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Energy transition: not for the faint-hearted

Peter Voser, Chief Executive Officer, Royal Dutch Shell plc, writes in a web-exclusive commentary for the Canadian newspaper Globe and Mail that it will take both innovation and patience to change the energy game.

This op-ed was published 17 September 2009 for the Canadian newspaper Globe and Mail.

Energy transition: not for the faint-hearted

All of us want to use energy and feel good about it. The challenge is to supply sufficient amounts of affordable energy to power our lives and build an energy system that can sustain future generations.

The time is ripe for an Energy New Deal. With our history as a technology pioneer, Shell is eager to contribute. But opinion polls suggest many people believe that a new energy system can be built quickly and on the cheap.

In reality, it will take decades, huge sums of money and tireless effort by generations of scientists, engineers and policy-makers. Big energy projects cost billions to build and remain in operation for decades. Compare it with a new car. Ten years after you've sold it, someone somewhere in the world will still be driving it. A power plant, once built, will operate for at least 35 years.

Developing new technologies also takes time. You easily spend 10 years maturing a new technology from the lab to a first commercial plant. And that's just the beginning. It usually takes another 25 years for this new energy type to conquer 1 per cent of the global market. For instance, biofuels are reaching that mark about now. Wind could do so by 2015, 25 years after the first large-scale wind parks were built in Denmark and the United States. These are realities that people should grasp and leaders be frank about.

We can't change the energy supply system overnight. But that's no reason to become discouraged. For our part, oil and gas companies can provide motorists with more efficient fuels and lubricants at the pump, push energy-efficiency during oil production and refining, and blend in sustainable biofuels. For instance, our Canadian partner Iogen Corp. is a leader in technologies that convert straw into ethanol, using enzymes.

Shell also sees a role for itself in generating sustainable electricity on which electric mobility depends. We intend to increase supplies of natural gas, the cleanest-burning fossil fuel, we offer coal and biomass gasification technology and we're a sizable player in wind. But in the coming years, like it or not, most electric vehicles would rely on conventional coal-fired power, which is responsible for the fastest growth in greenhouse-gas emissions worldwide.

It's both crucial and doable to tackle emissions from coal-fired power, given that the emission points are stationary and limited in number. The best way to reduce emissions from power generation is to replace old coal-burners with new power stations that can run on natural gas, coal and biomass and are equipped with carbon capture and storage (CCS) technology.

CCS can also help reduce emissions in the oil sands industry. Shell has been advancing development of a CCS project in Canada called Quest. That project would reduce carbon dioxide emissions from the Scotford Upgrader near Edmonton by 1.1 million tonnes of carbon dioxide each year – equivalent to taking 175,000 vehicles off the road.

This improvement would come on top of other reductions already achieved as a result of many technology innovations. Today, fuel from oil sands produces 5 per cent to 15 per cent more carbon dioxide than fuels from conventional oil when measured from “well to wheel.” We are determined to narrow that gap even further.

So there's a lot that companies such as Shell can and want to do to bring sustainable energy to the market. But we can't do it all by ourselves. Governments and consumers have an important role to play, too. Radical improvements in energy efficiency are technically feasible, and reduced energy consumption can be achieved with proper political management.

Governments can help to speed up the deployment of low carbon technologies through internationally aligned policies that put a price on greenhouse-gas emissions. In December, the world's nations will assemble in Copenhagen for the United Nations conference on climate change. As one of the world's primary energy suppliers, Canada plays a pivotal role in promoting a positive outcome in Copenhagen. Society needs progress.

At Shell, our preference is for cap-and-trade systems that place a cap on the overall level of emissions permitted. The trading of emission allowances then gives companies an incentive to seek the most cost-efficient solutions. CCS should receive full recognition under such a system, on the principle that a tonne of carbon dioxide stored underground is as good as a tonne of carbon dioxide avoided by a wind park.

With the right government policies, company investments and consumer choices, it should be possible to power our lives and build a new system. Shell has a long history of pioneering energy solutions, and we're as eager as ever to try new things. But we are also realists, as are Canadians. It will take both innovation and patience to change the energy game.

Peter Voser is CEO of Royal Dutch Shell. This is adapted from his keynote address to 150 global business leaders at the Spruce Meadows Round Table in Calgary last week.

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