Shell New Energies EVP: Hydrogen Subsidies Will Pay Off, Just Like They Did for Solar
Shell’s Mark Gainsborough on renewables, hydrogen and bringing together the oil giant’s burgeoning family of clean-energy businesses.
PARIS : Shell expects its filling stations to eventually become fossil-fuel-free. But getting there will require major changes, and in the energy business, change often means subsidies.
So it is with hydrogen, says Mark Gainsborough, executive vice president at Shell who heads up the company’s New Energies unit. In addition to the power sector, Shell New Energies is responsible for the company’s activities in new fuels, such as hydrogen and biofuels. The company is growing its network of hydrogen filling stations in Europe and North America and is supporting the adoption of hydrogen fuel cells in transportation.
“Early-stage deployment of technologies almost always needs some sort of support,” Gainsborough told GTM on the sidelines of the European Utility Week conference. “Solar PV got to where it is today because it had $100 billion of cumulative subsidies. We’re all looking back on that and saying, ‘That’s great; that technology has now been substantially de-risked and reduced in cost.’”
Hydrogen is one technology that Gainsborough believes would benefit from a similar scale of government support.
“We’re in a phase where there’s a growing recognition that hydrogen has a key role to play. And I think that in Europe now, there’s a recognition that some subsidy programs to help the deployment of hydrogen would make sense.”
Support for hydrogen would also be beneficial on the demand side of the equation, Gainsborough said.
“We also have to think about what’s the right way of incentivizing industry to decarbonize. We’ve had a lot of supply-side subsidies in renewables. But I think increasingly there’s a school of thought that says you have to think about how you can help industry.”
“That’s very much the story with hydrogen. We need a bit of help getting to scale with the hydrogen business, to the point where it can become economically self-sustaining.”
Old-fashioned renewables business
Gainsborough said Shell New Energies expects to continue adding to its power-generation fleet, including renewables, but will be highly selective about its investments.
The company isn’t chasing specific capacity targets, he said, and is more interested in lining up its power-trading capabilities with its existing and future customer base.
“In many markets, we’ve been quite successful at meeting our needs for renewable power to sell to customers through long-term purchase agreements,” Gainsborough said. “In the U.S., out of 10 gigawatts of supply, we have more than 3 gigawatts…coming from renewables.”
“We don’t have a fixed target about how much generation we want, but I expect we will probably grow quite a bit in generation if we find the right projects to invest in.”
One generation sector where Shell is making a bigger splash is offshore wind. The company holds a 20 percent stake in the Blauwwind consortium, which will develop a 732-megawatt offshore wind farm in Dutch waters, where it already has a smaller farm up and running.
Shell also owns a stake in more than 4 gigawatts of offshore wind development off the East Coast of the U.S., where two weeks ago one of its projects was named the winner in Massachusetts’ second offshore wind procurement round.
A growing number of oil and gas companies are active in offshore, including Norway’s Equinor and Italy’s Eni. Last week Shell announced the acquisition of French floating offshore wind specialist Eolfi.
“The North Sea is a focus area for us,” Gainsborough said. “We’ll be looking actively at opportunities there like the U.K. [and] the Scotland leasing round as well.”
“We’re certainly looking at opportunities in other markets around the world, but one of the things we have to recognize is that even for a company on the scale of Shell, you can’t be everywhere. So we will be selective.”
Bringing the family together
Shell has been on acquisition spree in the clean-energy sector over the past few years. In addition to potential new investments, Shell wants to help the companies it already holds stakes in work together within a collaborative ecosystem it could help enable.
That’s true both of its companies active in developed markets, such as sonnen and Greenlots, as well as those making inroads in emerging economies, like d.light and PowerGen.
Shell is currently budgeting for clean-energy investments of $1 billion to $2 billion annually, ramping up to $2 billion to $3 billion by 2025. The group’s annual capital expenditure is currently around $25 billion, on its way to $30 billion.
Among its other goals, Shell wants to bring clean, reliable power to 100 million people who don’t already have it by 2030, as evidenced by its recent investment in African minigrid firm PowerGen.
Shell has taken a varied approach to investing in cleantech companies, from outright acquisitions to minority stakes that often come with a board seat. Gainsborough says the company is “open-minded” about its approach in the future, be it making a much larger acquisition or looking to bring firms together more formally under the Shell umbrella.
As for larger strategic deals like the $52 billion acquisition of the BG Group that transformed Shell’s natural-gas business, Gainsborough won’t rule them out.
“When you’re on a growth path, which includes M&A, you have to be a bit opportunistic. Sometimes opportunities come to the table, and we would certainly take a look at those.”
“We’d need to make sure it’s something that the group can accommodate within its spending plan,” he said. “We’re not inclined to raise our overall capital ceiling, so it might mean some tradeoffs internally.”