The critical journey to carbon neutrality
Meeting the world’s climate goals will require an enormous societal effort. This includes the way businesses consume energy to produce their products. Hans Stinis, Shell Energy Europe’s General Manager for Product and Market Development explains how cleaner energy solutions are helping to create long term sustainable value for customers.
Hans, the recent UN Intergovernmental Panel on Climate Change (IPCC) report urged governments and society to act more rapidly and urgently to change the way we produce and consume energy to ensure a safer and more sustainable world for everyone, both now and in the future. Is it a wakeup call?
Well, it must be a wakeup call. What IPCC is telling the world is there is no more space for delays. I’d like to stress what our CEO, Ben van Beurden, always indicates: the only way to deal with climate change is through collaboration. We all - energy producers, consumers, traders or policymakers- need to work together and play our role in the energy transition journey.
So, do you see this collaboration between the various players in the energy markets taking place?
I see a very promising start. At Shell Energy Europe, we have a constant dialogue with our customers to ensure we have an integrated view of their energy needs. We sit with them to understand their needs for gas, power or environmental products, and we try to optimise the assets they may have to unveil common sources of value. Large energy consumers, industrials, retailers and producers are increasingly coming to us to discuss how they can decarbonise their energy use. And this is where collaboration and partnership stand out. We are best positioned to help because we know our customers. We understand their needs, and we regularly discuss the best ways to help them achieve their environmental commitments.
Indeed, according to research conducted by World Wildlife Fund, 63% of Fortune 100 companies and nearly half of Fortune 500 have set one or more clean energy targets. This suggests a promising dialogue between energy suppliers and consumers that will continue to grow in the future.
Do you think energy suppliers are ready to meet their customers’ needs for cleaner energy?
Shell Energy Europe is ready. Our integrated marketing and trading approach is very useful as we consider how best to meet our customers’ needs as they look to decarbonise their business. We are driven to develop solutions for both today and for the future.
What we are doing in the electricity space is a good example. The world needs to expand the use of electricity as more electricity allows more renewable generation to come into play. Shell Energy Europe is active in promoting the development of renewable generation capacity, supporting both Shell’s own projects and those from third parties.
Let me share a couple of examples to illustrate how we provide solutions for different tenors, geographies and renewable technologies. Shell is one of the partners of the Blauwwind Consortium for the Borssele III/IV wind farms in the Dutch North Sea. This project is designed to have a total installed capacity of 731.5 megawatts, enough to power about 825,000 Dutch homes. Shell Energy Europe has an agreement to buy half the electricity once the wind farms begin generating, and we are actively marketing our share to parties seeking to meet their renewable energy needs. In parallel, we work also with third party producers, where we have an established Power Purchase Agreement (PPA) business across Europe. In 2018, for instance, we signed a five-year deal with British Solar Renewables to buy all the electricity generated by Bradenstoke, the largest solar park in England.
We work with energy producers and consumers with a very simple goal: to develop products that are credible, functioning and cost-competitive.
“Our integrated marketing and trading approach is very useful as we consider how best to meet our customers’ needs as they look to decarbonise their business.”
So, in the end, is this all about costs and profit?
It’s fundamentally also about costs and profit. The energy transition and the need for the world to meet the goals of the landmark Paris Agreement on climate change will require an enormous societal effort, including the way businesses consume energy for manufacturing their products. This needs to be done in a market-base and cost-competitive way. If producers, traders and consumers of energy find ways to remain profitable along the transition, the development of a cleaner energy system will be faster and more sustainable. There is no conversation with our customers about clean energy solutions that does not also include the economic rationale of making the right choices.
Which leads us to Shell Energy Europe’s clean energy solutions. What are these?
Let me use the Greenhouse Gas Protocol (GHGP), which sets the global standard for how to measure, manage, and report greenhouse gas, as a framework to quickly describe our clean product offering. Basically, Shell Energy Europe provides solutions for the three scopes of GHGP, providing our customers with a platform of solutions to manage their direct and indirect CO2 emissions, as well as to decarbonise emissions from the electricity they buy. We do that with a combination of our strong natural gas experience, our partnerships with renewable power producers, our global experience in environmental markets and by investing in nature through voluntary carbon offsets.
The solutions we offer allow our customers to link to projects as well as to effectively have access to the clean certifications for electricity and emissions available in the markets. Corporate PPAs, natural gas combined with voluntary carbon offsets, or renewable and forestry certificates, are components of a product mix that are available to our customers today.
