A Voice of Reason from an Oil CEO?

Yet again, Shell’s CEO, Jeroen van der Veer, has put himself out in public speaking truth that merits attention.  Last year, van der Veer made the case for serious energy efficiency as part of the energy path forward:

More than half the energy we generate every day is wasted.

What’s the point of producing even more energy if we continue to waste most of it? Instead, we should aim to become twice as efficient in our use of energy by the middle of the next century. That is entirely feasible, provided that the will is there.

I discussed that Times (London) oped in Powerful Call (by a powerful man) for Energy Efficiency.

Well, van der Veer has spoken up again.

Thanks to Jerome a Paris (and his sources), we have an internal Shell e-mail from van der Ver warning Shell employees to be ready for a series of articles.  And, this OPED merits serious attention for all of us (or even all of the US).

From: Jeroen van der Veer, Chief Executive
To: All Shell employees
Date: 22 January 2008

Subject: Shell Energy Scenarios

Dear Colleagues

In this letter, I’d like to share reflections about how we see the energy future, and our preferred route to meeting the world’s energy needs. Industry, governments and energy users – that is, all of us – will face the twin challenge of more energy and less CO2.

See that direct “less CO2”, so different from what we hear from, let us say, ExxonMobil

And, yes, almost certainly, unless there is an extremely radical change to world society, we will require more energy … even we meet the doubling efficiency target.

This letter is based on a text I’ve written for publication in several newspapers in the coming weeks. You can use it in your communications externally. There will be more information about energy scenarios inthe months ahead.

Hint: that I’m writing about this is probably desired by Shell. This email was intended (or allowed?) to be leaked. And, ‘heads-up’, more to come. 

By the year 2100, the world’s energy system will be radically different from today’s. Renewable energy like solar, wind, hydroelectricity and biofuels will make up a large share of the energy mix, and nuclear energy too will have a place.

See that declaratory statement: “will be radically different”.  Hydrocarbons don’t get mentioned in that paragraph.

Mankind will have found ways of dealing with air pollution and greenhouse gas emissions.

Okay, I hope that this is true.  Actually, it is almost certainly true. Either we’ve found a way to massively reduce (or reverse) GHG emissions or we’re dealing with air pollution and GHG through facing massive challenges of catastrophic climate change.

New technologies will have reduced the amount of energy needed to power buildings and vehicles.

Guess what. Those technologies already exist (especially re buildings, see PassivHaus, for example). 

Indeed, the distant future looks bright, but getting there will be an adventure.

The rosy vision … let us hope that this part is tru.

At Shell, we think the world will take one of two possible routes. The first, a scenario we call Scramble, resembles a race through a mountainous desert. Like an off-road rally, it promises excitement and fierce competition. However, the unintended consequence of “more haste” will often be “less speed” and many will crash along the way.

Speed is bad, with the consequence of problems. Does this suggest that Shell will argue for slow-rolling change away from a fossil-fuel economy, that they will seek to delay climate change legislation?

The alternative scenario, called Blueprints, has some false starts and develops like a cautious ride on a road that is still under construction. Whether we arrive safely at our destination depends on the discipline of the drivers and the ingenuity of all those involved in the construction effort. Technical innovation provides for excitement.

Acting deliberately, with forethought, carefully, seeking technological innovation as the solution path. 

Regardless of which route we choose, the world’s current predicament limits our maneuvering room. We are experiencing a step-change in the growth rate of energy demand due to population growth and economic development, and Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.

 Again, this might be optimistic.  But, here is a major oil company CEO who is stating, rather bluntly, that Peak Oil will hit no later than 2015.

As a result, society has no choice but to add other sources of energy – renewables , yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.

“No choice …”  No choice but for expanded use of oil sands? 

And, “inevitably means emittingmore CO2”?  Can humanity afford that additional CO2 loading?

In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.

 Taking the path of least resistance, policymakers pay little attention to curbing energy consumption – until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.

Sadly, does this seem a likely route, policymakers (politicians) “taking the path of least resistance.”

And, this speaks to the future, but are we not already at (or past) this point where we have “major shocks” (oil prices, Katrina, ice melting)? And, if not, how bad does it have to be to have a “major shock”? 

The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.

Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels.

As calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a cost on industrial CO 2 emissions gain international acceptance. Rising CO2 prices accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO 2 and store it underground.

Writ large, in this large a sense, the “Blueprints” scenario does appeal, because if offers opportunity.  But, even in these paragraphs, some serious questions can emerge. Why focus on sequestering carbon in the few words available to him? Is it more likely that CCS (Carbon Capture and Sequestration) will be figured out, at an affordable cost, or that renewable power options like Combined Solar Power, High-Altitude Wind, Space-Based Solar Power, Wave Power, and others will be developed, with ever lowering price points, to be more than competitive with fossil fuels (especially coal with unreliable, expensive CCS)? 

Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December’s Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it. Much will depend on how attitudes evolve in Beijing, Brussels, New Delhi and Washington.

The PRC, India, EU, and US … nearly half the world’s population and the vast majority of its GDP. 

Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our grandchildren, we believe the Blueprints outcomes provide the best balance between economy, energy and environment.

This is a very interesting statement.  Shell has been a real leader in using scenario-based planning for structuring its corporate futures to satisfice across scenarios, it has long served the company.  The situation is so dire, in their scenario work, that moral imperatives demand searching for paths to make one scenario more likely to occur.

For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.

Again, the emphasis on CCS.  Time to let us see the MIT calculations and assumptions.

The sobering reality is that the Blueprints scenario will only come to pass if policymakers agree a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, mobility and buildings. It will be hard work and there is little time.

How many business leaders will take meaningful positions to help drive “policymakers” toward sensible solutions.

For instance, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries in 2050, plus at least 50% of those in non-OECD countries. Today, there are none.

And, we’re not sure that it will work.  Betting that it will is a dangerous and, potentially, very costly.

 Since CO2 capture and storage adds cost and brings no revenues , government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the very least, companies should earn carbon credits for the CO2 they capture and store.

Why earn “credits” for captured CO2 if they would have emitted it otherwise (and have had to pay the costs of having dumped that pollution into the atmospher)?

Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.

So, will Shell Oil begin funding the Apollo Alliance?

This is a call for a technological solution to something that is only partially a technological problem. 

The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort.

“Companies” can do more than “suggest possible routes”. How is Shell Oil expending its advertising dollars in the United States?  Who do Shell Oil executives donate to in election campaigns?  No, companies have more influence than this. 

That is the article, and how I see our challenges and opportunities. I look forward to hearing how you see the situation (please be concise).

Jeroen van der Veer, Chief Executive

 Well, van der Veer has asked for responses, that is at least from Royal Dutch Shell Oil Employees so who knows whether he wants this one …

A tentative (consise) response

  1. Betting the farm on CCS is very high risk and likely high cost (even if it works).
  2. Renewable power and energy efficiency seem seriously understated in your statement.
  3. How much will you be investing from Shell Oil in renewable energy and energy efficiency, as opposed to drilling for new oil?
  4. Your statement seems to understate the realities and implications of climate change, with the potential of catastrophic climate change.
  5. What will Shell do, in terms of public education, to increase awareness on Climate Change, Peak Oil, and the need for serious, concerted action by the world’s governments and people?
  6. Finally, might I suggest that you look to Energize America for lessons, you might find some there.

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