It’s funny to think of FTSE 100 giant BP (LSE:BP) as a renewable energy stock. But that’s what the former oil supermajor intends to become. Today I’ll explain exactly why I plan to buy and hold it forever.
The BP share price has bounced up 18% since early November. That is after losing half its value in 2020. Change is coming.
As part of the August-announced shift away from oil, CEO Bernard Looney said he would cut BP’s refining capacity by about 30%. That has started in earnest. November 2020 saw it close its Kwinana oil refinery in western Australia, for example.
Renewable energy stock pick
So, the thing I think will aid explosive growth in renewable energy stock is electric vehicles. To me this is the acceptable face of change. And BP’s Chargemaster subsidiary is raking in millions in deals to provide electric charging infrastructure now.
In October 2020, it announced a £21m deal to supply over 1,000 chargers to Police Scotland.
BP says it is the largest ever deal of its kind in the UK. It means charging points installed at 265 locations up and down Scotland. And while 21 million quid is relative peanuts for a company the size of BP, it does indicate the level of interest in electric car fleets beyond the consumer angle. This could be a seriously profitable side of BP’s future business.
BP is now rolling out its 150kW rapid chargers at its 1,200 UK petrol stations, too. So it’s able to leverage its oil-based infrastructure to increase its market share of this rapidly growing sector.
Solar, wind, biofuel
Tough decisions made now will help and not hinder the BP share price, in my opinion.
Let’s take a quick look at the other parts of its transition to a renewable energy stock. BP started with a 43% ownership stake in solar energy provider Lightsource in 2017, bumped up to 50% in December 2019.
In wind power, BP operates nine onshore sites in six US states with a net capacity just over 1,000MW. And in biofuels, the supermajor has a joint venture with Brazilian bioenergy firm Bunge to run 11 biofuels sites in the South American company.
On the hydrogen side, BP announced a deal in November 2020 to develop a 50MW industrial-scale hydrogen plant in Germany with Ørsted. This project could be up and running by 2024, BP said.
Hydrogen bomb(s)
Hydrogen is definitely a super interesting clean-energy tech solution. But the fact remains that there is not the significant mass infrastructure to make it work properly anywhere on earth.
Hydrogen-powered vehicles, from cars to trains, would get us to our net-zero carbon targets much faster. But there are too many difficult problems with hydrogen storage and delivery for it to become the immediate Next Big Thing.
I’ve looked at some of AIM-listed hydrogen power companies like Ceres Power and ITM Power.
Each remains a popular renewable energy stock to trade. As such they remain pretty volatile. And while they’ve grown fast to £1bn+ valuations, I just can’t see these smaller companies converting on their promises before they burn through vast amounts of operational cash.
And to me BP has two major advantages. First is its ability to use its existing mass infrastructure. Second is its already-signed deals with other multinationals. That’s what makes BP my best renewable energy stock to buy now and hold forever.
