Shell explores new models of alternative energy

Singapore

SHELL is exploring a possible business model in integrating natural gas and renewables, or tapping its vast network of retail stations to bring new energy offerings to customers, said a senior executive.

These are some of the possibilities that the group is now studying through its New Energies division just formed in May, Shell's head of scenarios Jeremy Bentham said in an interview in what are some of the group's first public comments about the unit.

The business will have three segments, he explained.

One is integrated energy solutions, looking at how energy from different sources can work together; another is future fuels, which include its existing hydrogen and biofuels activities; while the third is about connecting customers with new business models for energy as energy systems become decentralised and digitalised.

The division will be run alongside Shell's Integrated Gas division, with US$1.7 billion of assets attached to it and annual spending of about US$200 million, The Guardian reported.

In a strategic briefing on June 7, Shell CEO Ben van Beurden said that the New Energies business is expected to become a significant growth priority beyond 2020. Investments will remain relatively low for now, focused on current positions and identifying potential opportunities, he said.

"Notice (the division) is not called renewables, because it's not just about renewables," added Mr Bentham. "It's about how these things work together."

Shell owned a solar photovoltaics business in the mid-1990s, but sold it off in 2006. "We have been exploring this space for quite some time and learning things. For example, we learnt that we were not good manufacturers of solar panels," he said. "Others are better at that - people with electronic industry background and things like that. So we moved out of the business, although we still have some R&D going on."

The group, however, retains its wind energy business in North America and Europe, and a joint venture in Brazil that produces bioethanol from sugar cane. It is also exploring the potential of hydrogen as a fuel, and in the process of installing hydrogen fuelling pumps at 400 locations in Germany by 2023.

Mr Bentham said that the company has learnt, from working with municipal authorities in countries such as India and the Philippines, that an integrated modular micro-grid, using gas and solar as the main energy sources, could help to make energy systems more resilient.

"A solar company can't do that integration alone, so there are opportunities here," said Mr Bentham. "We are now exploring in detail whether those might be particular opportunities that we'd invest in, but it's the kind of areas we're looking at."

This area of new energy systems also makes sense for companies such as Shell, which is used to running big projects and drawing on know-how from different sectors, he added.

Ultimately, the New Energies business must also be profitable.

"To be sustainable as a business, you do that commercially. And the commercial engine has driven a lot of benefits in the world," said Mr Bentham. "It doesn't mean that it will uniformly do the right things, but it is the way things get done in the world."

"We have to be sustainable, to be able to generate future investment," he emphasised.