Category: Aviation

A Climate-Neutral EU by 2050

dchone May 5, 2020

As the EU works to reset its emission reduction goals to align more closely with the 1.5°C goal of the Paris Agreement, a question arises around the scale and scope of the energy transition required. What will it look like? How fast should it proceed? Which technologies need to be accelerated to achieve the desired outcome? To help answer these and provide a perspective on the transition, my colleagues in the Shell Scenario team have produced a scenario sketch of the journey forward, arriving in 2050 with a net-zero emissions energy system (NB: The pathway was formulated in late 2019 prior to the COVID-19 pandemic and therefore does not include the energy system disruption being seen in 2020).

From a policy perspective, the EU has been addressing the climate issue for at least 15 years, with the EU Emissions Trading System in place since 2005. The 2020 energy situation arises from the 2007 climate and energy package, which included three key targets:

20% cut in greenhouse gas emissions (from 1990 levels)
20% of EU energy from renewables
20% improvement in energy efficiency

The targets were set by EU leaders in 2007 and enacted in legislation in 2009. They are also headline targets of the Europe 2020 strategy for smart, sustainable and inclusive growth. Within this, the EU Emissions Trading System is the EU’s key tool for cutting greenhouse gas emissions from large-scale facilities in the power and industry sectors, as well as the aviation sector. The ETS covers around 45% of the EU’s greenhouse gas emissions. In 2020, the target is for the emissions from these sectors to be 21% lower than in 2005.

The year 2020 represents a halfway point from 1990 to 2050, during which 20% of the hard deployment work has been done, but with a number of key technologies available at scale that hardly existed or didn’t exist around the turn of the century. Solar PV and Electric Vehicles are two examples (although solar PV did exist in 2000, it was expensive and small scale). That leaves just 30 years for the remaining 80% reduction, which must also include bringing to scale several other technologies which are yet to be deployed in the EU. This is a tall order and the scenario sketch illustrates how extraordinarily stretching it will be.

The additional key technologies that must move quickly to scaled deployment are as follows;

Clean hydrogen production via electrolysis of water or removing and storing the carbon from natural gas;
Hydrogen fuel cell road transport for heavy goods (see chart below).
Carbon capture and storage in various industrial settings – e.g. steel, cement, petrochemicals.
Biomass power plants fitted with carbon capture and storage (as a negative emissions technology).
Air transport that utilizes hydrogen as a fuel – in the sketch first flights are imagined in the mid-2030s.
Advanced biofuels for planes, ships and heavy road transport (see chart below).
Grid scale electricity storage.
Electrification of light and heavy industry processes.
Use of hydrogen in homes for heating and cooking.
Some technologies that appear late in the sketch will need intensive development over the medium term. Hydrogen as a fuel for industrial facilities, but particularly iron ore smelting, is a good example.

On the assumption that development and demonstration of all the above proceeds rapidly, deployment kicks in for most during the 2030s. But in the 2020s the energy technologies that have been nurtured over the last twenty years must be accelerated. For example, by 2030 solar must be quadruple current deployment, wind nearly triple current deployment and nuclear must be growing again, not declining.

In the 2030s the really hard work starts, with carbon capture and storage moving from first demonstration in the EU by 2025 to 40 medium sized facilities (one million tonnes CO2 stored per annum) by 2030 and over 100 by 2035. New technologies such as hydrogen fuel cell trucks must become ubiquitous during the 2030s, with at least 600,000 vehicles on the road by the end of that decade.

All of the above will require both technology development incentives and deployment policies. The analysis assumes a rising carbon pricing mechanism – whether explicit or implicit – to more than €200 per tonne of CO2 equivalent by 2050 to deliver and sustain the emission cuts and CO2 management necessary for the EU to reach climate neutrality. But even the EU ETS will need to change, as I discussed in a recent post.

While carbon pricing is an efficient lever for reallocating resources and driving behavioural change, it will not be enough on its own. A sectoral approach to policy which brings clean technologies, fuels and products to market, as well as their deployment and diffusion at scale, must urgently be developed. It is essential that policy should help provide consumers and businesses with low-carbon alternatives to adopt.

In the sketch, 2050 marks a point of climate neutrality for Europe, helped by the development of large scale carbon sinks through reforestation. But this isn’t the end of the transition, merely a point of significance. The hydrogen economy will continue to grow, electrification of industry will expand and efficiency gains will continue to be made. As was illustrated in the Sky Scenario, Europe will likely shift to become a net-negative emission economy during the second half of the century, a necessary requirement to ensure global net zero emissions and a 1.5°C limit on warming.

Download the EU Sketch here.

The third runway by the numbers

dchone March 4, 2020

Last week the project proposal for a third runway at Heathrow in London was put on hold after a successful court challenge based on climate concerns. The courts sided with the plaintiffs who argued that the proposal did not adequately demonstrate how its overall emissions impact would be managed given that the UK has now adopted a target of net-zero emissions in 2050. While the emissions from the project itself are modest, with cement probably being the largest component, the ongoing emissions from aviation expansion as a result of the project could be considerable on a cumulative basis over many years.

At this point I should note that the third runway at Heathrow has been a contentious project since it was first proposed and there are many reasons put forward as to why it should or should not be built. My focus here is on the expected expansion of aviation in and out of the United Kingdom and the resultant emissions. Aviation has grown rapidly over the half century since the introduction of the widebody Boeing 747 (by which point it had grown considerably since the first intercontinental jet services some twenty years prior), to the extent that there are now over four billion passenger flights per year globally.

