RT @SPGlobal: Essential Intelligence from S&P Global helps you dive below the surface. Because a better, more prosperous world is yours for…
Shell calls for low-carbon vehicle policies in transition progress report
Shell on 20 April released its first report on its progress towards the aim to "become a net-zero emissions energy business by 2050."
The report said that by the end of 2021 the company had reduced the net carbon intensity of the energy products it sells by 2-3%, and it is aiming for a 100% reduction by 2050.
Shell set a net-zero goal in 2020, and the report charts progress in pursuing it through a strategy agreed to by shareholders last May.
That followed last May's Friends of the Earth (Milieudefensie) et al. v. Royal Dutch Shell plc court ruling in the Netherlands, in which Shell was ordered to cut its global Scope 1, 2, and 3 CO2 emissions by 45% compared with 2019 levels by 2030.
The court noted that Shell didn't have a 2030 emissions target and found its emissions policies were "intangible, undefined and non-binding plans for the long-term," according to US law firm Cleary Gottlieb.
Shell has since filed an appeal, but appears to have taken the message on board, offering a new absolute operational emissions reduction target of 50% by 2030 below 2016 levels in October. This target would not only halve emissions from its operations (Scope 1) but also for the energy bought to run them (Scope 2). The company said it had already reached an 18% reduction in its progress report.
Shell also announced it would move its headquarters from the Netherlands to the UK in November 2022 for reasons of share structure simplification.
But it said the relocation would not affect its compliance with the Dutch court decision. Its projects and technology division, global upstream, and integrated gas businesses and renewable energies hub remain in the Netherlands.
The company also must contend with shareholder pressures. Ahead of a planned Annual General Meeting this week, directors resisted a resolution by shareholder activist group Follow This that Shell set targets to reach net-zero on Scope 3 by 2050. No oil company has such targets, Follow This said.
Shell's directors called such targets "unrealistic interim targets that are harmful to the company's energy transition strategy and against good governance."
Shell's strategy for reaching its existing targets focuses on heavily investing in new product areas.
For example, it operates 44,000 retail service stations in 75 countries, some of which, for example in the US, it may shift to EV and hydrogen.
But in its progress report, Shell suggested it would find it difficult to reach certain targets it was being asked to reach unless governments "put in place the policies that bring about fundamental changes in the way society consumes energy, for example by mandating the sale of cars that run on low-carbon energy."
Hydrogen ramps up
In the progress report, Shell outlined investments in low-carbon fuel production, solar power, wind power, and hydrogen in 2021 and early this year.
Its hydrogen investment areas include not only production, but also its storage and shipping, facilitating delivery to the road freight, steel and cement sectors.
Industrial hydrogen supply is a focus area for Shell's R&D efforts. "Our scientists are developing new ways to store hydrogen safely, including underground, for example, which will be critical to ensure secure, large-scale supplies of hydrogen to our industrial customers in the future," Shell said.
For hydrogen production, Shell has increased its capacity from 2 MW to 30 MW of electrolyzers, which it said represented 10% of global capacity. The bulk of this capacity came from its joint venture that built a 20-MW electrolyzer in Zhangjiakou, China, that supplied wind-powered green hydrogen for fuel cell vehicles during February's Winter Olympics.
The company's EU-funded 10-MW electrolyzer in Rheinland, Germany started up in July 2021 and will supply mobility and industrial customers. It is sited near Shell's planned sustainable aviation fuel (SAF) facility. Shell will seek investment enabling the Rheinland electrolyzer to expand 100 MW amid plans to decide to invest in at least 300 MW of capacity globally by the end of 2022.
It has also increased hydrogen vehicle refueling sites in Europe, North America, and China, reaching 50 hydrogen refueling stations in Europe and North America by the end of last year. It also has a stake in the H2 mobility joint venture that operates 90 hydrogen refueling stations in Germany.
Shell recently announced a plan to potentially invest £25 billion [$33 billion] in the UK, including in hydrogen, offshore wind, CCUS, and EV projects, subject to emerging subsidy policies.
CCS to expand 25-fold
Shell in the report pledged to reduce customers' emissions by offering them carbon offsets and carbon capture and storage (CCS) services that will mitigate the emissions created through the use of its other products.
Shell also wants to develop CCS to meet the new target to reduce its own operational emissions.
"Shell's ambition is to work with governments, customers, and partners to unlock the potential for CCS to reduce emissions where there are no currently scalable low-carbon alternatives," it said, adding it is banking on a dramatic growth in markets for carbon credits.
Shell is involved in two operational CCS projects: Australia's Gorgon CCS and the 1 million mt/year Quest CCS project in Canada. According to NGO Global Witness, the Quest project emits more GHGs than it sequesters, but Shell said that it's capturing 90% of the CO2 emissions from the hydrogen unit, as per design intentions.
Beyond those facilities, the company said it has at least 10 CCS projects under development, with a plan to increase capacity 25-fold by 2035. This includes the Northern Lights project in Norway.
Six projects that use Shell's CANSOLV CO2 system in the UK and the USA not only to capture post-combustion emissions from the refining, chemicals, and power sectors, but also to help produce pure CO2 to be sold on and re-used.
Low carbon fuel and electricity
In 2021, Shell also made progress in other low- and zero-carbon products areas such as renewable electricity, biofuels, and chemicals, according to the report.
While it failed in its goal to expand from 26 to 50 bio-LNG refueling sites in Europe as promised, the company said it was installing such stations.
In further European expansion, Shell said it plans to build a facility to produce sustainable aviation fuel and renewable diesel from waste near Rotterdam Port in the Netherlands.
Shell says it expects a third of its total capital spending to go towards low-carbon projects in 2022, rising to a half in 2023.
Shell did achieve a 2021 target to invest $2-$3 billion in renewable products and energy.
It has 4.7 GW of renewable generation capacity in operation, under construction, and/or committed for sale. Its rival BP said it had 4.4 GW developed at the end of 2021.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
- Climate Action 100+ urged to improve transparency, investor engagement amid greenwashing concerns
- ESG disclosure putting US, Canadian oil firms at a disadvantage: Alberta Premier
- International Sustainability Standards Board wins praise for draft reporting standards
- Pension funds track EU climate policy while abandoning net-zero: survey
- US Treasury Secretary defends climate policies at Senate hearing
- BP mulls £18 billion spend on oil, net-zero for UK energy security push
- Developing countries may not be able to tap into private capital: panelists
- Major asset managers still like to invest in fossil fuels despite net-zero pledges: study
RELATED INDUSTRIES & TOPICS
- Biofuel Markets
- Energy Environment Policies and Practice
- Environmental Compliance
- Environmental Policy
- Environmental, Social and Governance (ESG)
- ESG Investing
- Gas Renewable Integration
- Greenhouse Gas (GHG) Emissions Management
- International Oil Companies (IOCs)
- Legal Risk
- Natural Gas / LNG Markets
- Oil & gas downstream
- Oil & gas midstream
- Oil & gas upstream
- Steel Markets
- Upstream Contracts
Each year, we commemorate Asian American & Pacific Islander Heritage Month to celebrate the rich, diverse culture a… https://t.co/oOU06vryXV