The New Statesman talks to Shell’s Vice President Global Business Environment
Which Natural Gas technologies do you think will progress most in the next ten years?
I think there’ll be quite a few and some of it depends on what you mean by progress – the rate of growth or the size of growth. If you’re looking at the size of growth the big energy game changer that there has been has been the development of unconventional tight gas and coal bed methane. Because there’s already such a big infrastructure for gas in the world you will see these having a major impact over the next ten years and beyond. But equally, there are technologies which are small in absolute levels currently, but which have the capability of growing rapidly at double-digit percentage growth every year. Things like solar PV (photovoltaic), solar thermal technologies, wind technologies – these can grow significantly, but it will still be a long time before they are truly material at global scale.
When new advances are made in fossil fuel technology – reducing carbon emission for example – a common criticism is that this reduces investment in renewable sources. Is that true?
I don’t think it’s true. The world is developing in such a way that prosperity is growing, on average, which is a positive thing. So hundreds and hundreds of millions of people have been taken out of dire material poverty by economic development and that is enabled, fueled and results in, greater energy consumption. The energy industry as a whole is growing. We expect that consumption by 2050 will be something like double the consumption at the beginning of the century, so there is growth all round. You’re going to need more of just about everything if you are going to meet that demand.
What were you say were the challenges in commercialising new energy technologies?
I think there are a number of challenges. People tend to point to technological challenges but I don’t think that’s really the heart of it. Technology is very important – we’re a technology company, so it’s very very important, but essentially taking technology from one scale and developing it into a scale that becomes eventually material on the world stage, that can mean three orders of magnitude, so even if you grow at 25% per year it takes thirty years to make three orders of magnitude and then you’re at 1% of the energy economy of the world. What is then very material is the investment climate, so, do you have a climate in which investment is being encouraged, or do you have a climate, for example, where policies are changing and where policies are unclear, which creates uncertainty which actually suppresses or moderates investment. It’s probably in that combination of commercial investment practice and the climate that gets created through governments to enable new technologies to play the kind of role that they can do.
Although their use will grow quite swiftly over the coming decades, renewables will probably not replace fossil fuel in that time. How can we manage that expectation?
We have to be honest, we have to be clear. People are in general used to the kinds of technologies that turn over very quickly. The mobile phone is one clear example of that. When you’re looking at major infrastructure, whether its energy or transport or waste management, a major infrastructure is a big investment and then has a lifetime of decades. When you’re in that situation you have to recognise the choices that you’re making now have a big impact, but that big impact rolls out over decades. We have to help people understand what it means for something to become large scale in global terms and how long that takes.
What about biofuels? What role will they play in our energy needs and how soon can we expect them to become part of the energy mix?
They are already quite a big part of the energy mix. Biofuels are mandated and as a company Shell is the biggest marketer of biofuels, as well as having invested in technologies for sustainable biofuel production now and in the future. Biofuels are already part of the energy mix and I would anticipate by about 2030 you’re probably talking about 10% of transport fuels globally being covered by biofuels. Perhaps even more. It is an important area that is growing.
How could our consumption habits shape the future of energy change?
Consumption is very important. There is a lot of focus placed on supply, which is very important, but consumption is important as well. If we think about the shaping of demand, we can look at the big examples of how advanced economies can be quite different in their use of energy. For example, if you look at personal transport, the average US citizen uses three times as much energy as the average European citizen. I don’t know whether they’re happier or what, but let’s look at and peel back why that is. Part of that is because of behaviours in terms of buying bigger cars, but also very significantly, driving patterns are different. The average US citizen drives twice as far as the average UK or European citizen. The background to that is the way that cities have developed. Cities developed in the US where the was a lot of land available and where the energy outlook at the beginning of the 20th century was of abundant and inexpensive energy, so they developed in a way in which you had sprawling cities with poor public transport, and as result of that, personal transport distances are twice as long as in Europe, which has a big impact upon the amount of energy being used. The way that we design our lives has a very significant impact.
With that in mind can we realistically expect to provide enough energy for another two billion people by 2050?
We shouldn’t be complacent about this. There are challenges there. But they are challenges that can be met, but again, we have to meet them by the types of choices that we make now for the reasons that I’ve spoken about because they affect the investments in the next five or ten years and because of the natural lifetimes of the energy systems, you will reach out to 2050. So we cannot be complacent about this. However, we are not going to run out of molecules. The question is more about the pace at which these can be produced. The context in which these can be produced. And also, the extraordinary moderation in the pace of demand growth that can be helpful in doing this, which means, the design of cities, personal behaviours and consumption behaviours. All of these will play a role together. So yes, we can fuel development out to 2050 and beyond, but we can’t be complacent. It won’t happen by itself.
