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Stuart Hampton

Shell’s alternative, alternative energy.

by Stuart Hampton | Dun & Bradstreet Editor

March 23, 2009 | No Comments »

According to Royal Dutch Shell board member Linda Cook in a strategy presentation she gave last week, Europe’s largest oil company has invested $1.7 billion in renewable energy and to reduce carbon dioxide output since 2003. Sounds impressive, no? But $1.7 billion is only a small fraction of the $1.7 trillion in sales and $126.8 billion in net profit the company has generated in the same time period.

And while Ms. Cook, Shell’s executive director of gas and power, stated confidently that Shell does indeed plan to build a “material business in  alternative energy”, she also made it clear that those doyens of the green energy business – wind power and solar power – were no longer in favor in the Shell boardroom. Shell’s future in the green energy business would be in biofuels and carbon capture processes.

This will come as a blow to wind power advocates. Shell has about 550 MW of wind farm capacity worldwide and has promoted its commitment to this power source in its corporate advertisements. Perhaps this decision was blowing in the wind last year, when Shell pulled out of the 1,000 MW London Array project, scheduled to be built in the Thames Estuary. The joint venture (with E.ON) had planned what would be the world’s largest offshore wind farm.

But the company knows that alternative energy is in its future. Shell has predicted that by 2025, 80% of the world’s energy supply will come from fossil fuels and 20% from alternative energy sources. What it wants to do is make sure that  it bets on the green sources and strategies that make most sense in the context of  its overall business model.

Of the top three Big Oil companies, this approach is much closer to that of “Hey, we’re an oil company” Exxon Mobil rather than “What’s your carbon footprint?” BP. Like Exxon Mobil, Shell has decided that it is a fossil fuels-based oil company and needs to pursue alternative energy sources and clean energy processes that are closest to where its expertise is. Shell, already the world’s largest buyer and blender of crop-based biofuels, plans to invest money in developing a new class of organic fuels (such as switchgrass and other grasses) which do not use food-based crops.

The company also plans to concentrate on developing cleaner ways of using fossil fuels, such as carbon capture and sequestration technology, processes that would help reduce carbon emissions from its big oil sands developments in northern Canada.

Shell wants to make sure that its green energy strategy makes some green and saves some green as well.

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