number of oil companies by linking up with companies whose core strengths complement their own, is hopeful. Perhaps it reflects a recognition by big oil that we are at the beginning of a (long) transition to a post-petroleum age, and that the development and commercialization of alternatives is a decades-long process.

As the market for electric vehicles grows in step with concerns over energy security, climate change and peak oil, pressure will grow for oil companies to find new sources of profit, and a move into clean electricity may be just the thing .

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