New energies and unparalleled transformation

Welcome to the latest DNV GL Talks Energy podcast series, recorded live at the Singapore International Energy Week (SIEW) 2018. Each week, notable industry thought leaders join us to discuss the hot topics from SIEW and provide their insights into the main drivers behind the global energy transition.

New energies and unparalleled transformation

New energies and unparalleled transformation

What is the role of the energy sector in the energy transition? DNV GL hears from Duncan van Bergen, Vice President of Shell New Energies, about Shell’s vision for the future and the scale of transformation required.

In this engaging episode, Duncan discusses the dual challenges of growing energy demand and a lower carbon future, with the population heading for 10 billion by 2070. Duncan tells us how Shell is investing in electricity retail, decentralized power, new fuels and electric mobility. He addresses the urgency issue raised by the IPCC report and highlights the unparalleled transformation needed to meet it. Duncan shares Shell’s ‘Sky’ scenario work, showing that a target of well below 2°C is possible and is therefore imperative that we try to achieve it. He shares examples of the scale of the challenge ahead and points to how Shell will manage the transformation with industry partnerships. Finally, Duncan tells us how he sees for the sector, both a mixture of daunting responsibility and business opportunities in the future.

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Duncan van Bergen Shell
Duncan van Bergen, Vice President of Shell New Energies

New energies and unparalleled transformation

Duncan van Bergen, Vice President of Shell New Energies talks to us about the radical role of the energy sector in the energy transition, the scale of the challenges ahead and how Shell is modelling the future.

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NARRATOR Welcome to the DNV GL Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.  

MATHIAS STECK Welcome to a new episode of DNV GL Talks Energy. My guest today is Duncan van Bergen, Vice President, Shell New Energies. Welcome, Duncan.

DUNCAN VAN BERGEN Thanks so much, Mathias, great to meet you.

MATHIAS STECK Great to have you here. Duncan, we want to talk about the role of the energy sector and its acting towards the energy transition. If it's radical enough, what more has to be done, what is Shell doing in this? But before we do this, it would be great if you can introduce yourself as a person as well, & what part of Shell you are from.

DUNCAN VAN BERGEN So, as you said, my name's Duncan van Bergen, my home is here in Singapore, actually, so it's wonderful to have an event happening here close to home. I've been with Shell for quite a while, I joined Shell in 1997 and I've had the pleasure of working in many different parts of our business. So, I've seen through that lens, quite a few pieces of the energy system as we are going to be talking about today. 

But I now work in Shell's New Energies Group, which is a part of Shell that we've set up in 2016 really to pull together all the pieces of business that we had already running in Shell, some of them for a decade or more, that have to do with Shell's energy transition towards a lower carbon future. That's where I now work.

MATHIAS STECK That links quite nicely into my first question. Because one thing we hear today, there's a lot of discussion about oil and gas and coal is kind of the enemy of the future. But we shouldn’t forget to set the scene that we wouldn’t have arrived here, with creating wealth, creating innovation, without these industries. Now, we are rushing out of them. But what does it do to an industry, how do you define yourself? What is the transition there towards this new future we have to adopt to?

DUNCAN VAN BERGEN Look, I think you position it well, in the sense that energy plays an absolutely core role to both the economy and to society. We cannot imagine a society without energy, it wouldn’t exist, the way we have gotten used to living. Energy is what makes businesses tick, is what provides heat, cooling, it's what all of us use at home to power our lives. 

I think it's important to set the debate properly, in the sense that, as society, we probably have a dual challenge. As society, we need to take account of the fact the population is growing. We'll talk perhaps a bit later about the Shell scenario work, but we, like most observers, see the population in the world growing to close to ten billion people by 2070, and people are getting more prosperous, and that's a good thing. More and more people are joining the middle class every year. 

What is a natural phenomenon is that, as people get more wealthy, they use more energy on a per capita basis. At the same time, we clearly have a CO2 challenge. So, we have this dual challenge now, and absolutely the energy system and the energy industry is smack in the centre of that challenge of providing more energy and cleaner energy for a growing and wealthier population. 

