10 questions for Shell's New Energies VP
Three years ago, the oil major created a division to invest in electricity, clean energy, electric vehicle charging, alternative fuels and other newer businesses. GreenBiz recently got an update on how all of that's been going.
More than any of the other global oil majors, Royal Dutch Shell — the second-largest publicly traded oil company in the world — is trying to proactively figure out the energy transition and how to move to cleaner fuels and electricity. Yes, it's got a long history of fossil fuels behind it, as well as in front of it. And yes, none of the world's oil companies are doing nearly enough, fast enough, to move the world away from a dangerous reliance on fossil fuels.
But how do you slowly turn the helm of an oil and gas-filled tanker barrelling toward climate change? For Shell, the answer lies in how it can create both cleaner molecules and electrons, and continue to provide the transportation fuel for the decarbonized vehicles of the future.
In late June, GreenBiz sat down with Brian Davis, vice president of Energy Solutions within Shell's New Energies division, to chat about how Shell is investing in generating and distributing electricity, as well as the emerging technologies of the future, including electric vehicle charging and alternative fuels. His answers have been lightly edited for clarity.
Katie Fehrenbacher: Why did Shell launch the New Energies division in 2016?
Brian Davis: We created our New Energies business as a response to a couple of trends that we saw around energy transitions, certainly to move to decarbonizing the energy system over time and moving to eventually a net-zero environment. The other trend we saw was digitalization, so the increased choice coming from connected devices and always-on activities.
New Energies brought two things together for us. One was the activity we’d been in for a long time around low-carbon fuels for mobility: so biofuels, EVs and hydrogen. The other area that was new to us was electrification, so creating the power business and starting to build the power business and how should Shell play a role in power. Those are relatively early-stage businesses, so we thought it made sense to put them together in a business unit that could focus on developing those solutions a little bit apart from the main business.
Fehrenbacher: Why did Shell decide on $2 billion-a-year to supply the division?
Davis: The guidance to the market was $1 billion to $2 billion a year. Why that number? Because we thought that was a number that would allow us to do a certain amount of stuff. It’s a material and important amount of money; $1 billion to $2 billion is a lot of money. But equally, in the context of Shell spending $25 to $30 billion a year [its capital investment], it’s still manageable and affordable in our capital.
Fehrenbacher: Shell has done a lot of acquisitions recently, particularly in the electric vehicle charging space. Can you talk about the strategy there?
Davis: The basic strategy was we see more of our customers moving toward electric vehicles where they’re available. We’ve basically always been about providing fuel to our customers in a way that is affordable and convenient. Electric vehicles are becoming more available. We have a history of fueling vehicles, so the question was how do we provide the relevant solution.
We looked around at the industry, and initially at NewMotion in the Netherlands, and we saw a company that had been able to start building a successful network of chargers and start providing a network of charging solutions, not just at home but on the go, and everything associated. We thought it’s better to buy a successful player and help scale it, than start ourselves and catch up with them. That was the basic strategy. It made sense, it was consistent with what we’re trying to do and to go faster, buy a successful player and help them scale.
More recently with Greenlots in California, they’ve been very successful at providing a solution to U.S. utilities here, so more of a business-to-business. And they’ve got their software solution for designing and managing, and we thought that would make a lot of sense in the U.S., so we thought we’d buy them and help them scale faster.
Davis: The trends are similar in most markets. The solution will be probably similar in many markets, but it needs to be tailored and adjusted to local circumstances. So if you look today, most electric vehicles in the west are in Norway, California, the Netherlands — and each has a slightly different flavor. So you need to tailor the solution for those markets.
But assuming you’re in a market for electric vehicles, then there are some differences to whether the markets are regulated and open access or competitively unbundled. About how you play and can you quickly put it in and does the utility supply the electricity, etc. But the basics of "I need a good charger at home, at the office and on the go," they are all very similar.
Fehrenbacher: In terms of EV charging, what’s Shell’s role? Do you want to be a dominant player in rolling out EV charging infrastructure?
Davis: I wouldn’t say we’re a dominant player, but we want to be able to provide enough infrastructure to meet our customers’ needs. When you look at electric vehicle recharging, and you look at the ways that people charge: you charge at home, you charge at the office. So our philosophy is we want to supply energy to your home, and if you have an EV then we’d like to give you a compelling way to charge with Shell Energy at home. But then you don’t only charge your EV at home, you want to be able to charge wherever you're going to need it, much like you can today in a car and drive and refuel when you need it. So we’d like to have a solution that makes it easy for you to charge wherever you want to charge, through having a card or some way of offering some convenient and easy way of charging when you want to.
Fehrenbacher: In your interview on stage, you talked about how Shell is doing 50 percent molecules, 50 percent electrons. What is Shell doing about new fuels?
Davis: The molecule will remain an important part of the overall energy system, as I explained before. We are interested in all of those.
Biofuels, we’ve been in for a very long period of time. We’re working very hard to move beyond the so-called first generation sugar, fermented sugar piece, into using the rest of the biomass. And other ways, waste stream-to-biofuel type of solutions. They’re more technically challenging because you have to come up with some chemical process technology that turns the wood into diesel or waste into fuel. And we're actively working on those. If you find that solution, then that’s a potential way to create a sustainable biofuel that’s going to be used in places that need it like aviation or heavy duty trucking.
