BP versus Exelon
Two energy companies made the cut in the 2005 edition of Wired Magazine’s annual article about cutting edge companies. This year’s installment of the survey led with the following quote:
“They’re masters of technology and innovation. They’re global thinkers driven by strategic vision. They’re nimbler than Martha Stewart’s PR team. They’re The Wired 40.”
Both of the energy companies, BP and Exelon, claim to be visionary organizations aiming toward providing a very important product for future generations. Each one has incorporated “green” symbols into its logo and provides a lot of information about its environmental posture and desire to help improve the health of the planet. The underlying numbers, however, show that the two companies have different business models and significantly different prospects for the future.
The British Petroleum company now calls itself BP and heavily promotes those initials as meaning “Beyond Petroleum”. Its advertising highlights its investments in solar panel production, claiming that it is one of the largest producers of solar photovoltaic power panels in the world. This advertising is obviously having its desired effect; its posture in renewable energy is touted as one of the main reasons that it made Wired’s top 40 list of visionary companies.
Advertising skepticism is a healthy attitude; it is worth digging a little deeper into the numbers and behaviors of companies and their products before believing company PR. If BP is truly beyond petroleum, it should be possible to see some revenue, investment and profit numbers supporting that claim. According to the Wired article, BP actually made a profit from solar in 2004 and managed to sell $400 million worth of photovoltaic products. A quick look at the company web site shows that 2003 sales of those products was $307 million, providing a recent year over year growth rate of just over 30%.
That sounds pretty impressive until one looks at the line just above the solar sales figures and sees that total 2004 sales for the “Black & Green Machine” (Wired’s description of the reason for including it in the top 40) were $285 BILLION, up from $232 Billion in 2003.
Wired’s readers are generally people that can “do math”; this should be an occasion for pulling out their calculators to determine that BP’s solar business amounts to 0.14% – less than 1/6th of 1% of the total sales of the company – and that the whole company’s sales figures increased by more than 22% between 2003 and 2004 from a much larger base than that of the solar business. It is also interesting to note that the overall profit for the company – the money left over after all expenses including taxes and many capital expenditures – was more than $15 Billion, a 50% improvement over 2003.
The solar business is not a new part of the company. According to the BP web site, the company has a long history in the solar business; it first became involved in solar power systems in 1980 when it purchased Lucas Energy Systems. In a refreshingly honest statement, BP tells its investors the focus of its solar business:
BP Solar made a profit for the first time in 2004 and increased global sales of solar capacity by more than 30%. Our revenues rose from $307m in 2003 to over $400 and we are aiming for similar growth rates in 2005.
This has been achieved following the reshaping our business over the past two years. During this time weÕve lowered costs, focused on key growth markets (particularly the US and Germany), concentrated on our most successful products and mounted high-profile marketing campaigns. (Source – BP Global/Environment and society/Renewable energy downloaded on 1 May 2005.)
Wired stated that BP’s challenge for 2005 is to “Silence critics who accuse BP of “greenwashing” – making token investment in alternative energy for the PR value.” This is one critic that does not plan to be silent – the numbers speak for themselves. Despite its “high profile marketing campaigns”, BP’s profits and investments remain almost entirely focused on oil and gas. Its investment in solar energy production is miniscule compared to its annual sales and profits.
Exelon, another energy company, ranked number 39 on the Wired 40, just above BP. Exelon is not as large as BP; its annual sales were only $14.5 Billion in 2004. However, its non fossil fuel driven energy sales are far higher – its 17 large nuclear plants (18,000 MW), 19 small hydroelectric plants (1,600 MW) and four contract wind farms (175 MW) represent more than half of its capacity (38,000) and more than 2/3 of its annual production.
Wired states that Exelon’s challenge for 2005 is “Opposition to nuclear energy. Exelon will have to step lightly as it boosts capacity.” According to a an April 2005 poll conducted by CNBC’s Squawk Box, 69% of the 3600 respondents answered “Love it” in response to the question “What do you think of nuclear power?”. The other choices included NIMBY (Not In My Back Yard) – 13% and No Way – 18%.
Based on numbers like that, a better course of action for Exelon than stepping lightly would be to conduct a BP style “high profile marketing campaign” touting its large nuclear investments and plans for increasing those investments as it lays the regulatory, financial and political foundation for new nuclear plants. When you are the market leader in a technology that people love, you should say so.
Exelon has a much more realistic claim than BP to the use of green symbols in its logo. It is doing far more than the much larger BP to reduce human impact on the environment by reducing air pollution, water pollution and the detrimental effects of oil and gas drilling. It is also providing a much larger supply of energy from politically stable regions, helping to reduce the need to rely on dictators and tyrants to supply the world’s energy needs.
