One third of the generation capacity we manage in the US is from renewables, including hydro, wind and solar. The rest is gas fired.
By leveraging our strong trading position, we are able to help companies meet bold sustainability goals. For example, several companies represented here today are members of the RE 100 – a group committed to using 100% renewable-powered electricity.
They’re typically doing this by contracting directly with large renewable projects.
We are able to help them manage the challenging risks associated with these variable renewables, thanks to our broad portfolio.
Growth of power sector
Getting the transition to a low-carbon future right in the power sector is critical. But it’s not everything.
As things stand, the power sector only accounts for around 20% of the energy system. This could increase to take up 30% of the market share by 2050, according to a plausible path outlined by Shell Scenarios. Then by the end of the century electricity will take up around half of final consumption.
That’s a big increase. And given renewables chiefly produce electricity, this shows a huge opportunity for their growth, and the consequent lowering of emissions. But what about the other sectors of the global economy where energy is consumed, and that produce significant CO2 emissions? Transport, buildings and industry.
Switching to using electricity powered by low-carbon or renewable energy sources is possible in some parts of the economy, but not in others.
With the manufacture of food and clothes, for example, low temperature processes and mechanical activities are needed. This makes the move over to electricity relatively straightforward.
It’s also possible to make the switch in the buildings sector. The growth of electricity will depend on how efficiently new buildings are designed, and how fast and to what extent existing buildings can be retrofitted.
But in industries that produce iron, steel, cement, plastic and chemicals it won’t be possible to use electricity. That’s because of the extremely high temperatures, chemical reactions or dense energy storage needed. These can currently only be provided by hydrocarbons.
As for the transport sector, while passenger road travel can be increasingly electrified or rely on hydrogen, longer-distance freight shipping and aviation will continue to need energy dense liquid fuels, including oil, biofuels and liquefied natural gas.
By 2050, electricity could take up 30% of the energy system – up from around 20% today. Fast forward to the end of the century and it could make up around 50% of final energy consumption.
Given energy demand is likely to double this century, that leaves a huge chunk that can’t be met by electricity.
Gas – which emits around half the carbon dioxide and less than one tenth of the air pollutants that coal does when burnt for power – should play an increasingly important role in powering sectors of the economy which can’t be electrified.
Bioenergy will also be critical. Our Scenarios team has calculated a possible future where bioenergy accounts for 15% of total energy demand by the end of the century.
Of course, the fact that some sectors can’t currently be electrified is no excuse for sitting on our hands. There’s a lot that governments and energy companies like Shell need to do.
Impact of policies
First, governments. Many other countries around the world can’t rely as much on the market-driven force seen in the US to bring about change.
In these countries, government-led carbon pricing mechanisms must be introduced. They are a key policy tool that can help slash emissions. They drive efficiencies and provide an incentive for lower-carbon business and consumer choices.
Look at what’s happened across the pond in Europe.
Last year, coal-fired power generation in Europe fell by around the same amount that gas-fired power increased. This shift is, in part, due to recent policies such as the UK government’s carbon price floor of £18 a tonne of carbon dioxide.
The growth of gas in place of coal led to a 4.5% drop in CO2 emissions from Europe’s power sector compared to 2015, according to analysis by the European think tanks Sandbag and Agora Energiewende.