So, it's about recognizing that we need to both. We need to provide more energy, so that people can have happy, healthy livelihoods, and we need to do it in a way that is compatible with the big challenge that we have ahead of us, which is staying in line with the Paris agreement commitments. Staying in line with a temperature increase of well below two degrees C, and aiming at one and a half degrees Celsius. If anything, the IPCC report that was released puts renewed urgency behind that of saying, one and a half degrees Celsius is actually what we should be aiming for.

MATHIAS STECK About a year ago, we had a podcast with Brian Davis from Shell New Energies, and he told us about the different areas of opportunities you are focusing on. So, when I copied that right, it was new low-carbon fuels for transportation, deployment of wind and solar energy, and then finally new business models for energy, driven by digitalization and decentralization of energy systems. Can you grab an example, like one thing maybe, what has happened since then, since these models were brought up?

DUNCAN VAN BERGEN The way Brian put it to you in the previous podcast is absolutely still spot on. So, indeed, it's around power and low-carbon energy as part of the power system. It's about new fuels and how they continue to be an important component of the overall energy system, and it's about new solutions.

We have moved absolutely in line with that strategy, so in the power space, we've done some big moves. We earlier this year completed the acquisition of First Utility, a UK-based electricity retailer, so now we are in the direct contact with consumers, which we think is important, in the sense of how the entire energy system is being reshaped, where the consumer and their choices is playing an important part.

We've also made a number of acquisitions in other related areas, to do with decentralized power. We recently took a participation in a German company called Sonnen, which is an active player in home-based systems that allow optimization around having home-based electricity generation and how that flows back into the grid. And we've done other moves like that.

At the same time, in the new fuels arena, we continue to grow quite rapidly. We have historically, already a big position in biofuels. We are growing in hydrogen, together with innovative partnerships, we have a number of hydrogen retail stations for mobility in Germany, are growing similarly in California, quite exciting. And also in the electric mobility space, is an area where we are becoming quite active.

Earlier this year, we completed the acquisition of a European company, Dutch-based, called NewMotion, they are a provider of home and basically offsite charging solutions, the largest in Europe. I think, I need to check the numbers, but I think they have more than 50,000 charge points across Europe.

So, as you can tell, we are walking the talk, I think, in the sense of executing on some of that strategic roadmap that you discussed with Brian earlier.

MATHIAS STECK Yes, it's an impressive array of activities. Thanks for sharing this.

DUNCAN VAN BERGEN I can't do it justice, literally. I'm just trying to give you a few snapshots.

MATHIAS STECK Yes. When I look at the bigger industry, let's say climate change as a problem for the entirety of the industries. Our own energy transition outlook comes to the conclusion that we are massively overreaching the current budget we had given us, 810 gigatons CO2. We come up with something beyond 900. Then you mentioned the inter-governmental panel on climate change report, which had very alarming signals on what now needs to happen in the next 12 years to prevent climate change, or warming, beyond the 1.5 degree, or two degree, which would already be a disaster.

If you look at the industries entirely, would you say we have understood the matter of urgency? Are we moving aggressively enough? Once again, I'm not talking about Shell now. I talk about the industry as a whole. What would be opportunities there to move faster?

DUNCAN VAN BERGEN Well, in terms of whether people have understood it, in that sense, I can only talk for Shell, and I think we have understood it, and have aligned our strategy accordingly. But beyond that, I absolutely believe we're just getting started. Then I'm talking for the entire economy, including the energy system.

We're just getting started, and we have a long way to go. This is about achieving a transformation of the entire energy system in a way that probably has very few parallels before it. I don't know if you've had a chance to look at some of our scenario work. So, Shell has been, for decades, since the 1970s, a big believer in the importance of doing scenario work to look at what are believable future states of the world, and of the energy industry, specifically, within that. Earlier this year, we released and published a scenario called Sky.

Sky is a scenario where we have depicted what is a technically possible, but fairly complicated future state, where indeed we achieve the goal of being well below two degrees Celsius, and in certain options of the scenario, you actually get to the one and a half degrees Celsius. It's the first time we published a normative scenario, so that's one where there is actually a specific outcome around which we test whether it's possible or not.

Sky suggests that while extremely complicated, whilst requiring an unprecedented level of collaboration between governments, civil society, business and consumers, that it is possible, and I would say it is therefore also imperative that we try to achieve it.

