According to WoodMac’s analysis, the 22 percent return on equity investment for North American onshore projects dwarfs the 5 to 7 percent return on solar projects and the 7 to 9 percent return on wind projects with guaranteed revenue. But renewables can compete with returns on exploration, downstream projects and upstream merger and acquisition investments.

Majors own less than 2 percent of the world’s operating solar and wind projects. Though lower returns may cause hesitation, Heggarty said many majors are actively looking to translate their experience in oil and gas to the clean energy business.

That’s especially true in Europe, where majors face more external pressure from government, investors and consumers — and where they don’t have the same access to cheap oil as do their counterparts in the U.S.

But even U.S. companies have demonstrated an interest. Last week, Chevron and ExxonMobil joined a climate initiative that already includes European companies like Shell and British Petroleum as members. Though Kretzschmar said the move doesn’t indicate those companies will quickly diversify into renewables, it does indicate mounting pressures to act on climate. She does think ExxonMobil and Chevron will more earnestly move toward clean energy technologies “when the time is right.”

When that time comes, Heggarty said majors might choose to concentrate on areas where their expertise can easily be translated.

Offshore wind, for instance, makes sense for a company with in-house engineering expertise that’s already worked in offshore oil and gas exploration. Big solar projects in emerging markets like Saudi Arabia, where oil and gas companies already have working experience, could also be easier points of entry. But to see real success in the clean energy space, Heggarty said majors will have to approach it with a different mindset, rather than trying to “shoehorn” those projects into a company’s existing business.

“One of the challenges is that oil and gas companies are comparing renewables projects on a similar basis. Although they are both in the energy space, they are very different propositions — totally different risks, challenges and returns at the end of the day,” said Heggarty. “What we’re saying to some of these companies is they need to think about these investments in a totally different way.

Source: greentechmedia