There is a lot of discussion in the energy industry about Corporate PPAs. Do you see these types of agreements happening anytime soon?
Corporate PPAs are already happening. Many influential global brands are setting ambitions towards renewable-only electricity. Corporate PPAs are one way to reach these goals. According to Bloomberg, the industrial and commercial sector has globally increased its power from renewable plants in 2018 to 7.4 gigawatt (GW) of capacity, up from 4.8 GW capacity in 2017. The renewable power market in Europe lags behind when compared to the US; however, the numbers continue to highlight the growth (1.7 GW capacity in EMEA in 2018). We also see that Corporate PPAs are no longer just a wind play as solar Corporate PPAs are rapidly growing.
To me, the role of the “trader in the middle” is the key to unleashing the full potential of a Corporate PPA. Shell Energy Europe is well positioned to play this role by meeting the needs of the developers, with whom we have a consolidated and growing offtake business, and corporates, which we know very well due to our long-lasting presence as their energy supplier. We provide the right solutions for balancing, shaping and hedging the two parts of the deals to make them feasible for both parties.
“Our international reach and expertise in environmental products has allowed us to build strong working relationships with several of the world’s highest quality developers, helping them to develop their various projects across several continents.”
You mentioned investments in nature through voluntary carbon offsets. What are offsets and how do they work?
Yes, these are known as “nature-based solutions”. As you know, there are emissions from hydrocarbons that today cannot be avoided. Think about airlines or the steel industry, for instance. Industries like these cannot yet eliminate the emissions related to their processes. So, we need to provide energy users with solutions that can reduce and capture the CO2 that they emit. This can be done through the retirement of voluntary carbon offsets, which are a recognised mechanism that allow individuals and companies to invest in environmental projects that contribute to achieving lower CO2 levels in the atmosphere.
CO2 emissions in the atmosphere impact us all, and as such, require a global approach with global solutions that ultimately benefit what is a global atmosphere. Our international reach and expertise in environmental products has allowed us to build strong working relationships with several of the world’s highest quality developers, helping them to develop their various projects across several continents. These projects focus on planting new forests, replacing damaged forests and protecting the existing ones across the planet. The projects have been selected for their demonstrated climate and environmental benefits, as well as for their commitment to support some of the United Nations Sustainable Development Goals, such as improving local health and education, reducing poverty and promoting gender equality, amongst others.
A great example of a project in Shell’s portfolio of carbon offsets is the Kasigau Corridor REDD+ Project, in Kenya, developed by Wildlife Works. The project aims to avoid the emission of over 45 million tonnes of CO2e over its 30-year life, to protect more than 200,000 hectares of a highly threatened dryland forest and to plant more than 50,000 new trees in the area. Main drivers of deforestation in this area are slash and burn agriculture for subsistence farming and illegal charcoal production. Wildlife Works is developing alternatives such as teaching local community members to make sustainable products as part of an alternative livelihood strategy, creating jobs including eco-factory tailors, plot sampling staff, community outreach and unarmed wildlife rangers or developing a process for green charcoal.
Before we conclude, let me ask you a final question: Shell is mainly perceived as an oil and gas company. How can you reassure your customers that you are the right partner in this energy transition?
The reality is that Shell’s portfolio will continue to evolve over time. For example, in Europe, we are growing an offtake business from renewable power producers where we have already established the equivalent of more than 500-megawatt (MW) capacity, adding to the 3,500 MW that we manage in North America.
At the same time, gas, the cleanest-burning fossil fuel, will continue to play an important role in meeting our customers’ needs. As one of the largest gas traders in the market, Shell Energy Europe continues to be best placed to offer solutions for gas.
Shell has set an ambition, pegged to society’s progress, to reduce the net carbon footprint of our operations and of our customers’ emissions from using our products by around half by 2050. Our investments in nature and in new areas of energy whether that is wind or solar power, charging points for electric vehicles or lower-carbon biofuels demonstrate our determination to play our part towards a cleaner energy future.
We want to thrive in the energy transition, not just survive, and this is the best reassurance we can give to our partners. Ultimately, I am convinced that the best way for us to persuade our customers is to engage with and listen to them.
And this remains the part of my job that I enjoy the most…
Hans Stinis spoke to Cristina Colom, Marketing Communication Manager at Shell, in November 2018.
For further information visit Shell Energy Europe’s Clean Energy Solutions section
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Shell Energy Europe is one of the major energy supply businesses and a leading marketer and trader of energy commodities, including gas, power and environmental products. Shell Energy Europe’s Trading office is in London.
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