A few days ago I posted a blog about the Norwegian oil company Statoil developing and deploying the world’s first commercial scale floating wind turbines. Statoil is changing its business model. Climate change, ocean acidification, air and water pollution are all largely driven by humanity’s addiction to fossil fuels. Technological innovation and falling prices have made the case to switch from fossil fuels to renewables an economically smart move, as well as being a macro ecological imperative and an absolute necessity for humanity to continue to flourish. The cleantech revolution is happening and is being driven mainly by small start-up companies. What future do the big incumbents have? Will they change with the times or struggle to keep the old polluting economy going? Peabody and DONG provide the most extreme examples of this choice.
The name DONG stands for Danish Oil and Gas. In 1972 it was set up by the Danish government to develop North Sea oil and gas fields. It expanded into electricity supply and owned coal fired power stations. Fossil fuels were its core business. As it has grown it has transformed itself into a cleantech pioneer. It is now the world’s largest builder and owner of offshore wind farms. 80% of its capital is employed in the wind sector and just 4% in oil and gas, and it has said it will sell off this vestigial side of the business while investing heavily in more offshore wind. Last week the first wind turbine blades left Siemens new Hull factory for DONG’s Race Bank Offshore Wind Farm. DONG has also invested in the Cambeltown wind tower factory in western Scotland, owned by Korean company CS Wind. DONG is also now developing some interesting waste to energy projects such as the REnescience project at Northwich, Cheshire. It is creating lots of useful jobs helping develop the technologies that will help combat climate change.
Peabody is a much older company, founded in 1883 in Chicago, USA. It was and remains focused overwhelmingly on coal. To quote Wikipedia ‘Peabody has been an important actor in organized climate change denial.’ It has totally failed to make the transition to a cleantech future. It filed for Chapter 11 Bankruptcy in April 2016. The day after the election of Donald Trump its shares shot up by 50% and in April 2017 it emerged from bankruptcy. It still owns vast coal reserves. If this coal is ever going to be exploited then Peabody has economic value, but if, as climate change and the cleantech revolution show, these assets are just worthless liabilities then a return to bankruptcy seems inevitable.
Most of the world’s huge oil companies, such as Exxon, Chevron, BP and Shell, are still dominated by their oil interests. Most of them have dabbled in renewables but their main capital resources are still overwhelmingly in oil. Will they make the change and fully commit to the post fossil fuel future or will they cleave to the old polluting past? My hunch is that most of them have left it too late: cleantech start-ups will grow exponentially and squeeze them out of the energy market. Their stock market values are likely to plummet as the realization that the reserves they own and that underpin their stock market valuations are worthless. Oil and coal will follow flint from being key economic assets to interesting geological curiosities. When in 1991 the first offshore wind farm opened at Vindeby in Denmark many in the global energy industry thought offshore wind a ludicrous idea. Nobody would say that now. A lot has changed in the last 26 years: much more will do so in the next quarter century as the pace of change inevitably quickens.