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Oil giant Shell with bold moves towards a future focused on electricity generation

Shell gas station (source: flickr/ pony rojo, creative commons)
Alexander Richter 3 Apr 2019

Royal Dutch Shell has announced bold moves for a future as large player in the electricity generation market pushing a new emphasis on its relationship with lobbyists, accepting carbon tax and hopefully considering geothermal energy as valid business option for its future.

Dutch oil giant Shell has come out with several statements in the last week that are more than interesting in the context of a possible role of oil companies in a renewable energy world.

Here a few of the news coming out in the past two to three weeks:

March 13, 2019 – Financial Times – “Shell aims to become world’s largest electricity company

During the recent CERAWeek conference in Houston, Maarten Westsellaar, Shell’s director of gas and new energies  announced that for Shell to achieve its goal of cutting its greenhouse gas emissions by 2035, “the amount of power – of clean power – we will need to be selling … will make us by far the biggest power company in the world.” … in the follow-up to the Financial Times he said that “the group could develop a power business including supplying customers, trading and providing equipement, that was the same size as its oil or gas operations.”

April 1, 2019 – GreentechMedia – “Shell New Energies Director on Investing in Clean Energy: ‘It’s about Survival‘”

Referring to statements in conjunction with the Bloomberg New Energy Finance Summit in New York City last month, Maarten Wetselaar said that Shell’s own “analysis sees electricity exceeding 50% of end-use energy consumption by 2070, rapidly making its way into transportation, home heating and cooking, and industrial processes.” …  essentially describing a move to electricity and that if the company would not be in that business, it would become marginalized.

With spending levels of around $2 billion per year, Shell thinks it can answer criticism about these recent investments into cleantech as “greenwashing”. … in that context the overall investment program per year is more than $25 billion.

The full article by Greentech Media provides a further analysis and critical look at the plans of Shell.

April 2, 2019 – Bloomberg – “Shell just sent lobbyists a message on Climate Change

Bloomberg reports on an analysis of Shell on its relationship with industry associations with regards to their climate change goals. Establishing that it has some “misalignment” with nine of them and “material misalignment” with one, the company is re-evaluating its relationships.

April 2, 2019 – CBC – “Shell urges Canada’s oil lobby group to support carbon tax

The Canadian Broadcasting Corporation (CBC) reports yesterday that Shell has asked “Canada’s largest oil and gas lobby group to start supporting carbon tax policies in the country.”

This relates to news the same day on the overall evaluation of the goals and activities of industry lobbying organisations.

December 2018 – BBC – “Royal Dutch Shell ties executive pay to carbon reduction

In December last year, BBC reported on a move by Shell to set carbon emission targets and link it to the pay of executives of the company. With that the company plans to link energy transition and long-term pay, which though is still subject to a shareholder vote in 2020.

“Shell aims to set three- to five-year targets every year which will include specific net carbon footprint targets.”

Clearly this has been done on the pressure from investors, e.g. from the Church of England Pensions Board. The precise figures over the carbon targets and what percentage of pay might be affected is still to be defined, but it will – so BBC – affect as many as 1,300 high-level employees.

March 14, 2019 – ThinkGeoEnergy – “Shell joins Eavor’s distruptive new conduction-only geothermal demonstration project

Last month, we also reported on Shell taking a position in a new technology play with a pilot plant that is to prove a new conduction-only geothermal utilisation concept in Canada.

October 4, 2018 – ThinkGeoEnergy – “Oil firm Shell applies for geothermal exploration permit in Rotterdam/ Netherlands

In October last year, we also reported on Shell working on geothermal projects in the Netherlands.

So overall, Shell has made quite the statements in the last few weeks and if or if not this is a “greenwashing” effort, it still shows that the tide is changing for oil companies. With an increasing move to electricity driven energy transition, clearly the statements and actions by Shell are positive signs, which we all hope will amount to concrete actions.

In this context, Shell clearly seems to talk about electricity only, but there is hope that it will also include the heating market.

The challenge really is how we can find ways of getting other oil and gas companies, but also coal power producers to target a clean energy future and get them engaged into geothermal energy. Geothermal energy is an interesting target due to the understanding and know-how in subsurface resource exploration. If the company recognises a move away from a commodity-focused business model to a utility-return model in the electricity world, geothermal is not that far off for Shell.

With its concrete look into geothermal development in the Netherlands, we also hope that Shell put its money where its mouth is and move beyond small investments in technical plays, and engage in larger-scale geothermal development beyond the Netherlands.