Of course airlines, airports and aviation companies are responding to a strong demand signal from consumers (the UK is an island). In order to drive change consumers also need to understand their own externalities and be prepared to manage them, most likely by a cost passed through with the ticket purchase.

A 2017 UK Department of Transport assessment of aviation showed growth for both capacity constrained and unconstrained scenarios, with the low constrained case showing a 60% rise through to 2050 and the high unconstrained case showing a doubling of demand.

Heathrow consumes about 20-25 million litres of Jet-A1 every day, so a third runway would increase this by 50%, or some 10-12 million litres per day.

A double check based on aircraft efficiency and expected distance of travel gives a similar number. If we assume that the runway operates for 18 hours per day with a flight interval of 90 seconds, with 50% of the time being used for take-off, that implies 360 additional departing flights every day. If we then assume that every flight is dedicated to longer haul, say New York or Dubai, then that means about 37,000 litres of fuel per flight based on the improved efficiency for modern aircraft of about 2.2 litres per 100 km per passenger, 300 passengers and some 5,500 km of travel, or a total of just over 13 million litres per day.

The consumption of 13 million litres of Jet A-1, 365 days a year, will result in the release of about 12 million tonnes per year of carbon dioxide when combusted. So the question that needs to be asked is how the mitigation of 12 million tonnes per year will be organised such that it has reached net-zero by 2050.

The answer lies with the sector itself, not just the airlines that own the planes or the companies that make them or the airport that is building the runway or the fuel providers that sell Jet A-1. All these parties will have to collectively own the problem and set about solving it. There are already the beginnings of some answers, but efforts will need to be accelerated such that the question posed through the court in relation to the net-zero goal of the UK can be confidently answered. For example;

Various processes have been developed to produce bioJet, including those which use municipal waste as the feedstock. These are now starting to scale in some locations.
Air capture of carbon dioxide is emerging as a possible solution for sectors such as aviation. This would involve removing carbon dioxide from the atmosphere at a rate equivalent to its emission and committing to geological storage, delivering net-zero emissions. The DRAX power station in Yorkshire is piloting one form of this technology and Carbon Engineering is building a large scale version of a different approach.
There is some development underway for short haul electric planes, but long haul will need a very different solution. In my last post I discussed the option of hydrogen in aviation.

All the above are still in their early stages of development and deployment, with bioJet looking to be the most promising immediate option. Nevertheless, over the coming thirty years it should be possible to bring UK aviation emissions to net-zero through some combination of the above.

But who should be responsible for implementing the strategy? Within the aviation industry, a framework already exists under which all this could be managed.

The airlines have already agreed and are now beginning to implement the CORSIA framework under the auspices of ICAO. This sets out a journey through to 2035 which will see global aviation emissions limited to current levels. It includes a facility to balance emissions through a trading arrangement where they cannot be directly mitigated through fuel changes, although the final rules of this have yet to be agreed and will involve Article 6 of the Paris Agreement. In almost any aviation scenario there will be unmitigated aviation emissions in 2050. CORSIA will need to evolve further after this first phase to be aligned with the emerging net-zero goals in many countries with major aviation hubs. The trading arrangement will eventually need to focus on removal of carbon dioxide from the atmosphere in combination with geological storage.

This form of emissions challenge to projects and development may well become more frequent, not just from campaigners but also from regulators, as the governments they represent grapple with the task of getting to net-zero emissions. There will likely be a real shift in focus from the projects themselves and their subsequent operation (i.e. Scope 1 plus Scope 2 emissions), to the broader impact they have on societal emissions (i.e. Scope 3 emissions). That will place more onus on project developers to think through and then manage the broader implications of their actions.

Aviation futures

dchone February 18, 2020

The aviation industry accounts for nearly one billion tonnes of carbon dioxide emissions annually against a global total in excess of 40 billion tonnes, which means it is around 2.5% of total emissions. However it is a high growth sector without obvious alternative energy carriers, implying that as other emissions fall and aviation continues to rise, its fraction of the total increases rapidly. Should global emissions fall by 50% in the same time that aviation doubles, then that fraction becomes ten percent.

Perhaps for the reasons given above, there is a particular focus on aviation emissions, far more so than a sector such as steel where emissions are currently much higher and will likely continue to be for many years. Additionally and unlike sectors such as steel and cement which are seen as essential elements for the provision of basic services such as homes and clean water, some people view aviation as a luxury which isn’t entirely necessary for modern society, hence the calls for limiting air travel as a means of limiting emissions from the sector. I don’t see rationing as a realistic pathway forward; the ability to traverse the globe in under a day has become too valuable.

The aviation sector will need to find another way forward. The current focus is on sustainable aviation fuels, such as those made from waste and sustainably harvested biomass, or perhaps even synthetic hydrocarbon fuels derived from processes that chemically combine hydrogen (from electrolysis of water using renewable energy) and carbon dioxide (from direct air capture). This latter route is currently very costly given the state of the variety of technologies required and large scale use of biomass always raises questions around its origin, the overlap with agriculture for food and the emissions that might arise from land use to create the biomass. Nevertheless, both these routes are worth pursuing.

But what other options might exist for the industry in the decades ahead?

Apart from balancing the emissions from aviation with some form of atmospheric carbon dioxide removal (from growing trees to direct air capture and geological storage), other routes would have to involve a shift away from hydrocarbon based fuels.

