Chevron’s future isn’t in wind and solar
Behemoth oil companies, at least in political discourse, are often portrayed in stark contrasts: greedy climate villains torching the earth or innovators finding ever-cleaner ways to provide an essential product most of us still can’t live without.
One day of Chevron CEO Mike Wirth’s itinerary in Houston this week for the annual CERAWeek conference illustrates that it’s much more complicated than that. He told us when he visited with the editorial board Wednesday that he was lunching with U.S. Energy Secretary Jennifer Granholm afterward, and later planned to meet with the unrelenting climate activists at the Environmental Defense Fund.
In the middle, he took questions from us for an hour. We came away, as we often do in these discussions, frustrated by the pace of industry efforts and regulatory barriers, and yet fascinated by the inventiveness of what’s being tried, nodding receptively to the pragmatic notion that an “orderly” energy transition is better than a chaotic one, and, hopeful that something will succeed grandly enough to stave off a largescale climate disaster.
One thing that stood out to us is how unapologetically Wirth defends the company’s decision to leave wind and solar to the experts already working in those fields. Chevron knows what it does well, Wirth explained, and that’s not setting up acres of solar fields or building wind turbines in the Gulf of Mexico.
“There’s really good wind and solar companies out there. And we don’t have particular expertise in wind and solar and a lot of the intellectual property in the turbines or in the panels,” he said, also acknowledging the financial motive: “Our business generates typically double-digit kinds of returns on invested capital; wind and solar tend to be single-digit returns. And so in a competitive business world, you also have to look at that.”
Yet, Chevron has made plenty of headlines for investing billions of dollars in “low carbon” energy as the company transitions gradually away from the fossil fuels that have made it a fortune for decades. That includes emerging technologies such as carbon capture, geothermal and green hydrogen.
“It’s really trying to be sure that we’re pragmatic and realistic about the fact that the lack of energy can create real severe consequences,” Wirth said. “So we have to be thoughtful about how we manage this transition and it will be an evolution more than it will be a step change.”
As chairman of the American Petroleum Institute, long criticized for lobbying against climate action in Washington, Wirth called the group “a force for good,” and said he’d used his position to draw more attention to methane, which is responsible for at least 25 percent of today’s global warming, according to NASA, and is much more damaging than carbon dioxide.
Where Wirth believes Chevron can have the most impact is in “leveraging our strengths to deliver low-carbon energy to grow the world.” He noted the company’s heavy investment in biofuels to offset the diesel emissions generated by light-duty vehicles such as long-haul trucks. Chevron is also pouring money into producing hydrogen in a much less carbon-intensive way.
The company plans to take over operations of a joint venture with Houston-based Talos to develop a 140,000-acre carbon capture plant in East Texas, in Chambers and Jefferson counties — with a big subsidy boost from President Joe Biden’s Inflation Reduction Act.
“Without the IRA, the economics on this kind of project would be very challenged,” Wirth said.
And the company is beginning to explore the feasibility of scaling up geothermal energy, which uses drilled wells to harness the heat of the earth to generate power.
He doesn’t foresee the global hunger for oil waning anytime soon, and committed to continuing Chevron’s exploration efforts as long as there is a market for it. And he argues, we should be reassured by that: “As long as you’re going to be using it,” he said of fossil fuels, “you want the most responsible producers.” These days, that doesn’t include Saudi Arabia or Russia.
On the topic of government policy, Wirth stressed that the government shouldn’t pick winners and losers, but it should remove unnecessary obstacles to innovation, including streamlining the glacial permitting process.
Another helpful reform? Wirth believes a carbon tax would be the single most impactful policy that would harness the power of the free market to advance the clean energy transition because “that’s a clear market signal applied economy wide.” He said that Chevron has lobbied for the tax but of course, it remains politically fraught. Even environmentally progressive states such as California have failed to establish a carbon tax.
As an editorial board in the energy capital of the world, we were encouraged by the pragmatism of Wirth’s commitments and goals, yet disappointed that Wirth clearly doesn’t see Chevron anywhere near the forefront of the green revolution. He estimated that investments in low-carbon technologies make up a mere 10-15 percent of the company’s capital spending. It’s all important work. Is it enough? Of course not. We agree that the federal government, for its part, needs to show a willingness to have “an honest conversation about what’s really possible in one time frame.” Perhaps that’s what Granholm did at lunch.
But we argue the industry should have that honest conversation, too. Much more is possible right now than is being done.
CEO instead touts carbon capture and green hydrogen.