Gas and renewables
Let me start with natural gas and renewables.
I know some people would like fossil fuels to be replaced by renewables as we speak. But for technical and economic reasons, this can’t happen overnight.
Some industrial sectors could decarbonise over the coming decades – in particular power generation. Other sectors will need more time. And some will continue to need hydrocarbons.
Having said that, Shell expects renewables to eventually become the largest component of the global energy mix.
We think that their share could double from 13% now to around 30-40% of the global energy mix by 2060.
This suggests that hydrocarbons will continue to play an important role for decades to come. Only hydrocarbons can provide a full suite of energy products and address the shortcomings of alternative energies in terms of availability, storage and energy density.
But, at the same time, the world needs to reduce CO2 emissions. This is why I’m convinced the energy mix needs to be based on a greater share of natural gas in combination with renewables. Natural gas is relatively clean-burning, abundant and versatile. When burnt for power, it produces half the amount of CO2 that coal does.
In Germany, renewables are growing fast in power generation - heavily subsidised by so called “feed-in tariffs”. On the other hand, coal plants are running full throttle and are used as a back-up.
We all know the energy transition will have a different shape from country to country.
However, it is disappointing that the share of natural gas in German power generation slipped below 10% last year, whereas coal’s share was at 43%.
If all these coal plants were replaced with modern gas plants, Germany could eliminate about 150 million tonnes of annual CO2 emissions.
To put this into perspective: Currently, Germany emits around 900 million tonnes per year, and the government wants to lower these further, to 750 million tonnes by 2020.
Just the fuel switch from coal to gas could achieve the reductions required by the government’s Climate Programme for 2020.
I think the recent decision of Germany’s government to close down 2.7 gigawatts of coal-fired power plants by putting them into a reserve is a step in the right direction. But more work needs to be done.
Carbon Pricing Systems
Turning to next week’s conference in Paris, Shell calls on policymakers to incentivise options that focus on emissions reduction over the long term. Government-led carbon pricing systems, ladies and gentlemen, are a crucial step in our journey towards “more energy with less CO2”.
These systems have the potential to promote low-carbon technologies and also encourage energy efficiency. I’m glad the German government supports a strong
Emissions Trading System as the most important instrument of EU climate policy.
With other energy companies, Shell has established a Paying for Carbon initiative.
We ask governments to introduce carbon pricing systems where they do not yet exist. And we ask them to create a framework, along the lines proposed by the International Emissions Trading Association, that could connect all the national systems.
To be clear: the establishment of a global CO2 pricing mechanism will take its time.
In the meantime – and this is no easy-to-manage task – we have to be careful and try to avoid carbon leakage in industrialised economies.
However, if we get CO2 pricing right, carbon pricing systems could really reinforce the transition to a low-carbon future – in particular switching from coal to gas in power generation.
On to my third and final point: collaborative innovation.
To give some examples related to mobility: we are working with automakers and other partners to improve the efficiency of transport fuels.
Also, we are a leader in the liquefied natural gas, or LNG, industry. At Shell we use this knowledge to extend the LNG market beyond its current primary use of generating power, into transport. LNG is now beginning to emerge as a cost-competitive and cleaner fuel for shipping and heavy-duty road transport.
And let’s not forget hydrogen: In many conceptions of a net-zero-emissions world, this will be used as a fuel. It can be made from electricity and water, and it could store excess energy, while possibly providing heat for industry.
Looking at Germany, I’m glad that – in collaboration with the federal government, Daimler, Linde and others – we’re looking to build a network of about 400 hydrogen fill-up sites across this country. This will be a visible step to achieving the Energiewende in the mobility sector.
Shell has been a pioneer in developing and delivering infrastructure for hydrogen mobility – in the US, but particularly here in Germany. Our hydrogen fill-up network is meant to become a starting point for activities in more European countries.
For me, these examples demonstrate how hugely important collaboration and public-private partnerships are in shaping the needed energy transition.
In sum: Shell fully acknowledges that the energy system is moving towards a low-carbon future.
For us, this is an opportunity. An opportunity to help produce more energy with less CO2, an opportunity to be a partner in progress… inside and outside Germany.
Thank you for listening. I look forward to our discussion.