Our Energy Diet Challenge
Sep. 09, 2017
Speaking at a “Jumping to Energy 2.0” event as part of Holland Day at Spruce Meadows, Shell Canada’s President & Country Chair Michael Crothers emphasizes that our future demands a massive shift in our energy diet, and a large menu of options that consumers must find palatable.
Check against delivery
Goedemorgen. Good morning and welcome to Holland Day. My personal connection to the Netherlands is that my wife’s family emigrated to Canada from Groningen in the 1950’s, which I’ll say more about later. I’d like to thank the Consulate-General of the Netherlands and Linda and the Spruce Meadows team for convening this event, which I think will be very interesting. I also want to acknowledge out of respect that I speak today on traditional Treaty 7 land.
Shell has been in Canada for 107 years and we plan to stay here. To put our presence in context, we remain among the largest oil and gas companies in Canada with more than 4,000 staff. We operate a thriving refining and retail business, produce chemicals for export, are rapidly growing shales production in the Montney play in B.C. and the Duvernay here in Alberta, and continue to work hard to progress the LNG Canada project with our coventurers – under the capable and determined leadership of their CEO Andy Calitz, who is here today.
Many Canadians don’t realize Shell is headquartered in the Netherlands. As modest Canadians, we tend not to use the more regal terms “Royal Dutch Shell”.
I know some of us are here today with spouses or significant others. And perhaps your first date involved “going Dutch”, that commonly used expression meaning to “split the bill equally”. My father-in-law immigrated to Lethbridge from the Netherlands and similar to my parents who came here to Calgary from Ireland, I’m sure there was no “going Dutch” – they paid their own way.
The energy transition bill
While ‘going Dutch’ might work on a dinner date, it’s unlikely society will simply equally split the energy transition bill.
Shell supports climate action and we are doing our part to be a proactive player. The transition will require unprecedented collaboration between policy-makers, leaders from business and non-governmental organizations, and consumers. Although Shell has long called for governments to create carbon-pricing mechanisms that place a meaningful cost on CO2 emissions, we’re keenly aware that governments need to think about everything from trade exposed sectors to impacts of energy prices on low income Canadians.
When it comes to funding breakthrough technologies, costs can’t always be borne equally. However, industry, government and society must work together. Emerging technologies will need time limited support until they can compete on their own. A combination of regulation and public innovation funding creates an appetite, an incentive for companies to invest in commercializing technology.
Take carbon capture and storage as an example. Shell’s Quest project at our Scotford complex east of Edmonton was funded by Shell, Chevron and Marathon with major support from the Alberta and federal governments. In its first two years of operations, Quest has captured and safely stored two million tonnes of CO2 ahead of schedule. That’s the annual emissions of over half a million cars!
Cost has been a major barrier for carbon capture, but if Quest was built again today, we estimate that it would cost 30 per cent less to construct and operate. We’re sharing lessons learned through Quest with the Netherlands and other countries to help bring down future costs of the technology. This is key, since scientists say that the fastest way we can reduce carbon emissions is to eliminate coal combustion and implement carbon capture and storage.
Some recent work by the Conference Board of Canada pegs the investment required to achieve Canada’s climate reductions between now and mid-century at a staggering $2-3 trillion. That also represents a huge opportunity for Canada to create the right investment landscape for different solutions to be developed and deployed at scale and potentially exported.
Menu of options
Given the challenges ahead we need a menu of options.
To continue the dining analogy, tomorrow’s energy system will require a large menu of options. The “energy diet” in Regina will look different from that of Rotterdam. To ensure competitiveness, society should want these energy diets to deliver real GHG reductions in a way that’s affordable to consumers and industry.
Often we’re presented with a false choice between renewables OR hydrocarbons. But both will be vital to meeting demand in the coming decades.
While some sectors can readily switch to low carbon electricity, there are no easy replacements yet for hydrocarbons that can provide the intensity of heat required for heavy industry like steel, cement and many chemical processes.
