Shell’s Clean Energy Pursuits Spinning its Wheels

A shell gas station sign shines at night

(Credit: Unsplash)

by | Nov 14, 2023

With COP28 just around the corner, companies are racing to put their best face forward and illustrate their carbon-cutting progress. That includes the big oil companies, which have seen profits fall in recent months. To that end, Shell has said it won’t “pretend to lead” the energy transition.

Shell and other oil giants are pinned in neutral — like they are stuck in a ditch and spinning their wheels. On the one hand, they have the cash to invest in alternative sources of energy and guide the movement. Conversely, their legacy businesses are producing and delivering oil and gas.

They need to invest more in sustainable energy. However, they are diversifying their energy strategies. It’s as though they are straddling the fence. As for Shell, it’s been at the forefront of the oil diversification movement, although it is dialing back those investments.

“We need to get leaner, we need to get more focused, we need to get more disciplined,” Chief Executive Wael Sawan said at an oil industry conference, as quoted by the Financial Times. There is “no change in direction,” he said, noting that the company is “pacing” itself. Sawen took over Shell’s top position earlier this year.

Shell has roughly 50,000 megawatts of renewable generation. It is investing in wind, solar, and electric vehicle charging.

The company, which reported a 38% drop in profits, is cutting a few hundred positions in the hydrogen realm. Green energy activists are pressing the oil giant to invest more in cleaner energies. For its part, Shell has a net-zero commitment, although it is withdrawing some nearer-term goals. Moreover, Russia’s war on Ukraine requires more oil and gas production to feed Europe’s energy appetite, especially as the continent tries to wean itself from Russia’s fossil fuels.

According to the U.S. Energy Information Administration, the outlook for renewables is bullish. They will increase from 21% in 2021 to 44% in 2050, mainly wind and solar power. Federal tax incentives that will evaporate by 2026 have fueled the growth in wind and solar, it adds, but declining costs for both technologies will play a significant role in near- and long-term maturation.

The Transition is Happening

The International Energy Agency adds that oil and gas will still comprise 46 percent of the global energy portfolio in 2040. But net zero does not mean the elimination of fossil fuels. It means off-setting those emissions — contingent on building new infrastructure: modern transmission grids to carry more green electrons and underground pipelines to transport the carbon that has to be stored. Some maintain we need carbon capture and storage to get to net zero.

U.S. Energy Secretary Jennifer Granholm has said the transition to carbon neutrality will produce a global clean energy market worth $23 trillion.

And that is a massive opportunity for this country — one that has the most significant research and technology laboratories in the world. Through the Inflation Reduction Act, the government provides the funds to help scale carbon capture and sequestration, alternative vehicles, and advanced nuclear reactors to create millions of new jobs.

The energy secretary noted that the auto market is making a slow but sure transition to available alternatives. At some point, it may be hydrogen cars. But electric vehicles are ahead of the pack for now. Every major car maker is building EVs — from General Motors to Volvo to Toyota. Of note, Tesla has a market cap of $800 billion, making it the biggest EV maker worldwide.

But higher prices, range anxiety, and electric batteries unknowns are keeping many potential buyers at bay.

“We need to be able to move away from fossil fuels and toward sustainable energy,” Elon Musk has previously said. Batteries are more efficient than the internal combustion engine, producing more energy for the same inputs. That makes them cleaner no matter what fuel powers the batteries.

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