Who is driving innovation in the energy systems of the future?
Innovation is, I think, an intrinsic part of human behaviour: creativity. You find it wherever you look. There are different kinds of innovation. There are innovations which you might think of as being the front end of the funnel – basic science, often in university settings or in the beginnings of commercialisation of that, often in small and medium sized industries, but also, on the technologies side, companies like ourselves. Shell invests over a billion dollars a year in research and technology development. Each type of institution plays an important role. But it’s not just technology, important as that is, it’s really then about taking that technology and deploying it. That requires often innovations in the way collaborations develop, collaborations between sectors. Collaborations between, for example, the energy sector and the information sector. I know we’re collaborating at the moment in a number of different fields with companies like Hewlett Packard or IBM. Those are important as well, but as in the way there is collaboration between industry, government and academia or NGOs, the kinds of stresses that there are in the energy industry cross normal boundaries. They cross public-private boundaries, they cross industry sector boundaries – so you need innovative collaborations if you’re going to address them and turn them from threats into opportunities.
Can you comment on the water, food and energy nexus?
I think this is a very important point. Water, energy, food or land use – they’re all closely intertwined. So when there are stresses in one area, they tend to feed stresses in another area. These things can’t be looked at in isolation, which makes it difficult because historically they tended to be looked at in isolation. You need a lot of energy, for example, to transport and treat water. You need a lot of energy to produce and transport food. But equally, you need a lot of water to develop energy. Obviously agriculture is the biggest user of fresh water, but industry comes second. In industry, the energy industry, largely through power generation, is the biggest consumer of fresh water, so these things tie together. You probably had a cup of coffee this morning. Behind that cup of coffee there was on average a hundred and forty litres of fresh water. I don’t know if you ate steak last night, or a high-end food like that, but if you take a kilogram of beef – a kilogram of beef has over fifteen thousand litres of fresh water behind it. Every calorie of beef that you consume has forty calories of fossil fuel behind it. These things are closely intertwined. When there are stresses developing they won’t tend to develop in a linear way, they’ll tend to feed off each other. These systems need to be looked at collectively and that means both industry and government, and indeed, NGOs and civil society, finding good modes of collaborating to address the stresses that are emerging.
Should we be more worried about not having enough or not having the right kind of energy in future?
We should be realistically concerned that we are creating the capacity to invest in ways that are needed and that is both the physical investment in infrastructure, but also the investment in policy, if you like, building up the social capital about the way that energy is used. And so, we need to be thinking about not only the amount, but the kind of energy, both together. One of the basic features is that we are going to need more of almost every kind of energy, but it does make a difference for example if in the power sector a lot of that growth comes through coal or through natural gas. Both are fossil fuels, but natural gas creates less than half the carbon dioxide emissions as coal and is cleaner burning in general in many ways as well. The kinds of choices we make are important and will shape the nature of the system and the sustainability of that going forwards.
Where does the many responsibility for cutting the carbon lie: with consumers, businesses or government?
I don’t think you can say a main responsibility. I think you really have to look at the fact that to get this developing in the most constructive way, all the sectors of society need to dance together. Now of course, each has individual responsibilities within that, but it’s getting the dance together that is going to make the big impact.
What myths surrounding energy provision do you find yourself addressing most frequently?
I think the biggest myth that comes up in general conversation with people is the myth of the turnover of energy systems. Because people are used to changing their phone every year, or even faster if you look at some of my children, when you’re in that situation you have the belief that the world can change dramatically in short periods of time. Whereas, the world, the world infrastructure, cities and power stations are major, major pieces of investment, major structures. You can change a lot in a short period of time without it having an impact globally. It’s the question of having the persistence, the dedication to keep working on this, over years and years or decades in order to have a constructive influence over a long period of time. Getting that across is probably the biggest challenge and the biggest myth is indeed then that that can just be done overnight.
Are we all doomed?
No we’re not! But we must not be complacent. I’m not only a father now, I’m a grandfather, so my family horizon now stretches well beyond 2050 I hope, so I know that there are stresses and tensions in energy and related systems that do need to be taken seriously, and do need to be taken seriously now because of the time scales that are involved. Given that, when you focus on stresses you can fall into that sense of overarching anxiety and we need to step back from that just a little bit and recognise what is driving the stress is really the growth in average prosperity around the world as tens of hundreds of millions of people are being able to enjoy some of the benefits many of us have enjoyed for a long time. That’s a positive thing. It creates what I call the prosperity paradox. Prosperity is a good thing, and yet of course, it creates stresses which if not well managed can undermine some of the benefits of that very prosperity. We have a paradox: prosperity is good, but prosperity brings difficulties. We can manage that, but it needs to be managed starting now.