It’s vital that we develop strategies that fit the diverse needs and leverage the unique strengths of various parts of Canada so that we have a competitive supply of energy. For example, we have abundant and low cost hydro power in Quebec and BC, agricultural capacity in the Prairies for biofuels, and oil and gas production in Alberta which is steadily lowering its emissions. We appreciate the collaboration with the Canadian Association of Petroleum Producers, and I see Tim McMillan, their President is here with us today.
The future will also see cleaner burning natural gas backing up renewable energies. Shell is bullish on natural gas. It comprises over half of our total production and is a core component of our strategy to provide more and cleaner energy. Gas is abundant, affordable and accessible. Here in Canada we have fantastic natural gas resources and drilling costs have been halved in only 3 years. Shell is working hard to ensure gas remains acceptable to our stakeholders by reducing the amount of water we use, carbon we emit and land we disturb.
But we’re not putting all our eggs in one or two baskets. There is no energy source or technology silver bullet that will help society decarbonize. If we want to lower carbon emissions, we must rely on more than fad diets.
You may be aware that Shell has created a New Energies business where we could spend around $1 billion a year by the end of the decade. Through New Energies, we’re actively exploring three main areas of opportunity: new fuels for transport; renewable power; and ways to use digital technology to connect customers with new business models for mobility and energy services.
New Energies is a bit like being willing to try new foods. During a family trip to South Africa our kids were willing to be adventurous and try Kudu, ostrich and crocodile. The approach to clean tech development is very much one of experimentation. It’s great to see governments encouraging some risk taking through innovation funding. Networks like CRIN that Ginny will talk about are helping us make the right connections between entrepreneurs, venture capitalists, government and customers.
We’re also actively exploring potential for hydrogen stations in Canada. Shell is interested in hydrogen because it is a zero emission fuel with great potential to help decarbonize the transport sector. Our hydrogen aspirations may support our ambition to have 20% of the fuels sold at our retail stations coming from low-carbon sources by 2025.
Appetite for innovation
But this brings me to my next point: Consumers must have appetite for innovations
Canadians are highly innovative and we’ll succeed as long as we put people and their needs front and centre. We know we cannot hope to make money if we fail to understand the market.
Electric vehicles are on the rise in Canada and recent figures indicate there are over 36,000 on our roads. Today, customers wait anywhere from 30 minutes to several hours to charge their electric car. But could a road charge electric vehicles while they’re driving along it? This isn’t just a fanciful question. Shell has been working with Pavegen, a company that has developed paving slabs that convert energy to power from people walking on them. We are excited about the potential for this technology.
We’re also developing a smart, connected charging system that communicates with the grid…so cars take energy when there is plenty of it. This can prevent localized power shortages when several people plug in their cars at the same time, and it saves our customers money.
During what feels like a time of both opportunity and uncertainty, my colleagues and I have given much thought to our higher purpose. It’s simple, but powerful: we want to provide more and cleaner energy solutions for Canada and the world.
Shell is game and I know both our countries are up for the challenge. Canada and the Netherlands have similar values when it comes to environmental protection. We’re both energy-intensive countries with a sizable energy sector and a large industrial base, including refining and chemicals. We’re also both uniquely qualified to capitalize on the development of lower carbon solutions through our highly experienced energy workforce and supportive government policies.
Shell has endorsed the Netherlands Energy Agreement for Sustainable Growth, which aims to reduce CO2 emissions by, among things, growing the share of renewable energy to 16% by 2023.
Here, Shell is playing an increasing role. We were part of a consortium that won the tender to build 700 MW of offshore wind capacity in the Netherlands, building on our existing capability.
There are opportunities for collaboration between our two countries on technologies and policy approaches to successfully transition our energy systems.
To recap, to change our energy diet I believe we must:
- grapple with financing the transition and create partnerships to find competitive and affordable solutions to the need for more and cleaner energy;
- recognize the need for a broad menu of options; and
- ensure people have appetite for energy innovations by offering effective and affordable options.