One possibility that is currently gaining favour is the development of electric propulsion, with the plane using battery storage for the electricity. This is also problematic due to the very low energy density of batteries when compared to hydrocarbons, a subject I discussed in an earlier posting. Battery electric planes might emerge for very short haul flights (e.g. London City Airport to Rotterdam, a flight I take quite a few times each year), but it is improbable for longer haul travel due to weight constraints. Today, 80% of the aviation industry’s emissions come from passenger flights longer than 1,500km, which means that a long-haul alternative technology needs to emerge.

One possibility is to use hydrogen directly as a fuel, either in a fuel cell configuration which essentially means an electric plane, or in a jet turbine engine in the same way planes use fuel today. The latter route means that planes could still attain the speeds and altitude of current jets. Hydrogen is well suited to a gas turbine engine.

Hydrogen isn’t weight constrained as an energy carrier, but volume considerations may prove challenging. A new airframe shape would likely emerge as a result.

	Jet A-1	Current Li-Ion Battery	Emerging Li-Metal Batteries	Liquid Hydrogen
Energy MJ/kg	42.8	~0.7	~2	120
Energy MJ/litre	37.4	~2	~4	8

Today, the development of hydrogen for aviation appears limited, with the BBC reporting a decade ago that there was no future for the fuel, despite proof of concept. Cost seemed to be the major issue, but today the cost of renewable electricity has fallen sharply and electrolysis to produce hydrogen is seeing a resurgence of interest.

A trawl through various online resources reveals that hydrogen jet turbines have been demonstrated for over 60 years. The first such flight was a modified B-57 Canberra Bomber, with one jet engine powered by liquid hydrogen from a cryogenic wing suspended tank (shown below)

diagram-of-a-hydrogen-fuel-system-on-nacas-martin-b-57b-canberra-ce9f7f

Source: NASA

In the 1980s Tupolev modified a Tu-155 to act as a test vehicle for a variety of alternate fuels, which included liquid hydrogen. The Tu-155 first flew on 15 April 1988. It used hydrogen fuel and later liquified natural gas (LNG). It flew until the fall of the Soviet Union and is currently stored at Ramenskoye Airport near Zhukovskiy. The cryogenic tank was stored in the main fuselage of the plane, in part due to the volume constraint noted above.

TU-155-Liquid-Hydrogen-Aircraft-Design-Tupolev-2009

Source: Tupolev

In the mid to late 1950s Lockheed proposed a concept reconnaissance aircraft that operated on liquid hydrogen and a design was also proposed for a Lockheed L-1011 passenger plane some years later. This was in response to the oil shocks of the 1970s.

Source: Lockheed

Despite over sixty years of on-off development of hydrogen powered flight, hydrocarbon fuels remain the only energy carrier for commercial aviation. Today, the industry faces a long term challenge that may require it to revisit shelved technologies, applying new concepts and materials to the variety of issues that couldn’t be fully solved in the decades past. In the Sky Scenario, we imagine that the first hydrogen intercontinental flight takes place in the mid to late 2040s, with a new generation of planes entering service from about 2050. Even then, it takes decades more for this to become a mainstay within aviation, but then could well be the only technology of the 22^nd century. In the interim in Sky, biofuels and removal technologies (bioenergy with CCS in Sky or BECCS) are used to deliver a net-zero emissions aviation system.

What happened to that vacation offset?

dchone August 19, 2019

With many people in the Northern Hemisphere taking vacation at the moment, some may have clicked that button on the bookings website to offset the emissions from their air travel, cruise ship or even hotel. But what happens when the button is clicked?

In a recent article, the Guardian explored the nature of the voluntary carbon market and the wealth of project types that may be triggered as a result of that click. But they didn’t explore the very nature of the voluntary market from a carbon accounting perspective. This is where the Paris Agreement should change everything.

Today, as the Guardian article notes, that click leads to a project of some description executed through the voluntary carbon market. This is a market that has arisen over the years in the absence of cross-border compliance markets for regulating the emissions of carbon dioxide. Compliance markets are created and regulated by mandatory international, regional, and sub-national carbon reduction schemes such as the European Union’s Emissions Trading Scheme (EU ETS), the California Carbon Market and the largely defunct Clean Development Mechanism regulated by the Kyoto Protocol. By contrast, the voluntary markets function outside of the compliance markets and enable companies and individuals to purchase carbon offsets on a voluntary basis. For example, individuals who seek to offset their CO₂ emissions and companies who would like to become climate neutral can buy an equivalent in terms of carbon credits to “neutralize” or offset their carbon footprint.

The issue that isn’t explored by the Guardian relates to the legal title to the carbon reduction. In an emissions trading system, legal title belongs to the owner of the carbon unit created by the system, which then gives that owner the right to surrender it against their emissions in complying with the rules of the trading system. But in the voluntary market this isn’t as clear, even though the units are widely referred to as offsets which therefore implies that the reductions they represent belong to the emitter. The word offset is derived from financial markets where an offsetting transaction is an activity that, in theory, exactly cancels the risks and benefits of another instrument in a portfolio. Offsetting transactions are risk management tools that allow investors and other entities to mitigate the potentially detrimental effects that could arise if they cannot simply cancel the original transaction.