Perhaps a few highlights, Mathias, if I may, from that. One of the striking… well, a few of the striking changes that we see in the Sky scenario. I first mentioned, on the primary energy system, so the sources of energy being used globally, you see us evolving from a situation today, where still about 80% of primary energy comes from fossil fuels, so oil, gas, coal, and the remaining 20% a mixture of biomass, and still typically, a lot of traditional biomass, so peat, dung, wood, as well as a bit of nuclear, some hydro, and some early renewables penetration.

Shifting in 2070, which is the year to which we forecast the scenario, flipping that entirely on its head. So, a role for fossil fuels of less that 20% of that primary energy mix, an enormous growth of renewable energy sources in the energy mix, and a remainder of about 20% fossil fuels, mostly driven by decarbonized sectors of the economy. Some of them, where fossil fuels are used for their chemical or high heat properties. For example, there's still a piece of coal in there, but that's only metallurgical coal, and there's some use in dense energy carriers that we still see for fossil fuels in that scenario. So, that's one big shift, that flipping around of the primary energy mix.

And I'll mention one more, which is in the way we use energy as businesses and consumers, a real revolution in the amount of electrification that you see in the economy. Bear in mind that today, the way in which we use energy is only 20% through electricity. This is for many people a bit of a surprise, well, energy is electricity. No, today energy is 80% non-electric.

What we see is that by 2070, in that Sky scenario, we get to about 50% electrification, which is an enormous amount of growth, and that is also how you bring a lot of the renewable energy sources into the mix, and how you achieve some of the much-needed decarbonization. When you say, or when I say 50% electrification, it does mean that there's 50% non-electric. So, that means a lot of work around also other sectors of the economy, and figuring out how we decarbonize those.

I'll say one more thing, and then I'll stop. Is in the Sky scenario, very much, we see that it requires action on, a concerted action on quite a few fronts. So, it is about electrification, but it's also about the importance of a price on CO2. It is also about technological breakthroughs, and it is also about recognizing the role nature has to play in getting us to an acceptable scenario in terms of energy growth and lower CO2.

MATHIAS STECK Thank you. So, what you just described is also reflecting, of course, a great amount of transformation, innovation, inside Shell. So that, maybe the last point I would like to draw on, in this podcast, how do you manage this? How much is driven by our own R&D, how much are you working together with partners? How important is that to get these external inputs? How do you manage innovation and transformation inside Shell?

DUNCAN VAN BERGEN That's a great question, Mathias, I'm going to be a little bit more detailed than say all of the above. But it is indeed all of the above, but I want to recognize something you say, which is the importance of partnerships and the importance of us reaching beyond the organization, both from a perspective of innovation, from a perspective of talent, from a perspective of expertise.

We see more and more how we are partnering with startups. Shell was the first large energy company to start a corporate venturing arm, it's called Shell Ventures. Shell Ventures has been incredibly active in the energy transition, it has taken participations in some really cool ventures that may or may not succeed in being part of helping the energy transition. That's the nature of venturing. I mentioned already how we took, for example, a stake in Sonnen and bought NewMotion.

We are also… we have an agreement with IONITY in other parts of Europe, with regard to fast charging solutions. But many, many more. So, be it on the R&D, where we're working intensely with a number of universities across the globe in the area of venturing where we have a very active participation. But also, in terms of new people I see joining the organization, this is very much a recognition that what's happening is no less than a total transformation of the energy system.

MATHIAS STECK Very good. We are unfortunately coming already to the end of this episode, but I have one last question. We are recording here at the side of the Singapore International Energy Week. Invest, Innovate, Integrate, is their slogan this year. What is your main take away from what you could see so far?

DUNCAN VAN BERGEN Well, I'd say that a lot of the speakers I've heard, people I've met with are extremely, acutely aware of the importance of the energy transition. I think there is a mixture of a realization that this is a daunting responsibility, together with an enthusiasm around the business opportunities that come out of it. I'd say that most, if not all of the people I've met have that mixture of hey, the agenda is big and heavy, and we have a lot of work ahead of us, but also, wow, this is an enormous time of opportunity.

MATHIAS STECK Thank you very much, Duncan, for your highly interesting insights. That was Duncan van Bergen, Vice President, Shell New Energies.

DUNCAN VAN BERGEN Thanks, Mathias.

NARRATOR    Thank you for listening to this DNV GL Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talksenergy.