Navigating a world of surprises
May 25, 2017
Speech given by John Abbott, Downstream Director, Royal Dutch Shell plc, at the opening of Powering Progress Together at the Olympic Stadium, London, UK on May 25, 2017.
The ongoing energy transition will require a huge amount of innovation. In this speech, John Abbott says that the world’s scientists are up to the job and explores the best strategies to aid them in this task. Adopting the Silicon Valley attitude of being prepared to “fail fast”, gaining understanding of new areas and fighting for the right investment landscape are all important approaches. But all of them will fail without a commitment to collaboration.
I heard about a very interesting job agency the other day. It guarantees its clients will never be late, never fall ill, never go on strike or demand an awkward holiday.
Yet, in the two years since it started, it has failed to place a single person in a single job. But, in fairness, it hasn’t tried to either. That’s because it is a job agency for robots. If you need a robot, this agency will source the right one, for as long as you need it.
Surprising? Well, that’s the world we live in. It is a world full of surprises. Science is making many of them good surprises, but we can never quite know what’s around the corner. We can never quite know which new technology is going to fly.
For some reason, standing here in this stadium, I find myself thinking of the Olympics.
Thousands of amateur athletes all over the world, competing to be professional athletes, then competing to make their national team, then competing to win the gold medal. For every Usain Bolt, there are thousands of talented and ultra-fit athletes who didn’t even get close to the stadium.
Something similar is at play with technology. This has big implications for the world’s transition to a lower-carbon energy system. Much like an Olympic Games, this energy transition is a big challenge and it is also a great opportunity.
The UN expects the world population to grow from around 7 billion today to over 11 billion by the end of the century. It will come as no surprise to anybody when all those billions seek to improve their living standards and, whether that involves a first car or a first lightbulb, that will involve the consumption of energy.
A growing global population with more widespread access to energy means this century is likely to see the energy system roughly doubling in size. This creates lots of opportunity – for consumers and businesses alike.
The challenge for the world is to meet that ballooning demand at the same time as dealing with climate change.
That means getting to a state known as “net zero emissions”. “Net zero” is a world in which the greenhouse gases that can’t be prevented, such as those created by the chemical reactions involved in making cement, are negated elsewhere it could be by using nature as carbon sinks or by the sustainable burning of biomass combined with carbon capture and storage.
To put it simply: the world must stop adding to the stock of greenhouses gases in the atmosphere. “Net zero” is a world in which that has happened and the world must get there as quickly as it can.
I am a scientist. And I am a firm believer that science can provide the innovation the world needs.
But how do you discover the technologies the world has to have to address climate change? How do you find a Usain Bolt, Jessica Ennis or a Chris Hoy?
I know there is going to be some great thinking shared here today on how to find these superstar technologies. It is inspiring that so many fine minds are gathered here to do that. Thank you for coming.
When I look at Shell’s own approach, it comes down to three main things. First, embracing the Silicon Valley concept of failing fast. Second, getting involved in new areas and learning. Third, fighting for the right investment context.
Embracing the approach of Silicon Valley has meant creating some pockets of the business which feel quite different to the established structures.
There is Shell Technology Ventures, for example. STV is known affectionately within the company as “Stevie” and its job is to get out there and invest in companies with bright ideas and step-change technologies.
“Stevie” is why we are involved with a company called Kite Power Systems, developing a new way of harnessing wind power using giant kites. “Stevie” is why we have a link-up with “Sense”, a device which is capable of watching everything your house does. it’s a super-smart smart meter. It’s an energy use detective.
Not all of “Stevie’s” investments will work out but that’s ok. Some of them will and we will learn a lot along the way.
Another such Silicon-Valley-pocket is Shell TechWorks, a commercial start-up that is based in the world’s most innovative square mile, in Kendall Square, Cambridge, Massachusetts.
They employ bright minds from outside the oil and gas industry to think big and work fast. How can the cost of a hydrogen refuelling station be cut in half? Will consumers notice if their thermostats are remotely changed by 4 degrees Celsius to help cope with a power demand peak?
And then there the New Energies business and the work it does to play in the digital sphere.
Like Shell Fitcar™, which is being trialed in the US. Shell Fitcar™ sends information from your car engine straight to your mobile phone. It can help you drive more efficiently or tell you what that light on your dashboard really means.
