Shell Releases Energy Transition Report: Commits to 50% Lower Emissions by 2050, Biofuels to Top Oil by 2100 in “Sky” Scenario

April 18, 2018

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by Jim Lane (Biofuels Digest) In the Netherlands and England, Shell released its most definitive statement yet on its low-carbon future and committed to 50% lower emissions by 2050 and net zero by 2070 in its operations and emissions from its fuels. The road, to Shell, is apparently paved with good intentions.

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Shell reaffirmed its support for the Paris Agreement, while noting certain extraordinary consequences of the required re-shaping of energy supply, including biofuels supply exceeding petroleum by 2100 in the company’s “Sky” scenario.

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As Shell notes:

For example, in Mountains, strong governments and powerful economic actors work together to create stability and maintain their own interests. This enables big initiatives like the deployment of carbon capture and storage (CCS) at scale or the building of widespread gas and hydrogen infrastructure. In contrast, in Oceans, competitive markets and a strong private sector are the main engines of change. There is major technology innovation, but big coordinated initiatives are more difficult to achieve. Energy needs are increasingly delivered through a patchwork of initiatives.

Both Mountains and Oceans deliver net-zero emissions (NZE) from the energy system by the end of the century. But they fall short of the temperature goal of the Paris Agreement. Sky builds on this earlier work and assumes that society takes actions so as to meet the Paris goal. It requires unprecedented and sustained collaboration across all sectors of society, supported by highly effective government policy.

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25X increase in biofuels production by 2050

Given the gigantic and global nature of Shells’s business, they note how dramatic the energy transition would have to be at Shell “to match the energy system by 2050”. They illustrate with six examples and note that meeting the Sky scenario could mean achieving not some, but all of them:

■ Selling the fuel produced by 25 biofuel companies the size of our joint venture Raízen in Brazil.

■ Selling the output from 200 large offshore wind farms the size of our planned Borssele wind farm in the North Sea.

■ Changing the proportion of gas in the total amount of oil and gas we produce, so that natural gas increases from 50% to 75%.

■ Selling enough electricity on our forecourts around the world to meet three times the total demand for power in the Netherlands.

■ Developing the capacity of 20 CCS plants the size of our Quest CCS plant in Canada.

■ Planting forests the size of Spain to act a carbon sink for emissions that still exist.

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“Other sectors, such as the iron, steel, cement, plastic and chemical industries, and certain types of transport, currently rely on the unique ability of hydrocarbons to provide extremely high temperatures, chemical reactions or dense energy storage. Today, many of these cannot be electrified at all, or only at a prohibitively high cost.”

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Mobility: The percentage of internal combustion engines (ICE)in passenger cars falls from 100% in 2010 to around 75% by 2030. By 2050, it is impossible to buy a new passenger vehicle powered by an ICE anywhere in the world.

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Hydrogen: The share of hydrogen in total final energy consumption rises from less than 1% before 2040, to 6% by 2070. It is used as a high-density and storable energy source in transport and industry. Importantly in Sky, it is produced from water electrolysis using mainly renewable power.

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The Shell portfolio is, thereby, on the verge of a major shift. The “New Energies business is exploring new fuels for transport, where our activities range from developing advanced biofuels, made from waste and non-food plants, to launching hydrogen refueling stations and recharging for electric vehicles,” the company said. So, a sort of “All of the Above” ambition.

Primarily, expect a ramping up in Shell’s gas and electricity businesses — and to a lesser extent investment in biofuels and hydrogen. And they foresee “a range of between $40 and $100 dollars per barrel of oil to 2030 to be likely.”

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As we have seen elsewhere, the world is turning toward a double standard on investment in renewables, and Shell is no exception. In committing the bulk of its investment attention to power, it frankly confesses that it is seeking “equity returns of between 8% and 12%” from power projects. However, for new fuels, the company only noted in its forecast that it would “expect returns on capital similar to those in the Downstream business.”

It’s Shell’s disingenuous moment, because only three weeks ago they updated financial markets on those Downstream return ambitions. As NASDAQ.com reported here, “Shell plans to make a yearly investment of around $7-$9 billion in its downstream segment, forecasting a return on average capital employed (ROACE) of more than 15%.”

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One is left to imagine how the investment options and decisions would look if the company decided that it needed only the same returns in advanced liquid fuels that it expects from new power investments, instead of expecting advanced fuel projects to be 100% competitive with established fossil fuel technologies from the get-go.

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Hydrogen Council In January 2017, Shell and other companies launched the Hydrogen Council, a global coalition of chief executives working to raise the profile of hydrogen’s role in the transition to a low-carbon energy system. The council seeks to accelerate investment in the development and commercialization of the hydrogen and fuel-cell sectors. It provides recommendations to ensure appropriate conditions are in place to facilitate the deployment of hydrogen technologies. The council comprises 18 CEOs of energy, transport and industrial multinationals. In January 2017, the council published a report: “How hydrogen empowers the energy transition“ which further details hydrogen’s potential. In November 2017, the group launched a second report, called “Hydrogen, scaling up,” outlining a path to greater hydrogen deployment and its role in the energy transition.

Energy Transitions Commission. In 2015, Shell helped establish the Energy Transitions Commission which aims to accelerate change towards low-carbon energy systems that enable robust economic development and limit the rise in global temperature to well below 2°C. The ETC brings together leaders representing a wide range of sectors and interests: investors, energy companies, innovators, industrial energy users, nonprofit organizations and research institutes. As of October 2017, the ETC had 29 members. It is chaired by Lord Adair Turner and Dr Ajay Mathur. Chad Holliday serves as Shell’s Commissioner.

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In some ways, this is an attempt to put Shell’s investments into context for potential critics adopting a “hurry up” posture. The biggest changes in Shell’s business come between 2030 and 2050, in which it turns sharply towards renewables as hydrocarbon demand slows.

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We note the appetite for power projects with an 8-12% return while requiring 15% for advanced fuels. That clearly reflects the hurry-up in this document, which is less about Paris and more about a desire to get into the business of producing and delivering electricity as a world-scale replacement for producing and delivering fuels. READ MORE

BP commits to 'zero net emissions growth' (Houston Chronicle)

Excerpts from Houston Chronicle: BP said Monday that it will hold greenhouse gas emissions from its operations at or below its 2015 levels in the years ahead as the world’s biggest oil companies prepare for a lower carbon future that could threaten their businesses.

The British oil major released an “Advancing the Energy Transition” report that detailed its plans to reduce its pollution levels, especially its emissions of methane, the main component of natural gas and a potent greenhouse gas. Controlling methane emissions, which escape from wells and pipelines, is gaining more attention in the energy sector as BP and other companies shift investments to cleaner-burning natural gas from crude oil.

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While BP isn’t switching its primary focus to renewable energy sources such as wind and solar, BP in December said it would invest $200 million for a minority stake in British solar developer Lightsource.

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Other companies are taking steps as well. Exxon Mobil said last fall that it’s implementing a methane emissions reduction program and will phase out much of its natural gas-powered equipment over three years. The equipment, which emits methane, controls valves and pressure levels.

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Exxon, which is under investigation by two states over whether it misled investors and the public, has denied allegations that it knew about the climate repercussions of its business in the 1980s but hid the evidence.

Shell’s climate change research from the 1980s was recently revealed by a European news website that obtained and released internal Shell documents.

Other Big Oil companies, including Exxon Mobil and Royal Dutch Shell, have taken increasingly public stances on the need to fight climate change and lessen their carbon footprints — without abandoning fossil fuels. READ MORE