But what about the title to the reductions in a project activated through the voluntary carbon market? In the new world of the Paris Agreement, governments have created Nationally Determined Contributions (NDC) in which a plan is developed that shows how the country in question will reduce its emissions. For example, Kenya has stated that it will undertake an ambitious mitigation contribution and seek to abate its GHG emissions by 30% by 2030 relative to the business as usual scenario of 143 MtCO2eq; and in line with its sustainable development agenda. This is also subject to international support in the form of finance, investment, technology development and transfer, and capacity building.

When the click leads to a project in Kenya and that project is successfully executed, the emissions reduction achieved will be swept up in the assessment of Kenya’s greenhouse gas emissions at some point in the future when they are reporting out against the NDC to show how they have achieved their contribution to the Paris Agreement. As such, the voluntary project has been useful for Kenya, but its impact will have been reported as part of the Kenya NDC, which means that it isn’t technically an offset transaction against emissions in another place. This is because the project has helped Kenya and presumably eliminates the need for them to find yet more reductions in their economy to deliver on the NDC – the notional cap that they have placed on their emissions is, in part, fulfilled by the project. So the voluntary market is meeting a very specific need; it is helping finance reductions in other places against the NDC covering that location. This means it isn’t strictly an offset against emissions in the buyers location, even though a reduction clearly took place and was financed by the offset purchaser.

Under the Paris Agreement and Article 6, all this potentially changes, but it depends on the nature of the transaction. The voluntary market could continue as discussed above, as a financing mechanism for reductions in other places, or it could evolve into a fully accounted and tradable unit. In the latter case, when the unit is created in Kenya (perhaps under Article 6.4) and exported, it will trigger a change in their NDC and a change in the NDC of the country in which it is used in. Both NDCs will be adjusted such that overall global emissions remain on the same pathway. Paris is strict about double counting. The unit would also be formally recognized by both governments so title would transfer through the transaction, but the unit would now be helping the country in which the offset was purchased meet its NDC, rather than the country in which the project was executed.

A final case could see only the project host country adjust its NDC due to the export of the unit, but the importing country makes no change. The carbon title therefore remains with the offset purchaser. The unit is not used to help either country meet its respective NDC. When the unit is retired (held in perpetuity by the offset purchaser), it then represents a real offset against emissions and it takes the world slightly closer to the goal of the Paris Agreement than would otherwise have been the case.

It is still early days for the Paris Agreement and the rules of Article 6 for cross border trade of units have still to be agreed. As such, the voluntary market will continue under the current procedures. But as the Paris rules get going, expect to see things change. A further complication will be the application of these units towards flights where the emissions from the flight are already being accounted for through the new aviation emissions offset system, CORSIA, but that is for another post.

In the meantime, enjoy your vacation!!

A new pathway to Paris

dchone February 6, 2019

A new book that outlines a pathway to meet the 1.5°C goal of the Paris Agreement has been released for open access online , but is also available in hard copy from March 7th on Amazon. The work has been conducted by various academic institutions and is largely sponsored by the Leonardo DiCaprio Foundation. The route chosen is to meet all energy needs with renewables such as wind, solar and hydroelectric with the consequent phase-out of fossil fuel use for all energy needs by 2050. Carbon capture and storage (CCS) is not considered as an option, but natural sinks play an important role through large scale land restoration and reforestation. So rapid is the proposed transition that emissions fall sharply from next year (2020) and fossil fuel consumption is reduced by 60% in just a decade. An important additional component is an overall reduction in energy demand through a very strong efficiency drive.

There are six major components to the transition, with the first five relating to objective of 100% renewables for all energy use;

Increased capacity to generate electricity mostly through solar and wind power, enabling the electrification of all energy uses including power, heating, transportation, and even industrial uses.
Increased storage capacity in the form of battery arrays and pumped hydroelectric (which uses excess generation to pump water up to a reservoir releasing the energy when needed).
Improved energy efficiency – decreasing overall energy consumption, especially in the developed world, by making buildings, cities, and vehicles more efficient.
Re-purposing the existing gas pipeline and storage infrastructure to deliver hydrogen produced by renewable sources.
A gradual retraining of the energy workforce to participate in the burgeoning green economy.
Land restoration and reforestation to meet negative emissions requirements.

Following the IPCC 1.5° Special Report last October (SR15), it is clear that the lowest risk pathway in terms of climate impact is one that sees emissions fall rapidly, with minimal temperature overshoot before the end of the century. The book effectively follows the pathway P1 (no CCS, rapid fall in fossil fuel use) set out in SR15, although they make more extensive use of land sinks than P1.

Source: IPCC SR15

The IPCC P1-P4 archetype pathways can be categorized in terms of final energy demand and their use of sinks (both natural and artificial, e.g. bio-energy with CCS or BECCS), which also allows a comparison with the Shell Sky Scenario that featured in SR15.

Sky is akin to the SR15 P4 pathway, in that the additional energy demand they both foresee leads to extensive use of sinks to balance overall emissions and deliver a 1.5°C outcome. Within the Sky scenario efficiency plays a major role in curbing demand, but final energy demand still rises throughout the century (see chart below), albeit coming close to a plateau from 2080. This is driven primarily by the demands of some 2-3 billion people moving from modest income to middle income. In addition, there are a further 2-3 billion people moving from little income to modest or even middle income. Even with a major efficiency push, energy demand just doesn’t fall that easily, unless of course consumers hold back in their demand for energy services, e.g. travelling by air.

Sky, like P4, doesn’t see emissions falling until about 2030 in that this is the minimum time the scenario requires to build the necessary political and technical capacity to introduce carbon prices, ramp up production of various technologies and at least begin developing further out technologies such as hydrogen use for metallurgical smelting.

