Energy Transition and the Dual Challenge – Food for thought at the April Energy Industries Club Lunch

Last month Maarten Wetselaar, Shell’s director of gas and new energies, caused something of a stir in a number of interviews and presentations at the CERA (Cambridge Energy Research Associates ) Week conference in Houston when he claimed that Royal Dutch Shell, one of the world’s biggest oil and gas groups, could develop a power business that was the same size as it’s oil & gas operations.  As it prepares for a fundamental shift in global energy supplies towards lower-carbon sources, in order to achieve its targets for cutting greenhouse emissions by 2035 it would need to be selling an amount of ‘clean’ power that would make them the biggest power company in the world.

Wetselaar admitted that this ‘volte face’ is in its early stages. By 2020, Shell plans to be investing $1bn-$2bn a year in proving the new energy technologies that will be key enablers. This is still a fraction of the group’s annual capital expenditure of about $25bn, but significant nonetheless.

But even taking these grandiose claims with a large pinch of salt, recent events do underline both the profound nature and the scale of the changes that are happening in the energy industry as it wrestles with the Dual Challenge; increased demand for power whilst lowering the rate of carbon emissions. Both inevitably point towards increased electricity from sources other than fossil fuels.

The Energy Industries Club provided a platform for a more measured look at these challenges by Peter Mather, Group Regional President, Europe for BP who outlined BP’s significant investments to meet this agenda. Whilst there is an argument about how ‘renewable’ gas is, it is clearly a very useful transition fuel whilst storage technologies are developed that will enable intermittent renewable sources such as wind and solar to be practical propositions.  And major moves by other European energy businesses also bear out this seismic shift – Dong has metamorphosed into Orsted whilst other majors such as Total and Repsol have been increasing their investment in renewables and the electricity supply chain.

Much remains to be done but the tectonic plates of the industry do appear to be shifting.