Renewable Energy, Gas and shaping the future
Oct. 11, 2018
Shell Australia's Chairman, Zoe Yujnovich delivers an address at the 2018 AFR National Energy Summit
I would like to begin by acknowledging the traditional custodians of the land on which we meet –the Gadigal of the Eora Nation – and pay my respects to their elders both past, present and future.
Ladies and gentlemen,
This morning I’d like to take you all on a journey. By air in fact, on our new airline, Shell Sky.
I’ve bought you all Shell Sky tickets on one of two mystery flights that leave from Kingsford Smith, just up the M1 from here.
This is actually quite apt considering it’s about a century ago Shell provided the aviation fuel for Qantas’ maiden flight.
Half of you will go to our first destination, to Europe, landing in the year 2070.
The other half of you get to fly to places on a lot of people’s wish list, Africa, via India, to see places like Kenya, Uganda and Kolkata, today.
Only, I’ve overbooked. So a number of you aren’t going to get seats on the flights.
You’re going to stay here at home, in Australia.
So those of you who are running late and miss the flight get to look around here, in Australia. Having spent two decades abroad let me tell you there is much to enjoy about exploring our incredible country.
So for those of you on Sky Flight 2070, it sees us touching down in a typical, modernised, industrialised northern European city. Think Copenhagen or Stockholm.
Or even, dare I say, Paris.
Touching down in Paris 2070 we see things have changed since we were last here together in December 2015 when we signed the Paris Climate Accord.
It’s a little warmer than 2015, but not the heat wave we were fearing. Not more than half a degree warmer than today.
It’s a place where carbon is completely out of vogue, in fact, it’s reached net zero.
And this is despite a global energy system that has doubled in size since 2010 to support the world’s population, which has grown to 10 billion people, up from 7.5 billion today.
How has net zero carbon emissions been achieved?
According to modelling Shell has undertaken in its Sky scenario work, the electron overtakes the molecule as the energy of choice.
By 2070, electricity exceeds 50 per cent of end-use energy consumption globally.
That’s quite a change, as electrons today only make up 20 per cent of final energy use.
The remainder, the 80 per cent of energy demand, is in the building, transport and industrial sectors, which are significantly more difficult to decarbonise.
In 2070, renewables such as solar and wind are together producing about 45 per cent of the energy mix.
But the parts of the economy that are hard to electrify, such as steel making, heavy transport and chemicals, stand to benefit from hydrogen, biofuels and biomass.
So Paris is looking good, with technologies such as carbon capture and storage removing greenhouse gas from the air.
So those of you who are taking our second flight to Africa, via India, has its own surprises, but it might be confronting.
At these destinations, you’ll met people who live in poverty. Energy poverty.
Right now, there are still more than one billion people on the planet who don’t have lights to switch off at night, a generation who still live by candlelight.
Those who have to spend hours carting water from wells. Those who don’t have refrigeration, who need to find food every day. Those who still rely on wood for heating and cooking.
And because they don’t have lights to turn on, let alone the internet, it limits their children’s education, and the vicious cycle perpetuates.
We need to lift people out of energy poverty and that’s not just abroad. There are communities in Australia that equally need additional access to energy.
And those of you who missed the flights, take the time to look around here in Australia.
In this country we have enjoyed a massive endowment of natural resources: oil, gas, coal and iron ore.
We have sophisticated primary and manufacturing industries. We are clever and inventive people with access to an education system and supporting technology that is world class.
We have opened our economy to the world and benefitted from access to huge global markets for goods and services. We are a nation built on exports.
But we can see that something’s not quite right.
We do have ordinary people – singles, couples, families and pensioners – worried about how to afford to heat and light their homes and make ends meet.
As highlighted in yesterday’s panel session, our local manufacturers are warning the government that their energy costs are too high. They are saying it makes them uncompetitive, putting their businesses and jobs at risk.
And as a business leader, I can tell you that electricity costs are a concern for our own operations, too, soaking up a third of the cost of running our own industrial plants. And across QGC, where we employ thousands of people, electricity costs are our project’s number-one line item in our operating expenditures.
So we too have to seek ways to produce energy efficient outcomes. For example on Curtis Island how are we doing this?
