Shell starting new green businesses

Ms Catherine Newman, chief executive of Limejump, at a battery installation in the village of Minety, England. PHOTOS: NYTIMES

(NYTIMES) - On a clearing at the edge of a farm field, 40 big rectangular boxes the size of shipping containers sit behind a tall fence. Packed inside are stacks of lithium-ion cells and other electrical equipment.

Wired together, these units will form Europe's largest battery, the operators say, able to pump out powerful bursts of electricity to offset fluctuations in the power grid when ebbing winds or cloudy skies slow the generation of renewable electricity. As more power comes from wind and solar, the need for giant batteries will grow.

One of the companies behind this £40 million (S$75 million) project is Royal Dutch Shell. Like other oil giants, Shell is under pressure to move away from climate-damaging fossil fuels, and it is recasting itself as more of a renewable energy company, looking for investments as it sidles towards a new future.

Shell's foray into the English countryside in Minety, about 145km west of London, provides a clue to that future. But for a firm more used to offshore oil rigs and producing natural gas, the giant battery is part of what some critics see as a tortuous turnaround that, they say, must quicken to have a real impact on the factors causing climate change.

A Shell subsidiary, Limejump, is managing the device - it manages many such batteries - and will share revenues from selling the power stored in it in a deal with two Chinese investors.

Limejump is the type of business that catches the eye of Shell executives these days. With 80 software engineers, traders and forecasters, the company buys electricity from 675 wind farms, solar installations and other mostly renewable generators scattered across Britain, and sells it to businesses that want their energy to be green.

The company, bought by Shell two years ago, is one of dozens of investments the oil giant has made in the clean energy area. Another is in Sonnen, a German battery supplier that fashions its own power networks to challenge big utilities. Shell is also building up an electric vehicle charging business around the globe and nurturing hydrogen fuelling stations in California.

Mr Ben van Beurden, Shell's chief executive, has been talking about the need to cut emissions since 2017. In the view of some, though, Shell has dragged its feet. The company's clean energy investments since 2016 add up to US$3.2 billion (S$4.3 billion), while it has spent about US$84 billion on oil and gas exploration and development.

"You cannot claim to be in transition when you only invest" such a small percentage of capital in new businesses, said Mr Mark van Baal, founder of Follow This, a Dutch investor activist group.

All the oil majors, especially in Europe, share a similar dilemma. Their leaders see that demand for petroleum products is likely to eventually fade and that their industry faces growing disapproval, especially in Europe, because of its role in climate change. Shell is responsible for an estimated 3 per cent of global emissions, mostly from the petrol and other products burned by its customers.

Yet Shell and other oil companies still make nearly all their profits from fossil fuels, and they are naturally wary of shedding the bulk of their vast oil and gas and petrochemical assets - said to be worth about US$180 billion in Shell's case - especially when the consumption of petroleum is forecast to continue for years, a point underlined by this year's surge in oil prices.

In a recent article on LinkedIn, Mr van Beurden wrote that "it would not help the world one bit" if Shell stopped selling petrol and diesel today. "People would fill up their cars and delivery trucks at other service stations," he wrote.

Shell's acquisition of Ubitricity, which installs electric vehicle charging points in lamp posts (above) and other structures in London and other cities, is an example of the oil major's moves towards greener operations. PHOTO: NYTIMES

Shell also appears to be playing a longer, more cautious game than some rivals, like BP, that are pouring money into renewable energy projects. Shell executives seem to be sceptical about the profit potential of just constructing and operating renewable generation assets, like wind farms.

"It's a much more multifaceted strategy than I think people necessarily anticipated," said Mr Adam Matthews, director of engagement and ethics at the Church of England Pensions Board, who has worked closely with Shell on targets to reduce its emissions.

Shell executives say they want to put their chips on technologies and businesses that may evolve into key cogs in the cleaner energy system that is emerging. They want to not only produce clean energy but also make money from supplying it to businesses like Amazon and retail customers through large, tailored contracts, or electric vehicle plug-in points or utilities that Shell owns. The investment numbers will increase, they say, to up to US$3 billion a year of a total of about US$20 billion annual capital expenditure.

"We are thinking ahead; where is the future going?" said Ms Elisabeth Brinton, Shell's executive vice-president for renewables and energy solutions.

Yet Shell executives seem uninhibited about making investments in new areas when they find the case convincing. This year, Shell bought Ubitricity, which installs electric vehicle charging points in lamp posts and other structures in London and other cities.

Shell had bought the company as a way to reach the large percentage of city dwellers who kept their cars on the street and did not have access to chargers. That approach seems likely to propel the growth of clean energy at Shell and other oil companies.

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