And there is FarePilot, a company Shell set up in the UK for taxi drivers. Its app guides drivers to places where they are most likely to pick up their next customer. It is designed to help drivers find fares quicker, drive less to their next pick-up and carry more passengers in a shift. That’s a potential lowering of emissions by simply matching supply and demand better.
I’m going to tell you a bit more about what New Energies gets up to because the second element of Shell’s approach is to be involved, understand and, with a focus on the customer, find the value. This is very much what New Energies is about.
Shell cannot hope to make money in the new energy landscape if it does not understand the market. That is why Shell was part of a consortium that bid for and won the tender for some Dutch offshore windfarms.
It is why Shell is part of the H2 Mobility joint venture in Germany, which is dedicated to establishing a nationwide network of hydrogen filling stations. It is why we opened Shell’s first retail hydrogen site in the UK this year with two more to follow. It is why Shell is a founding member of the Hydrogen Council, and it is why we are working with Toyota to expand the hydrogen network in California.
I think of the work we are doing on biofuels. Shell is already one of the world’s biggest producers of low-carbon biofuels, through its joint venture Raízen.
The sugar cane ethanol produced with Cosan, our partners in Brazil, can reduce CO2 emissions by around 70% compared with petrol. And the same joint venture also has a facility capable of turning cellulosic sugar cane waste into fuel.
And that’s not all on biofuels. In a few months’ time Shell, along with our partners at the Gas Technology Institute, will be opening a demonstration plant in Bangalore, India, featuring a different type of advanced biofuel process. It is called IH2 and it turns biomass and waste into fuel that can be put straight into a car, van or truck.
Shell is involved with battery electric vehicles too with a system to help the grid handle the coming influx of electric vehicles. At a local level, the grid cannot yet handle lots of people plugging in their cars at the same time.
There was a report by the environmental think tank Green Alliance a few weeks ago. It found that plugging six battery electric cars in at the same time in the same area could cause localised power shortages.
Shell has been working on a system to mitigate that issue for some time. We are developing a smart, connected, charging system that communicates with the grid so cars take energy when there is plenty of it and save our customers money by doing so.
I should also mention, we will have our first electric charging post on a UK Shell forecourt in July with 10 planned in the country by the end of the year and more to follow.
The third part of Shell’s approach is to fight for the right investment context. This means having the right government policies in place and, very importantly, stability.
A government-led carbon pricing mechanism could, in particular, have a substantial impact.
The effect that the UK’s carbon price floor has had on coal generation shows what is possible. Based on analysis from Aurora Energy Research, this £18 per tonne price floor contributed to gas demand in the power sector rising by 56%, and coal-fired power generation dropping by 73% in the first half of 2016.
Gas burnt for power produces about half the CO2 of coal. The result of this shift, at least in part, was that emissions from the power sector in the UK decreased by 24%.
A carbon price is not a silver bullet but a well-designed carbon price can incentivise investment in a way that does not involve governments trying to pick technology “winners”. A carbon price can also help drive consumer behaviour.
So, that’s Shell’s approach to uncovering innovation: be prepared to fail fast, learn and seek the right investment landscape. We are really looking forward to learning from you on how our approach could be better.
Obviously, not every innovation is going to come through these three routes. As an example, good, traditional research into bitumen and asphalt has created products that can be used at much lower temperatures and, as a result, substantially reduce the CO2 produced when laying roads.
Ultimately, however, any approach will fail without a true commitment to collaboration. Collaboration is the golden thread that runs throughout everything I have talked about so far.
That is true about all the investments made in start-ups and young companies. It is true of the joint ventures at the heart of projects such as Raizen biofuels or H2 Mobility in Germany. And it is present in the work we do to seek good policies like government-led carbon pricing.
And that is also what today is about. Nobody has the monopoly on good ideas, but everybody in this room has plenty to offer everybody else.
I thank you all for coming together today in the spirit of collaboration. I thank you for your willingness to share with each other the expertise that you have.
I’d like to make one last point.
When it comes to an Olympics, there are many gold medals to be won, many winners, with each one excelling in a different way.
So it is with the energy transition: different winners for different challenges.
Will we find a Usain Bolt of the energy transition today? Perhaps not. But maybe. In sharing together by collaborating we can leave at the end of today feeling the world has one or two fewer surprises in store for us.
I would like to think they will be nice surprises.
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