We are developing a concept which will allow for one of our gas-fired generators to be removed from service and replaced with solar and battery. This has the potential to reduce our fuel gas use by about 416 million BTUs and save about 24,500 tonnes of CO2. Importantly, it also takes 47 per cent less running hours.
For those of you who are running operations, the nexus between finding cheaper ways of operating through demand reduction is a win-win across all of the bottom line.
The power generation plants that have served a young, growing nation so well for decades, are in many cases coming to the end of their life.
And the nation, just like all others around the world, needs to respond to the growing challenges of both the emissions aspects as well as the energy transition.
You can have cleaner energy, more energy and more affordable energy.
There are pathways forward that we can deliver this.
Let me give you some examples of how Shell globally is investing in cleaner energy solutions around the world.
In recognition of the need for global emissions reductions, we too have introduced an ambition to reduce the net carbon footprint in our energy products − these are products used by consumers − by 20% by 2035 and 50% by 2050, in line with societal progress.
Take personal transport as an example.
In the UK, we are getting ready for battery electric vehicles. Today you can juice up with a Shell charging point at home using electrons we sold to you. That is because Shell now owns the power company First Utility. And it also owns NewMotion, one of Europe’s largest providers of charging points for electric vehicles.
Shell believes hydrogen has a bright future and will emerge as a viable transport fuel in the second half of the century. We are founding member of the Hydrogen Council which seeks to promote innovation globally.
We are also part of a joint venture to install a nationwide network of hydrogen filling stations in Germany. Already today you can drive a hydrogen-powered vehicle from the northern tip of Denmark to Lake Garda in Italy.
In the US, the traditional home of the gas guzzler, we are building hydrogen filling stations in California. There’s even a Shell hydrogen stop for Toyota’s fuel cell trucks in one of the world’s busiest ports, Long Beach.
That’s not all. This project will be linked to a biogas plant which converts the bio waste from nearby dairy farms. Essentially, California will be getting the world’s first hydrogen trucks to be powered by cows.
We recognise that battery-electric and hydrogen will take time to reach significant scale, so there are other solutions that are available right now.
One of these is LNG, which can work well not only for trucks but also for shipping. It is cleaner to use than both diesel and heavy fuel oil, especially in terms of air pollutants.
In the past week, Sovcomflot, one of the world’s leading shipping companies, has just delivered the first crude oil tanker powered by LNG provided by Shell, with a second one on the way next year.
In 2019, cruise operator Carnival, will start adding LNG-powered ships to is fleet, also being provided by Shell.
Next time you board a cruise ship in Darling Harbour, it too may be powered by LNG.
And we’re seriously studying a wide range of new energy opportunities here in Australia – from large scale industrial solar opportunities, to hydrogen, to nature-based solutions and significantly more.
In Australia, there is no doubt we are in an energy transition. So too are many countries around the world. The energy transition is regularly portrayed in terms that compare it to a revolution – to a moment in time when everything changes.
In truth, the transition will happen at different paces in different places.
The energy transition in Sydney won’t be the same as in Kenya, in California or in Kolkata.
The energy transition will span decades and require unprecedented collaboration between policy-makers, leaders from business and non-governmental organisations, and consumers.
We see here that solar and wind farms are proceeding at pace. It’s a great thing. As Audrey Zibelmann said yesterday, the rate of rooftop solar in Australia is the highest in the world. More than six panels are being installed every minute.
But this pace of change creates challenges for system stability and reliability.
We cannot just “flick the switch”, but we can achieve a much more “rapid switch” to a net zero carbon emission world. To do that, we need to collaborate like never before and fossil fuels like natural gas have a role to play.
Natural gas will be the pivot around which the energy transition revolves, balancing the intermittency of renewable wind and solar energy, and supporting the emergence of new liquid fuels.
Modern gas-fired power plants take less than a third of the time a coal plant needs to ramp up to full operation.
That means they can quickly respond to an increase in demand for electricity or when the sun does not shine and the wind doesn’t blow.
Gas produces around half the greenhouse gas emissions and less than one-tenth of the air pollutants that coal does when burnt to generate electricity.
