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Shell must be bold to keep pace in brave new world

The Sunday Telegraph: 8 JULY 2018

A few months ago, Shell published a startling report on the future of the energy industry. Despite its dry title, the Energy Transition Report provided a scarcely believable vision of a world in 50 years that is recognisable from the one that seven billion of us occupy today, a planet that has been turned upside down by its very battle for survival. .

Electricity is expected to surge from about 18pc to 40pc of global energy consumption in the next 20 years, and by 2050, every car on the road will be an electric one.

The company’s chairman, Chad Holliday, said the purpose of the 41-page publication was to answer the question: “How can Shell survive, let alone thrive, as the world transitions to lower-carbon energy?” 

Think about that statement. Royal Dutch Shell’s roots date back to the 19th century. It is the biggest company in the FTSE 100 by a comfortable margin, with a market cap that dwarfs second-placed HSBC by £110bn. Last year, it generated revenue of more than $300bn, making it the seventh-largest corporation in the world by sales.

Shell is a beast of a company, yet here it is acknowledging that climate change and the shift towards cleaner energy could threaten its very existence. It was an astonishing admission that encapsulates the scale of the challenge that Shell and the rest of the oil industry faces to reinvent themselves: the world is going electric but Shell and its rivals still generate the bulk of their profits from polluting hydrocarbons.

Shell is fortunate that boss Ben van Beurden is embracing this brave new world. Using sophisticated modelling, Shell has come up with its’ (Sky”scenario, which envisages a technologically and macro-economically, possible route to achieving the goals of the Paris Agreement where there are net-zero emissions from energy use by 2070. 

But to achieve that will take profound change. It will require a tripling of energy efficiency, an end to deforestation and substantial technological advances to solve challenges like large-scale battery storage, the company says. And it will include a massive expansion of renewables, with wind turbines peppering the landscape for miles and rooftops carpeted with solar panels. 

Shell has taken some bold steps already. It has as bought NewMotIon, which makes electric car charging points for homes and workplaces; snapped up First Utility, a supplier of electricity and gas to nearly I million homes; and taken a big stake in Silicon Ranch, an operator of US solar power plants, Of course, the oil industry can do more too .only.a fraction of Shell’s profits are being invested in its so-called “new energies” division. 

But last week, van Beurden urged others to share the responsibility. In a speech at London’s Queen Elizabeth Olympic Park, the Dutchman called on regulators and consumers to do their part too.

The industry insists that-the introduction of government-led carbon pricing mechanisms would be a game-changer, and there is an increasing acceptance that consumers must make profound changes to their lives as well.

There is growing optimism that the central goal of the Paris Agreement to maintain global warming under 2C can be met, but the societal changes required will be bigger than anything we’ve seen in our lifetime.


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