But the new pathway proposed in the publication seemingly allows no time for such change. As noted, under that pathway emissions fall sharply from 2020, yet we are currently in a period of sharply rising emissions (according to an analysis by the Global Carbon Project, 2018 emissions are estimated to have risen by 2.7% compared to 2017). While such a fall would be an ideal outcome and for a better than 50% chance of being below 1.5° is probably required, the difficult question that must nevertheless be answered is by what process this happens? In the Sky Scenario it was proposed that rapid ratcheting of NDCs throughout the 2020s could lead to emissions beginning to fall by 2030.

A further challenge is the decision by the authors not to employ any form of CCS and also phase out all fossil fuel use by the 2050s. For sectors such as aviation, the likely energy source in 2050 will still be hydrocarbon liquids, even if new engine technologies have begun to appear. Some planes that will be flying in 2050 are being built now and there is no line of sight to an alternative technology, so presumably the current generation of planes will continue to be built for several decades.

With no CCS, it means that the fuels must be synthetically produced, either from biomass or by chemical conversion of hydrogen (generated by electrolysis of water using solar energy) and carbon dioxide (extracted from the air), such that they have a net-zero impact on atmospheric carbon dioxide. But these synthesis technologies hardly exist today, although parts of the possible process do (the Shell synthetic fuel plant in Qatar which uses natural gas as the starting point). Just meeting aviation and marine needs with synthetic fuel plants in 2050 would require some 100 large scale facilities, starting from a current position of zero (or perhaps two, if the synthesis reactors in the handful of existing facilities were re-purposed).

A 100% renewable energy world will still require an energy carrier that isn’t electricity, for example for intense heat in certain combustion applications. Hydrogen could be such a carrier and could also be used for energy storage as well as having a role in liquid fuel synthesis. But the scale of a global hydrogen industry to support the renewable energy world would far exceed the global Liquefied Natural Gas (LNG) industry we have today. The LNG industry includes around 300 million tonnes per annum of liquefaction capacity and some 400 LNG tankers. That amounts to about 15 EJ of final energy compared to the current global primary energy demand of 500 EJ. In a completely new energy system in 2050, a role for hydrogen as an energy carrier that reached 50 EJ would imply an industry that was four times the size of the current LNG system. The current LNG system has emerged over a period of 60 years; building a system four times the size in 30 years seems unlikely.

There is no doubt that the 1.5°C Paris pathway outlined in the book is an incredibly ambitious one, but it may even be beyond the bounds of the possible. It will take some time to review the full publication, so I hope to report back in the coming weeks on various aspects of the story presented.

Note: Scenarios are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Please read the full cautionary note in http://www.shell.com/skyscenario.

Timing for new technologies

dchone November 1, 2018

Over the past fortnight I have been fortunate to present the Sky Scenario to a number of different audiences in Doha, Delhi, Singapore and Canberra. Irrespective of the audience and location, questions always emerged around rates of transition in Sky and more often than not the question referred to the emergence of a hydrogen economy. In all cases, there was surprise that the emergence in the scenario is not as fast as expected.

Sky Scenario Hydrogen Economy

Hydrogen is an important energy carrier in Sky and its presence solves many issues associated with hard to abate sectors. This includes aviation, heavy industry and road freight. For example and as noted in a recent post, hydrogen can be used instead of coal for reducing ores to metals in the metallurgical industry. But within Sky, these solutions take some decades to emerge and don’t really grow to meaningful scale until well into the second half of the century.

This then raises the question of the rate of deployment of a new energy technology. Historically, new energy technologies can take 30 years to move from first application to meaningful deployment, which in turn may be as little as one percent of the system. It is only when such a level is reached that the true future potential of the technology starts to become apparent. The analysis behind this finding was conducted by members of the Shell Scenario team back in 2008-2009 and subsequently published in Nature magazine (No Quick Switch to Low-Carbon Energy – Nature 462 – 3 Dec 2009 – Kramer and Haigh).

As an example, solar PV (photovoltaic cells) started its long journey back in the late 1970s and is only now building towards 1% of global energy demand, although within the electricity sector its contribution is approaching 4%. That is a 30+ year journey to scale. Wind has followed a similar path. Electric vehicles have had many false starts, including a large scale false start around the turn of the last century which was soon eclipsed by the Ford Model T. The pathway for nuclear was exceptional; it emerged from projects in the Second World War and developed quite rapidly from the early 1960s, but has remained largely static during this century at 5% of the global energy mix. The time from the first nuclear reactor in 1942 to 1% of global electricity generation was only 20 years.

But why so long? Take for example the potential application of hydrogen in iron ore smelting instead of the traditional use of coal. The chemistry of the process is well understood, but not a single demonstration of the process exists. However, a consortium of northern European companies have announced the planned construction of a pilot plant, with a view to have an operational process by 2035. Should this be successful, the first commercial scale plant may then be considered, which in turn will take some time for design, funding, decision and then construction. Future deployment by other companies may rest on a ‘wait-and-see’ decision following the start-up of such a first facility.

While the number of large blast furnaces in the world is in the dozens, it would still take many years to replace them all. In Sky, the heavy industry sector that utilises hydrogen begins to emerge after 2045, which aligns with the above consideration of suitable process designs being ready by the late 2030s and construction proceeding from that point in time. Between 2055 and 2080 the sector grows by a factor of six, which represents a rapid transition to the new technology.

