BP says it plans to spend up to $8 billion over 10 years developing alternative energies such as wind and solar, capitalizing on growing interest in clean energy.
A new unit called BP Alternative Energy will manage a range of projects that BP said had the potential to deliver sales of around $6 billion a year within a decade.
Building on the success of BP Solar -- which expects to hit revenues of $1 billion in 2008 -- BP Alternative Energy will manage an investment program in solar, wind, hydrogen and combined-cycle-gas- turbine (CCGT) power generation.
"Our recent experience, particularly with solar, has given us the expertise and confidence to develop new products and markets alongside our mainstream business," said BP chief executive Lord Browne. We are now at a point where we have sufficient new technologies and sound commercial opportunities within our reach to build a significant and sustainable business in alternative and renewable energy."
Browne said the first phase of investment would total some $1.8 billion over the next three years, spread in broadly equal proportions between solar, wind, hydrogen and CCGT power generation. Investment will be made step by step, and will depend on the nature of opportunities and their profitability.
"We are focusing our investment in alternatives and renewables on power generation because it accounts for over 40 percent of man-made greenhouse gas emissions, the biggest single source. It is also the area where technology can be applied most cost-effectively to reduce emissions.
Investment in solar over the next three years is planned to boost BP's position as a leading manufacturer and supplier of photovoltaic systems. In a field where technology improvements and higher productivity are causing costs to decline, BP currently has 10 percent of the global market which is growing at 30 percent a year, faster than any other form of renewable energy.
BP currently has more than 100 megawatts of solar manufacturing capacity in the US, Spain, India and Australia, with a plan to double its capacity before the end of next year. BP recently signed a strategic joint venture to access China's expanding solar market and provide local manufacturing capacity and is exploring similar opportunities elsewhere in the region.
Investment in hydrogen fuels will include the world's first commercial project -- at Peterhead, in Scotland -- to turn natural gas into hydrogen by stripping out carbon dioxide and pumping it into depleted oil reservoirs.
The hydrogen will be used at a power station in Peterhead to generate 350 megawatts of 'clean' electricity, and the carbon dioxide re-injected into the offshore Miller field. BP is looking at a similar sequestration scheme to make hydrogen from low-value coke by-products at a US refinery which would be used to generate 500 megawatts at an adjacent new-build power plant.
Investment projected for wind represents a significant step up in this area of power generation for BP. The company currently runs two wind farms alongside existing oil plants in the Netherlands. It also owns industrial land in open, high-wind regions of the US, away from residential areas, providing the possibility to build the first large-scale US wind farm generating up to 200 megawatts in 2007. The company has identified enough US sites to accommodate wind turbines with a total capacity of 2,000 megawatts.
BP Alternative Energy will be based in Sunbury, Middlesex and initially employ some 2,500 people around the world. It will be headed by Steve Westwell, reporting to Vivienne Cox, chief executive of BP's Gas, Power & Renewables division.
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