Shell sheds light on New Energies strategy amid energy transition

Oil and gas giant Royal Dutch Shell Plc (AMS:RDSA) on Thursday published a report that outlines the different paths the world could take to achieve carbon neutrality and Shell’s planned contribution towards that goal, including future actions by its New Energies division.

As part of an ongoing reshaping of its portfolio, Shell plans to expand in the power market as it projects that the energy system will increasingly electrify in the coming decades. The group noted that it will continue to sell oil and gas, but will also move into lower-carbon energy.

This concerns the New Energies division that was created in 2016 for Shell to invest in renewable and low-carbon energy projects, including wind power. The group says it is preparing to invest in New Energies between USD 1 billion (EUR 811m) and USD 2 billion per year, on average, by 2020. The largest portion of capital will be spent on power and in particular on electricity generation using solar, wind and gas sources.

Shell considers renewable energy resources to be “an attractive investment opportunity” because of falling solar and wind generation costs and the electrification of the energy system. It, however, will only get itself involved in commercially viable projects at this point in order to avoid relying on uncertain long-term revenues. It seeks equity returns of between 8% and 12% for power.

The group will expand in power markets where it already has a customer base and  where the energy transition is to bring new  opportunities in trading and selling natural gas, renewable power and storage. One specific wind power market Shell plans to tackle is the Netherlands.

“I like to think that our New Energies business is sowing different seeds in different places. Over time, we will see where the best and most profitable crops start to grow. Then we will give the winners all the nourishment they need to flourish,” Shell chair Charles Holliday comments in the report.

CEO Ben van Beurden says that Shell intends to catch up with society’s progress towards the objectives set by the Paris Agreement, which means that it will need to cut the net carbon footprint of its energy products by about half by 2050. To do so, the group is likely to add more renewable power, biofuels and electric vehicle (EV) charging points when changing its product mix.

In its report, Shell presents three scenarios, including the most recent one — Sky, which is described as “a technologically, industrially and economically possible route to achieving the goals of the Paris Agreement”. The other two scenarios, called Mountains and Oceans, deliver net-zero emissions from the energy system by the end of the century, but fall short of the temperature goal set in Paris.

In Sky, the world manages to achieve net-zero carbon dioxide (CO2) emissions from the energy system by 2070. This scenario envisages the share of electricity in final energy consumption increasing to 26% by 2030 from 18% today, and to as much as 50% by 2060. Renewables overtake fossil fuels as the primary source of energy in the 2050s, and after 2060 the world uses “hardly any” fossil fuels in electricity.

RenewablesNow,  14.04.2018