The same may be true of a sector such as aviation, but possibly with an even later start. Aviation is completely dependent on energy dense hydrocarbon fuels, although there is some discussion of electric planes for very short haul routes. Hydrogen might emerge as a fuel for long-haul aviation and in Sky, we imagined that this would be the case. There has been some research over the years, but apparently very little at the moment. A Google search in the UK throws up a 2010 BBC report that notes hydrogen propulsion had been shelved completely by plane makers in favour of biofuels and continued efficiency improvements, although the same search also reveals a company in Singapore attempting development of a small test plane. While synthetic hydrocarbon fuels of some description may win the day in aviation, there is always the possibility of another contender emerging, but probably not yet. In Sky a first intercontinental hydrogen prototype flies in the 2040s, but scaled investment and use of hydrogen in aviation doesn’t commence in earnest until the 2050s. This is perhaps the earliest such deployment could be envisaged given the current state of development.

The thinking around transition timing discussed above is built into the Sky scenario, but it has also been pushed where possible to obtain the fastest possible transition. Big systems take time to change and major investments in emerging energy technologies come with caution and a lower appetite for risk. One aspect favouring this transition is the potential fragmentation of the energy system into smaller systems, including microgrids, local processing of waste and biomass (where local collection favours a smaller scale business model) and perhaps even technologies such as small modular nuclear reactors. Each of these can be built with smaller individual investments, negating the more cautious big investment approach.

Note: Scenarios are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Please read the full cautionary note in www.shell.com/skyscenario.

Closing another technology door?

dchone February 1, 2018

The National Oceanic and Atmospheric Administration have now released 2017 temperature data, showing the year to be the third warmest on record, but also the warmest in a non-El Nino year. The story resulted in a flurry of articles across the media world.

The New York Times published a story which attempted to summarize current efforts to reduce global emissions. Their take on the issue is akin to the Hans Christian Andersen parable, The Emperor’s New Clothes, where the Emperor was tricked into believing that his new clothes were the finest available, when in fact he was wearing nothing at all. The New York Times notes;

Inveigled by three decades of supposed diplomatic progress — coupled with falling prices of wind turbines, solar panels and batteries — the activists, technologists and policymakers driving the strategy against climate change seem to have concluded that the job can be done without unpalatable choices. And the group is closing doors that it would do best to keep open.

The choices they are referring to are nuclear, various forms of carbon capture and storage (CCS) and geoengineering. Readers of my posts over many years, and my recent book, Putting the Genie Back will recognise my particular passion for the second on this list, the role of CCS. As I see it, no matter which way you do the maths, the climate problem doesn’t resolve itself without some form of large scale carbon capture. Building carbon capture and storage capacity offers a further option which gets little attention today but may well be vital for the next generation; the prospect of climate restoration, or removal of additional quantities of carbon dioxide from the atmosphere in the 22nd century to bring the temperature back towards pre-industrial levels.

But as if on cue with the NYT story, researchers from the Potsdam Institute for Climate Impact Research (PIK) published a paper in Nature Climate (subscription required) which questions the implementation of BECCS in emissions mitigation. BECCS, or bio-energy with CCS, is conventional CCS applied on power plants operating with a biomass feedstock as their energy source. The geologically stored CO2 has been removed from the atmosphere via the carbon contained in the biomass. The Guardian also published a similar story.

BECCS plays a critical role in many climate models and the scenarios developed with them, in that it offers a route to remove emissions from ongoing use of fossil fuel in sectors where the technology pathway for zero emissions either doesn’t exist or is in its infancy. Aviation is one such example; there is no line of sight today to alternative fuels or means of propulsion for aviation, except for a drop-in hydrocarbon substitute produced via a biofuel route. A large-scale alternative to current aviation fuel or a brand-new propulsion system for planes will take decades to fully develop and deploy.

BECCS is also used extensively in the scenarios published as part of the IPCC 5th Assessment Report and are expected to feature in the IPCC Special Report on 1.5°C, coming out later this year.

The concern raised by the PIK researchers is that large scale growth of suitable biomass for power stations would disrupt other earth systems, breaching various planetary boundaries such as freshwater availability. They conclude that socio-economic pathways requiring substantial BECCS bear the risk of triggering potentially irreversible changes in the Earth system through extensive land-use change, water use, alteration of biogeochemical flows and compromising biosphere integrity.

While it is important to fully understand the impact and risks of various energy pathways, simply removing yet another mitigation option from the table isn’t helpful for a discussion that is running very short of possible routes forward. The broader use of biomass for energy, together with nature based solutions, including reforestation, changes in agricultural practices and restoring degraded land is very likely to figure in our energy future, so should be looked at more holistically. For example, looking at various practices around the world today offers great potential, when comparing the range of crop yields from what is otherwise similar land. Introducing best practices more widely could allow significant scope for bio-energy production without impairing other systems.

Carbon market developments in 2017

dchone January 15, 2018

Looking back at my 2017 post on developments in 2016, it becomes clear that the past twelve months have been more consolidation than progress in terms of carbon market development. It also means that the coloured map (below) hasn’t really changed, apart from a slight set-back and the very positive addition of Singapore.

A big story that emerged in 2016 was the prospect of a nationwide emissions trading system in China. Observers waited throughout 2017 for the formal commencement or at least an announcement, but news didn’t come until mid-December of an imminent launch. Rather than an economy wide cap-and-trade system, the government announced that an emissions rate based system would commence in the electricity sector. Harvard’s Rob Stavins has written extensively about it in a recent blog post.

