Power And Beyond: The Path To A Low-carbon Future

Maarten Wetselaar, Integrated Gas & New Energies Director at Shell, challenges the view that oil and gas represent the past, not the future. He argues that meeting global energy demand while lowering emissions requires a pragmatic path forward. This includes maximising the role of renewables, while embracing natural gas – the cleanest-burning hydrocarbon – and bioenergy as critical sources of energy in the future energy mix. Excerpts from his speech at the Aspire Forum in the USA on May 9, 2017:

“Get out of the way. You are old news. Time to move on.”

Not only are these the regular chants my children hurl at me as I take them on at soccer. They’re also criticisms levelled at companies like Shell which extract, produce and sell oil and natural gas.

These energy sources are seen by some as representing the past, not the future. Ironically, this view is potentially damaging to efforts to meet rising global demand for energy while moving to a low-carbon future. This transition must happen to avoid the serious consequences of climate change. But dismissing the role oil and gas will play in the future energy system is not the solution. So what is? Here is my take on the changes which need to take place.

Power mix

Renewable sources of energy, such as wind and solar, must continue growing to meet increasing demand for electricity, while lowering emissions.

Shell is putting money where its mouth is. Within my portfolio is our New Energies business, which explores commercial opportunities in areas such as biofuels, hydrogen and renewables. We expect to grow our investment in this business to $1 billion a year by the end of the decade.

Just last month, we set up an office in San Francisco, which is home to an expanding team focusing on business opportunities in low-carbon and renewable energies.

But Shell also believes that natural gas – the cleanest-burning hydrocarbon – is and will continue to be important when used alongside renewable sources of energy to generate electricity.

Modern gas-fired power plants take less than a third of the time a coal plant needs to ramp up to full operation. That means they can quickly respond to an increase in demand for electricity or when the sun does not shine and/or there is limited wind.

Here in the US, use of renewables has risen significantly. And gas is being used in place of coal. These trends are good news from an environmental perspective.

In fact, the International Energy Agency has said that the US power sector has led the world in cutting carbon dioxide emissions over the past decade. Fatih Birol, the Agency’s Executive Director, told an audience at the World Economic Forum in Davos that this is thanks largely to natural gas displacing coal.

This is an important transition for the US, which uses 18% of the world’s energy supply and emits 16% of the world’s total greenhouse gas emissions.

State-level and market-driven momentum

So far, moves in the US energy mix to cut emissions have not primarily been driven by an overarching national policy. It’s the actions of individual states, the price of gas, and industry initiatives which are proving key to moving the country to a lower-carbon, higher efficiency energy future.

A separate piece of analysis by IHS recently concluded that market-driven changes in the mix of energy sources will result in around two-thirds of the States’ meetings goals set out in the Clean Power Plan. This will happen, the report states, without a national policy, as long as renewable tax credits remain stable and state policies are supportive.

It’s worth adding that while vital, state policies aren’t everything. As ever in the US, market forces and innovation are essential to maintaining the momentum. As new technology is developed. This leads to lower costs. And hey presto – demand from consumers increases.

Innovations in wind power, for example, have lowered costs time and again over the past few years. So much so that in the oil and gas homeland of Texas, there are now more than 11,000 wind turbines.

Shell’s trading position

Shell has a big presence in the US – from our 14,000 branded retail stations to the 411,000 barrels of oil equivalent a day that we produce in both oil and natural gas. Shell, through its wholly owned subsidiary Shell Energy North America, is also the second largest wholesale marketer of power in the US. As part of our portfolio, we manage more than 10,000 megawatts of power generation capacity. That’s enough to power around 5 million homes.