Shell to Increase Reliance on Renewable Energies

The role of renewables in the energy mix of one of the world’s largest oil companies will continue to grow, says the company’s chief executive officer.

LONDON, England, UK, 2001-10-23 [] Shell Renewables is not “a very expensive greenwashing exercise” for its parent company, Karen de Segundo told a Greenpeace business conference in London. “Shell has been in energy for over 100 years, and we fully intend to be in energy a hundred years hence.” The subsidiary was created four years ago to develop “a sound and growing business, through commercially viable projects,” she explained. “We believe we can do that because, first, all the evidence suggests that renewable energy technologies will be a major part of the energy mix of the future. So, as renewables grow in the energy mix, they will grow in our business too.” Shell has concentrated its efforts in wind and solar photovoltaics, although it is also involved in geothermal and hydrogen. “For the Shell Group, renewables are an important part of our strategy moving forward,” she added. “They hold the prospect of truly sustainable development” that is economically, socially and environmentally beneficial. “Renewables are part of the commercial energy system, and that system is a dynamic one,” she said. “We’ve seen massive change on all those fronts in recent years; so, in the future, we can expect major changes in the way energy is provided.” New renewable energy sources currently provide 1 percent of the global energy mix, and the benefits of renewables will be delivered to the world “only if renewable energy becomes big enough to make a difference.” That, she explained, will happen only if renewable energy businesses “are underpinned by sound economic and commercial practices and policies.” “A lot of progress has been made by a lot of people” in exploiting the opportunities for renewables, but “there are still some barriers to be overcome.” The recent energy scenarios developed by Shell include possible options where the world moves directly towards renewables, supported by natural gas in the medium term. “For this scenario to happen in real life, there would have to be significant advances in energy storage, and a new generation of solar and geothermal technologies would be needed around 2020.” Another path toward renewables is less direct, based on a hydrogen economy that grows out of developments in fuel cells. Both scenarios involve a reduction in the human-induced emissions of carbon dioxide within 50 years, but they differ in how this might happen. Decarbonisation of the energy chain is the result in both scenarios, she added. “As we move forward, renewables’ share of the energy mix looks set to increase, with demand growing annually by up to 13 percent,” she said. Despite high growth rates, Shell believes renewables will represent a maximum of 2.5 percent of primary energy by 2010, with wind and solar PV expected to grow faster than other renewables. This growth means “huge opportunities” to deliver environmental, social and economic benefits, but growth has to be “fast and sustainable,” she warned. “The only way that can happen, at the speed required, is through the private sector – provided government has created the conditions for the market to flourish.” Subsidies are essential for the initial phase, but “cannot, indeed should not, be a long-term part of the picture,” said de Segundo. “We need people and organizations playing to their strengths so that they can make a profit and therefore carry on building in a sustainable way.” She explained that Shell is playing to its strengths in order to build a long-term business, and the company expects to benefit in the market for renewable energy by leveraging its global presence and brand, its technology and experience, and its partnership skills to develop a business. Earlier this year, it formed a joint venture with Siemens in PV while, in the wind sector, it will start generating electricity in November from its first commercial windfarm in Wyoming. The company has been awarded 30 offshore wind sites near Blackpool, and has submitted major bids in Morocco and will submit more soon in the Netherlands. Eighty percent of the world’s opportunities over the next three to five years will be offered in Europe and North America, she explained. Shell will expand its geothermal business by developing a ‘hot fractured rock’ technology that makes steam production more controllable and scalable. Its subsidiary in El Salvador signed an agreement last month with Geotermica Salvadorena, to generate emission-free electricity for the national grid in a process which de Segundo says has “real potential” to overcome barriers to the technology. “If renewable energy is going to become big enough to make a difference, the normal rules of business apply,” she noted. “You have to keep an eye on what’s changing in the market, then test and assess new opportunities as they arise.” “The only sensible way to move forward in renewables is to place bets on different technologies, and really work to understand them, so you can make decisions based on the potential of each opportunity and how well placed you are to realize it,” she added. “If you place bets, you have to be ready to change course over time.” Shell Renewables recently decided to stop development of its biomass-to-power business, and will concentrate on hydrogen, hot fractured rock geothermal, wind and solar PV. Cost remains the most obvious barrier to renewables, and incentives are not sufficiently widespread or applied consistently to create markets that will encourage investment in the technologies and uptake by consumers, she added. The third barrier is the lack of an adequate market structure for green certificate trading, a process that will provide the needed income stream. “Standards have yet to be agreed about what constitutes renewable energy production,” she noted. “Until those standards, and the market structure, are in place, a key enabler for renewables growth is missing.” If global emission trading systems are adopted, they will accelerate the growth of renewable energy and its benefits. Since 1990, trading of SO2 emissions by U.S. utilities has dropped by 29 percent, at one-tenth the cost to business that was originally envisaged, and she anticipates that the same path could work in carbon trading schemes. “Shell believes there is a viable and exciting future in renewables” and is committed to invest up to US$1 billion over the next five years. Shell cannot embrace renewables just because of their environmental or public relations benefits, nor can governments be expected to keep funding renewables indefinitely when cheaper energy sources are available. “We have to make the renewable energy sector work commercially, as quickly as possible, to give it the long-term future it deserves – and the world deserves as well,” she concluded. “Unless consumers buy renewable energy, it has no future. If you want consumers to buy renewable energy, they have to see what’s in it for them.”
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