The Chinese carbon market will double the share of global CO2 emissions covered by worldwide carbon-pricing systems to almost 25 percent.

China wasn’t the only country in the news. Also within the Asian economy, Singapore announced the start of a carbon tax based system from 2019, with a draft Bill appearing for consultation during 2017. The tax will be applied on power stations and other large direct emitters which produce more than 25,000 tonnes of carbon dioxide equivalent of greenhouse gases a year. There are currently 30 to 40 of such large emitters, mainly from the petroleum refining, chemicals and semiconductor sectors. The proposed tax will be around S$10-$20 per tonne CO2.

In North America, progress was mixed. The focus continued to be on Canada with the September announcement that Ontario had entered into an agreement to formally link its carbon market with markets in Quebec and California effective January 1, 2018. The Agreement will allow the governments of Ontario, Quebec and California (the Parties) to hold joint auction of greenhouse gas emission allowances and to harmonize regulations and reporting requirements. An important addition to this was the passage of a Bill in California to extend that State’s cap-and-trade system through to 2030. But with the announcement that the US would be leaving the Paris Agreement and that the Administration would be rolling back the Obama Clean Power Plan, progress in the rest of the country was muted.

In Central Asia, the Kazakhstan emissions trading system remained suspended (hence the change from green to orange), but following an announcement by the government, this should revert to operational status in 2018.

South Africa also moved forward slightly, with a further consultation announced on its draft carbon tax legislation.

Here in the EU, the ETS continued, but 2018 saw much needed reforms agreed. The main elements of the agreement are:

The linear reduction factor will be 2.2 % from 2021;
Each year from 2019 to 2023, 24 % of the cumulative surplus of allowances will go to the Market Stability Reserve; from 2023 the allowances held in the reserve above the total number of allowances auctioned during the previous year should be cancelled;
Conditional lowering of the auction share by 3 % of the total quantity if needed, to avoid application of the cross-sectoral correction factor;
Member States may voluntarily cancel allowances to offset national climate and energy policies that reduce the demand.

The EU ETS expanded slightly with the agreement of a link with the Swiss ETS, although it may be some time before this comes into practice. The ratification of the agreement will require the approval of the Council and Parliament, which is expected in early 2018. When parties are technically ready to connect the two systems, they will formally deposit their instruments of ratification. The agreement will enter into force at the start of the following year.

As the year concluded and nations met in Bonn for COP23, it was also clear that carbon pricing, both through taxation or a trading system was being widely considered. This offers considerable hope for the years to come.

A new era for aviation?

dchone October 9, 2017

The pressure to reduce carbon dioxide emissions and the prospect of a world running largely on renewable electricity has sent research and development teams in every sector back to their respective drawing boards to look at options that might exist for electrification. Perhaps the most challenging sector is aviation, where liquid hydrocarbon fuels are the only form of energy carrier available (mainly of fossil origin, but with some bio-origin fuels now appearing). The dependency on hydrocarbons is due to their high energy density and the challenge with fuel to weight ratio that planes have. However, fuel costs can represent up to 70% of total costs for an airline, so the business model tends to focus on efficiency as a primary consideration. Efficiency isn’t just about the plane itself, but about maximising passenger load, minimising extraneous weight, limiting taxiing and air traffic delays, using electricity for power at departure gates and optimising routes.

In the light of all the above, the idea of electrification in aviation is tantalizing, but there is little sight of this happening. At one end of the spectrum there is the prospect of single person electric drone taxis for short hops in cities, but after that there is nothing, until last week. EasyJet, in conjunction with the startup, Wright Electric, announced that they hoped to be flying a short-haul battery electric passenger plane within a decade.

The concept illustration looks impressive, but is this really feasible? Battery energy density is a key determinant and it is moving rapidly in the right direction. The energy density difference between the traditional Lead-Acid battery, still the standard for starting most cars and the best lithium based batteries is nearing a factor of 10, but lithium based batteries are still a long way from Jet A1 fuel as shown in the table below. The difference in energy density on a weight basis is around twenty times, in favour of Jet A1.

	Jet A1	Current Li-Ion Battery	Emerging Li-Metal batteries
Energy MJ/kilogram	42.8	~0.7	1.8
Energy MJ/litre	37.4	~2.0	4.3

Like an electric car, the efficiency of a battery electric aeroplane would be significantly higher than the combustion engine equivalent, although the starting point for a modern jet engine already exceeds that of vehicles. The chart below (IPCC Report on Aviation 1999, chart from 1991) shows that overall efficiency of jet aircraft falls in the range 20-40%, but significant improvements have been made since then. A modern Boeing 787 would show an overall efficiency approaching 50% on the same chart.

Even with near 100% efficiency for the battery electric aeroplane, the energy density of Jet A1 still gives that fuel a factor of ten advantage. As such, it will be distance that suffers, given there is a weight restriction for aeroplanes.

I am a regular traveler out of London City Airport and often see the Embraer 190 plane, which is similar in size to the easyJet concept photograph distributed with their announcement. But the Embraer 190 has a range of over 4,500 km, so one tenth of this gets near to the 335 mile range goal mentioned by easyJet, ideal for the flight I often take from London City to Rotterdam. So on paper, this would appear to work, but a plane with a range limit of a few hundred miles might significantly restrict the operational flexibility that airlines enjoy; for example, it couldn’t be swapped at short notice for a London City to Rome flight, should that be necessary.