Gas is the cleanest burning hydrocarbon – it means cleaner air and less emissions.
Natural gas, delivered to Asia from Australia, means reduced air pollution — making a tangible difference to the hearts, lungs and eyes of the people who live there.
Gas is also one of the few energy sources that can be used across all sectors of the global economy – to fuel transport, heat and light homes, and power industries.
Governments are increasingly recognising the benefits of natural gas as part of efforts to meet their own energy and environmental needs.
And at Shell Australia, we are steadily increasing our contribution to producing more energy.
Just this week we announced a significant expansion of our Queensland natural gas venture QGC, with the news that we will bring more gas to market over the next 30 years.
Called Project Goog-a-binge, from 2019 to 2020 it will see the drilling of 250 new wells connected to existing QGC gas processing plants.
The project will bring a further 930 petajoules of gas to market over the next three decades for our domestic and overseas customers.
Affordable and secure energy supplies keep the engines of all industries going, keeping people in work and spreading the benefits that derive from a strong economy.
Our energy projects in regional Australia drive prosperity through local towns and communities. The dollars raised in New York and London filter through to the workers, motel owners, service station operators and shopkeepers in country towns.
Our new Project Goog-a-binge, for example, is expected to create or sustain between 300 and 350 jobs in regional Queensland and generate business opportunities for local suppliers.
It is a substantial and ongoing boost for the local economy. In first half of 2018, Shell has already spent $140 million in Toowoomba and Surat Basin communities.
We currently supply around 60% of Queensland’s domestic gas demand through both QGC and Arrow Energy.
Exports provide the economy of scale to invest in Australia, whether it’s a natural resource extracted from the ground or an elaborately transformed manufactured good – which for LNG has characteristics of both.
LNG exports have brought much natural gas to the local market in Australia, gas that otherwise would have been uneconomic to develop.
Investment in the Queensland LNG sector has breathed life into the regional economy – delivering well-paid jobs and a separate investment cycle that acts as a natural hedge in economies reliant on income from agriculture.
This investment created 40,000 jobs during the construction phase and ongoing employment for 13,000 people.
The value of Shell's investments into Australia since 2009 were equivalent to the building of 115 Harbour Bridges, or 48 Sydney Opera Houses.
Before exports began, the QGC onshore gas fields supplied about 20 petajoules into the domestic east coast market a year.
After exports began, that amount rose to more than 120 petajoules supplied domestically in 2017, equivalent to about a quarter of east coast demand.
We must recognise that exports have resulted in greater contributions to the domestic markets because LNG scale enabled the investment we see today in Queensland.
The other important element to keeping energy affordable, at least for our customers, is to run the company and our operations as efficiently as possible.
Shell Australia competes globally within the Shell group for project finding, and We must make the businesses stack up. We have to be globally competitive to attract capital.
We are focused on delivering strong financial returns on the investments we make.
We do this so that we build investor confidence and enable capital to continue to flow to our growing operations here and abroad.
Strong financial returns provide our business with resilience when the global economic cycles inevitable oscillate.
Strong financial returns mean we can continue to invest in developing natural resources that are becoming physically harder and more expensive to reach.
Developing new resource fields leads to diversity of supply. Diversity of supply provides our customers with security of supply, at the most affordable rates, and helps to improve the efficiency of the markets that we are involved in.
And there is one more element to consider that will benefit consumers and help provide coordinated action to manage the transition we’re in.
I believe we need a signal from government to help draw consumers and businesses closer together with a market mechanism that balances the tensions before us of affordability, reliability and emissions.
A government-led market mechanism sends a clear, coordinated, consistent signal that businesses can continue to invest in solutions.
And with that investment, these solutions can be produced at ever-increasing scale.
And with coordination, businesses can also standardise.
With scale and standardisation comes lower costs for the consumer.
In closing, I would like to thank the AFR and Deloitte for providing us with this opportunity to grow the green shoots of the solutions to solve the energy challenges before us.
Those of us in the room today are quite fortunate. We have the ambition to develop ways to supply more, cleaner and affordable energy.
We as the leaders of industry are sitting in the pilot’s seat to steer our Shell Sky flight toward our preferred future destination.