By Thomas Francis. on Nov 1, 2020
The COVID-19 pandemic has been a devastating event both in terms of global health and the global economy, including the energy sector. There has been much talk of “building back better.” What does that mean for energy?
First, it’s really important to continue to support emergency workers, families and colleagues. Having taken over the leadership of the New Energies business during a pandemic, my priority is to care for colleagues, to make sure that their work environment is safe and that they’re able to deal with the associated stress.
As to the energy transition – COVID-19 may actually be an accelerant. Sonnen, for example, is a company in our New Energies portfolio that enables residential customers to generate their own energy through solar panels, store it and then share the excess energy with other consumers.
It’s had the strongest sales period in its 10-year history during COVID-19 – with particular success in countries such as Germany, Switzerland and Austria. Why? Because residential customers who are now working from home want to manage their energy use. They want to manage their bills, to have a sense of independence and energy security.
On the policy side, in Europe the COVID-19 recovery funds are often tied to big renewables, like offshore wind, or to accelerating sectors like green hydrogen. Given our holdings in renewables and hydrogen, we’re well-positioned to assist countries pivoting towards low-carbon energy strategies and really accelerate our growth in those areas.
Shell is making a move into integrated power. You have been in senior leadership roles in three integrated utilities. Why is power an attractive opportunity for Shell?
Right now, electricity provides roughly 20% of the end-use energy, but to stay aligned with the Paris Agreement on climate change, that proportion is going to have to more than triple. That’s according to Shell’s own Sky Scenario, which illustrates a technically possible but challenging pathway for society to meet the Paris goals. That scenario also shows that by 2070 the global generation of electricity would need to reach a level nearly five times what it is today. It will have to be the fastest growing area in the energy sector, and then within that sector, renewables and net-zero energy solutions will be growing the fastest.
So from a purely commercial perspective it’s a no-brainer for Shell. And then you add in the decarbonisation perspective, the net-zero emissions ambition we have: all of these factors line up commercially, on top of simply doing the right thing for society and for the planet.
You are referring to the announcement Shell made in April this year: its ambition to be a net-zero emissions energy business by 2050, or sooner, in step with society?
Yes, I’m grabbing onto that “or sooner” bit because I’ll be way too old in 2050!
Of course, becoming a net-zero emissions energy business is a huge task. The business plans we have today will not get us there. So, our plans must change over time, as society and our customers also change.
To accelerate the energy transition you have to have customers who say, “I want it and I’m willing to pay for it”. And that is exactly what we’re seeing in households and among our business customers – a pull for more decarbonised options.
For example, in the UK with Shell Energy Retail, customers are choosing to stay with us, or they’re choosing to come to us because they want certified renewable electricity. With the help of nature-based solutions, such as planting trees or protecting forests, we can offer carbon-neutral home heating gas, and they’re signing up for that by the thousands. By making that choice, our customers are voting with their wallets.
Also, Microsoft wants us to supply them with low-carbon energy products and services to support them in realising their objective to have 100% supply of renewable energy by 2025.
I’m also really proud of our offshore wind team. We won the Hollandse Kust (noord) project – we’re teaming with Dutch utility Eneco on a 759 MW offshore wind farm off the Netherlands’ coast, which will also showcase a number of technological demonstrations that we believe could be implemented at full-scale in the future. These include floating solar, battery storage and green hydrogen generation.
Even in the middle of COVID-19, our teams had to prepare the documents for the bid and negotiate with our counterparties and partners through lockdown. To get a big win, that’s a sign of our commitment to this – and shows we can deliver it even in challenging circumstances.
You have mentioned some New Energies investments, but oil and gas still dominate Shell’s portfolio. How will this portfolio be reshaped to make good on that net-zero ambition?
Speaking for the people who work in New Energies and our integrated power business, we’re proud to be a part of Shell, given its tradition of supplying energy over many, many decades. And part of Shell’s history is exploring new business through new technology. Back in the day, liquefied natural gas was a new business. Back in the day, chemicals was a new business. Shell has found ways to fit those puzzle pieces together, as New Energies will fit.
For example, Shell has a very successful retail fuels business with around 45,000 stations globally, but over time the number of cars fuelled by petrol and diesel is going to decline in favour of electric vehicles and hydrogen vehicles. So we are exploring in many markets whether we can add more Shell Recharge electric vehicle charge points in those retail forecourts. We have also announced plans to open Shell’s first 100% electric vehicle charging forecourt in the UK. In that way, Shell’s New Energies business is supporting Shell’s downstream retail business transition to an age of lower-carbon transport solutions for drivers visiting forecourts, while the retail business is helping New Energies attract new customers.
When you work back from the customer you can put the puzzle pieces together in a way that makes the best sense commercially for that particular market.
It’s why we’ve structured the integrated power business in a geographic way so that we’re aligned with local policy, we’re aligned with local trading opportunities, and we’re aligned with performance.
“When you look at high tech and the more entrepreneurial cultures… they tend to cut to the chase. I’m trying to build this culture in my business.”
Which low-carbon energy technology do you think might see surprising growth over the course of this decade?
I’m seeing a convergence between what we need our energy sector to achieve and what digital technology is evolving to deliver – particularly when it comes to issues like energy efficiency. People don’t talk about energy efficiency very much -They talk about things like solar panels, wind and, of course, hydrogen. But I’m watching the convergence of digital software-backed technologies with sensors, with voice technology.
We are partnering with technology leaders to develop and roll out innovative solutions for customers in their homes and businesses. For example, Shell and Microsoft are working together on new digital tools that would enable Shell to support suppliers and customers in improving energy efficiency and reducing their carbon footprints.
You were part of the founding team at a web-infrastructure provider and have spent some time in Northern California’s start-up tech industry. As a former entrepreneur in Silicon Valley, what aspects of that business culture do you think Shell would be smart to emulate?
Well, every company has to be true to itself. Shell is a huge multinational company with a strong set of core values of honesty, integrity and respect for people. So it really starts with building on those values.
When you look at high tech and the more entrepreneurial cultures, they are certainly comfortable taking more risks. They tend to cut to the chase. I’m trying to build this culture in my business.
Ideally, you’re able to create that safe environment where we can disagree strongly, and yet we do so with deep respect, with curiosity, with humility, with a desire to learn. We recognise that by really thrashing around that idea and looking for a solution, it’s going to be better. That is something I learned in tech and bring into my leadership style at Shell.