Hydrogen is also a business we’ve been in for a long time, since 1999 when we did our first hydrogen refueling station. We were a bit ahead of our time. The cars didn’t come. But now we’re seeing more interest in hydrogen. It's not certain that a hydrogen vehicle wins or an electric vehicle wins for a small light-duty passenger cars, but as you move into trucks and forklift trucks in warehouses or trucks in ports or things that drag baggage handling around on airports, those sorts of commercial applications could well be supplied by hydrogen as a better alternative to electricity.
Fehrenbacher: What about renewable natural gas?
Davis: I think there is a lot of potential in renewable natural gas. The United States is one of the countries that is leading the way there. It’s a pretty simple technology. On the one hand, you’re just anaerobically digesting biomass, using bugs to break it down in the absence of oxygen. And you produce methane rather than carbon dioxide. Which is good because that alternative biomass, if it was put in a waste, might ferment and turn into CO2 or methane and leak directly into the atmosphere. So it’s a good use of that waste resource. What you eventually come up with is a methane molecule, and we know how to use it. Right now, it’s relatively expensive in a place with low gas prices. So you’ve got to get the economics to work. If it does work economically, it is certainly a very viable and sustainable way to make an energy molecule.
Fehrenbacher: How is the second-generation biofuel problem going to be cracked? Is it going to be about finding a startup or an innovation in a research lab or is it just about investing a large amount of money and scaling an already developed tech?We realize society's expectations are changing. And so we want to be on the right side of history.
Davis: Yeah, we’ve been at it for 10 years, and we've been looking at many different process technologies to turn biomass into usable fuel. It’s fundamentally a technology and science challenge. You need a catalyst and reactor engineering to come up with a process that works.
I think it will unlikely be a startup initially. We’ve seen a few people that have interesting opportunities.
We’ve invented some of our own approaches, but then we find they’re difficult to work at scale and reliably that’s affordable. So you’ve got to get a combination of the technology that works, is reliable and cost-efficient.
We have a technology that we’re proving and trying to commercialize in India called IH2, which is a catalytic-driven process. It’s a Shell-derived catalyst. It takes woody waste, municipal solid waste and turns it into diesel or jet fuel. We’ve got a demonstration plant and hopefully, we’ll be able to demonstrate that it can actually work at scale. There are other companies we’ve partnered with that have technologies that maybe have one or two capability gaps around the reactor engineering or commercialization etc.
So our current strategy is we’ve done a little bit of our own development around the process, and we’ve found that’s pretty hard. We’re trying to find the ones that have survived and have a bit of promise and say, "Can we help fill in a capability gap with what we’ve got?" When somebody solves the problem, I think then you’re in a scaling challenge, which is how do you license it and build it and get it permitted. I think that will be more of a deployment thing rather than technical.
Fehrenbacher: In your onstage interview, you said you were inspired by Greta Thunberg, but at the same time she probably wouldn’t want to be aligned with an oil company. Coming from a fossil fuel company, how do you tap into that youth climate movement in an authentic way?
Davis: I think we all do it by relating to our kids. When you talk to them, what do they talk about? My kids — I have twins who are coming up for 18 shortly — my comment before was that I think what she’s managed to achieve is a really important change in the public discussion around it, and it’s now front of mind to a lot more people. And as a result of being front of mind that starts influencing politicians and influencing consumer choice.
What we see within Shell is that our purpose is "providing more and cleaner energy," and when we came out and articulated that, that really resonated with everyone at Shell because we don’t see ourselves as a bad organization. We see ourselves as a force for good.
We’ve been, for a long time, providing affordable energy to the world and developing and creating economic prosperity for where we operate. So in the communities where we operate, we’re seen as pretty positive, we bring prosperity and economic growth. We provide cleaner affordable energy for India and places to develop.
But we realize society's expectations are changing. And so we want to be on the right side of history, is the quote that Ben [Shell's CEO Ben van Beurden] often says. That’s what drives all of us.
When I talk to my kids, they’ve done work experience at Shell, they’ve felt pretty pumped about being in the New Energies business. The big challenge we face is ... you can make a simplistic categorization, you’re either one of them or one of these. You’re either part of the problem or you’re not. I think there’s a voice for action, and there’s being part of the solution. I think we’d like to be part of the solution.
Fehrenbacher: We're here in Silicon Valley, heart of the tech community. Silicon Valley has had a really hard time investing in clean technologies over the years with a few exceptions. What do you see as Silicon Valley's role in the energy transition?
Davis: It's huge. If you think about the future of mobility, there’s a lot of discussion around autonomous, connected, electric, shared, all of those sorts of things. They will bring more efficient, higher utilization and lower-carbon ways of moving people and goods, and a lot of that stuff came out of innovative tech. Reimagining the future of mobility is really here. There’s also been more harder technology stuff, batteries and whatever, that will play a role.
From Shell’s perspective, we’ve got an office in San Francisco, and it's approaching 50 or 60 people right now from not very many. I have a team of super-talented people here who are helping us build the digital platform that will connect and optimize all of this. When I look at the type of talent that has chosen to come work for Shell, in a place like California, they understand what we are doing, and they believe in the vision and they want to be part of scaling this. They’re bringing their talents to bear and working for us and feeling pretty proud of it.