JD Ross: Bold plans by big oil towards clean energy development

The concept of leading oil companies diverting their attention towards clean energy may have been unlikely some years ago, but today, more oil companies are taking bold steps towards the clean energy market. JD Ross Energy explores how big oil companies are diversifying and focusing more investment toward clean energy projects.

Diversification is for many oil companies a necessity, a movement that is required to ensure their survival as nations accelerate their plans towards complying with climate change targets. Shell is a prime example of how big oil is expanding its portfolio beyond conventional oil and gas exploration and taking carbon reduction and climate change far more seriously.

In 2016 Shell stated that it intended to drastically reduce its carbon footprint by 50% by the year 2050. Shell set this target in collaboration with Global Action 100+, an organisation that represents over $30 trillion in assets and the Investors Group on Climate Change. The oil major is making significant moves to comply with the Paris Agreement and recently announced that executive pay will be tied to overall carbon footprint goals. Investors and shareholders in Shell have also applied pressure on the company to show its support towards climate change and carbon reduction strategies. As a result, Shell removed itself from the American Legislative Council, a group regarded for its anti-climate change stance.

Shell is now actively working towards creating and delivering its new vision and move towards clean energy and new fuels, including hydrogen and biofuels. The plan does include an emphasis on increasing the use of LNG, so fossil fuels still remain part of their long term plan. Nonetheless, the oil major is making steps towards diversifying its portfolio and reducing its reliance on traditional oil exploration. What is clearly of interest to Shell is clean technology, highlighted by the level of investment and number of recent acquisitions.

Shells movement towards clean technology

Shell has committed to invest between $1 and $2 billion each year into alternative energy projects until 2020. The oil major also intends to double its investment into clean technology to an annual figure of $4 billion after 2020. Some energy analysts believe their New Energy Division could expand to rival their oil and gas business by the early 2020s. Some sceptics believe, however, that oil majors are promoting a green image yet, are continuing with business as usual activities. It is quite clear, however, that Shell is taking the clean energy transition seriously and has a genuine interest in the clean technology market.

Maarten Wetselaar, the director of integrated gas and New Energies Division at Shell believes that electrification is the largest emerging trend within the energy market and an area of great interest for the business. Brian Davis, the VP of Shell Energy Solutions recently confirmed their interest and vision of the transition towards electrification and has even made bold plans to form the largest electricity business in the world by the early 2030s.

To really drive towards this target Shell has made a number of acquisitions in clean technology through its new division, Shell New Energies. Recent acquisitions include the US electric vehicle charging network, Greenlots, the purchase of ChargePoint, the biggest charging network in the world, leading European EV charging supplier, New Motionand EV technology developer, Ample.

Shell has already made a number of acquisitions within the clean electricity market. Notable acquisitions include the purchase of electricity retail supplier, First Utility and solar energy developer Sunseap.

Furthermore, Shell has shown its commitment towards the energy storage market by acquiring leading German residential storage developer Sonnen and the US-based thermal storage developer, Axiom Energy.

Shell’s strategy is driven by an ambitious goal of investing in startups with technical experience in new, innovative clean technologies. Davis admits that Shell is essentially testing a number of fields and expects not all ventures will be successful, but those that are will form the focus for new business development.

Shells first pilot venture has involved the rebranding of UK business First Utility into Shell Energy Retail, selling solar energy, micro-grids, storage and EV charging infrastructure all within one entity.

Shell has been involved in a number of new clean energy projects and has recently joined the Global Wind Energy Council, participating in the Offshore Task Force, supporting the development of offshore technologies outside of Europe. Yet, despite its number of new acquisitions and involvement in clean energy projects, there is a number of industry members who are sceptical of their overall commitment towards the clean energy transition.

The LNG arm of business at Shell actually represents a larger portion than oil activity. Recent LNG projects, notably the investment into the LNG facility in B.C. Canada, have raised questions as to whether the oil major is more interested in diversifying its portfolio for new markets, rather than having a genuine interest in supporting zero carbon generation.

The acquisitions and investment currently made by Shell represent no more than 10% of total investments made by the oil major, so there is definitely space for improvement. However, it is evident that Shell is evolving and the business has historically tended to show a more cautious approach towards investing and committing to new technologies. Whether this commitment is driven by a genuine interest in clean energy markets or a desire to diversify the business in preparation for new emerging markets is likely a discussion that will continue for some time to come.

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