Shell: Rapid Introduction of Alternative Energy

January 25, 1995

This is a translation by Francis de Winter of a newpaper article from the NRC Handelsblad of the Netherlands. The NRC Handelsblad is one of the two or three top papers in the Netherlands, more or less equivalent in the Netherlands to what the Wall Street Journal is in the USA. FdW can be reached in Santa Cruz, CA, USA at 831-425-1211 or via EcoSystems

The Shell oil company has presented a new scenario in which it appears that renewable or "alternative" sources such as solar and wind energy, hydro power, and burning of biomass (wood and fibers) will be able to play a significant role much sooner than has been accepted until now.

Because of that it is likely that the high atmospheric CO2 concentrations predicted to date (and the associated greenhouse effect) will not develop, and because of that Shell is of the opinion that new restrictions on (combustible) fuels are premature and unnecessary.

From the year 2000 we can expect the contributions of hydro power and biomass to the world energy supply to grow rapidly, followed by wind and solar power. After 2040 geothermal energy will also play a role, as will several still unknown sources, called surprises in the scenario. Until 2030 we can expect the contribution of fossil fuels (coal, natural gas, and oil) to grow, and it will then start decreasing since there will be cheaper alternatives. The relative contribution of oil (in percent) has already been dropping since the 1970s, and of coal since the beginning of the century.

According to Ir. Georges Dupont-Roc, director of Energy in the division of Planning of Shell in London, the "surprises" could involve fusion or more fission. Dupont-Roc gave a presentation yesterday at this newspaper. His department foresees that in 2020 several alternative "fuels" will cost the same as fossil sources, so that they will become economical, and that this group will exceed the volume of coal and oil in energy contribution after the middle of next century.

In the first Shell scenario, called Sustained Growth, the world energy consumption grows an average of 2% per year. Of that total, renewable energy will constitute 15% by the year 2000, and in 2065 even 65%. The second scenario, christened Dematerialization, is based on an energy consumption growth of 1% per year, as a result of higher taxes on fuels and application of new technology to give a great boost to energy conservation. This results in keeping expensive fossil fuels in the ground, and gives an extra stimulus to renewable energy.

Dupont-Roc stresses that these scenarios should not be considered as predictions, but only be as "assumptions, a description of possible developments," which incidentally should be based on determinations of energy reserves and costs. The Shell researcher points to greatly reduced costs for the generation of electricity from solar and wind energy. In Australia the cost of solar energy went down 80% in the last few years, so that solar electricity is now cheaper than electricity generated using oil. Dupont-Roc predicts that some biomass projects in the USA will be competitive in the near future. The costs of photovoltaic electricity is dropping as fast as the average for oil production (((???))): 6% to 8% per year.

Until now the predictions of the most prestigious institutes and organizations have involved a marginal or minimal role of renewable energy sources on the middle term, which do not by far reach the spectacular role now considered possible by Shell.

In commercial energy supply (hence excluding the traditional burning of firewood by private households that is so prevalent in the Third World), there is a modest role predicted for alternative sources by the IEA in Paris, the Central Planbureau (CPB) of the Netherlands, and the World Energy Council (WEC) in London. According to the IEA, renewable sources will only contribute 4.2% in 2020 (against circa 20% as per Shell). The CPB foresees a contribution of 4% to 10% in 2015. WEC foresees between 3% and 10% in 2020, while Shell already expects a full 25%.

Many environmental groups favor a drastic and rapid transition in energy sources, accompanied by heavy taxes on fossil fuels and by political measures. According to the Worldwatch Institute in Washington, a country such as the USA could through such a program have 30% of its electrical demand supplied by solar energy, 20% through hydro power, 20% through wind, 10% through geothermal energy, and 10% through thermal power plants using natural gas.

Shell is opposed to an energy program controlled by the government. The free market and market prices must determine the energy supply, not subsidies, limiting regulations, or unfair taxes and restrictions.

Out of the developments of Shell comes the conclusion that the greenhouse effect will have a much reduced impact because of the increased use of renewable energy. "Furthermore because of the increasing technical doubts about a climatic effect of higher CO2 concentrations, Shell considers it premature for government to establish a fiscal policy aimed at reducing CO2 emissions, especially since this will reduce the financial resources that the energy sector has to devote to the development of other, non-fossil sources of energy," according to the vision of Shell.

Dupont-Roc avoids answering whether Shell, spurred on by the new scenarios, will devote more money to non-fossil energy sources, so that in the next century the company could make a gradual transition from an oil company to a general energy company. "That is a decision that must be made by our management, and ultimately by our stockholders. There are many players in the field of alternative fuels, and many of them are successful. That market also offers many opportunities."

"In this area it is not up to us either to choose the 'winning' technologies," underlines the Shell researcher. "Let the market do that. We will continue to think about this area, and that is what our scenarios are meant for. But I think that our first attention will now be devoted to the robust maintenance of our core business. The first 30 years the market for fossil fuels will still grow significantly, and in that sector we are good and we must continue to be good."

Frank de Winter Comments: The fact that Shell expects the market for fossil fuels to grow significantly for 30 years would seem to indicate that Shell suspects (or at least claims) that supply will be able to keep up with demand for that long. The Hubbert Peak occurrence for the cheap, pumpable oil we currently heavily depend on, is perhaps not being considered in the Shell scenarios, or it may be that the Hubbert Peak is expected much later than the late 1990s. From the sketchy view afforded by this short story, Shell Oil does not seem to expect major cost increases in fossil fuel in the first half of the 21st century.