Battery electric planes also bring with them a particular design change – apart from the obvious. Currently, planes land some 20% lighter than they take off, as they burn the fuel. With battery electric planes, they will land heavier than they take off, because the discharge of the battery means oxidation, meaning it gains mass. This will require very different landing gear.

Another facet of the EasyJet announcement is the desire to see these planes carrying passengers within 10 years. Given that the plane is concept only and doesn’t come from an existing family of similar planes, this may be ambitious. The 787 Dreamliner was announced in concept by Boeing in early 2003, finally receiving certification in late 2011. That’s nearly nine years for what is essentially a new version of an existing product, albeit with some significant changes such as the use of carbon fibre in the fuselage. But the 787 then had problems with its battery system for on-board electronics, leading to a temporary grounding and eventual regular flights from April 2013.

The 787 was not Boeing’s first attempt at a new aircraft following the 777 series. In the late 1990s it started development of the Sonic Cruiser, releasing a concept proposal in March 2001. With aviation business models changing rapidly at that time, Boeing abandoned this concept and instead moved to the 787, but this evolutionary process still consumed valuable design years. At least from one perspective, it could be argued that the 787 took over 13 years to go from concept to regular use.

The Wright Electric concept represents a revolutionary change in aircraft design and propulsion, so there is every chance that this may take longer than anticipated to get going. It will require extensive certification and testing by airlines, airports and the aviation authorities and may go through more than one design iteration, depending in part on the evolution of battery technology and the resultant changes in energy to weight and volume ratios. The story of the Mitsubishi Regional Jet is outlined here, and is a saga of changes and delays spanning 17 years. It is a conventional jet aircraft, but represents a first for Mitsubishi for a very long time.

A further ambitious aspect of this project is the notion that a start-up can take on the likes of Boeing and Airbus and find the necessary investors to back what is typically a multi-billion dollar investment in design, engineering, prototype development, manufacturing, testing and certification of a new aeroplane.

Behind all this is the pressing need for electrification across society, so this type of thinking and risk taking is essential. The question that remains though, is whether I will be able to ride in such a plane from London City Airport before 2030.

First steps forward for aviation

dchone October 13, 2016

Along with the rush to ratify the Paris Agreement and pass the 55 / 55 criteria for entry into force, last week saw the International Civil Aviation Organisation (ICAO) agree on a global Market Based Measure (MBM) system to begin to manage the emissions of CO2 from international aviation. The most recent IEA assessment for the aviation sector (2014 data) puts emissions at 504 Mt CO2, or 1.5% of global CO2 emissions from energy use. This represents a rise of 95% over 1990 levels versus a 58% rise in CO2 emissions more broadly over the same period. Nevertheless, this indicates a considerable efficiency improvement for aviation, as Revenue Passenger Kilometres (RPK) have nearly tripled in the same period. That same IEA report highlights a recent slowing down in global emissions, but the outlook for aviation does not appear to be following a similar pattern. A September market update from Boeing notes that China alone could order over 6,800 planes to a value of $1 trillion in the next 20 years.

As was the case with the Kyoto Protocol, international aviation emissions are not covered by the Paris Agreement. Rather, the aviation industry has spent the last few years negotiating an industry agreement to manage emissions. While there is an important emphasis on efficiency improvements and the longer term application of synthetic fuels, primarily from biomass, the centrepiece of the approach is an offset system utilising the global carbon markets. Collectively the approach will be known as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). This is similar to an approach that the IMO were considering for the marine sector in the run-up to COP 15 in Copenhagen, but didn’t implement.

The CORSIA calls for international aviation to address and offset its emissions through the reduction of emissions elsewhere (outside of the international aviation sector), involving the use of “emissions units”. Two main types of emissions units exist: “offset credits” from crediting mechanisms and “allowances” from emissions trading schemes. Offsetting could be through the acquisition and redemption of emissions units, arising from different sources of emission reductions achieved through mechanisms (e.g. UNFCCC’s Clean Development Mechanism), programmes (e.g. REDD+ – reducing emissions from deforestation and forest degradation in developing countries) or projects (e.g. substituting coal-fired stoves with solar cookers). The CORSIA will be implemented in a phased approach throughout the 2020s.

Offsetting of aviation emissions is really the only practical route forward for the industry, although synthetic fuels will likely play an important role in the decades ahead. But the offset strategy and approach needs to look toward a world of net-zero emissions, as required by the Paris Agreement. Recent scenario work by Shell that looks forward at possible pathways to a net-zero emission energy system sees aviation little changed from today, other than in size (expanding from 7 EJ today to 30 EJ by late in the century) and efficiency. While the overall transport scenario sees significant electrification, for aviation the primary fuel remains hydrocarbon based.

By later in the century hydrogen based jets may have appeared, but such a development remains distant with no current line of sight to such an outcome. Although planes have an operational life of about 25 years, a series, such as the Boeing 747 family, can extend for considerably longer. In the case of the 747 development started in the early to mid-1960s and with the order books seemingly drawing to a close on the 747-8 (despite a recent significant order for 747-8 freighters), the last 747 might leave the skies as late as 2050. That’s 85 years. This is because of the huge development costs for new planes, let alone what it might take for a fundamental shift to hydrogen.

While the offset approach envisaged for the 2020s will use the full range of current emissions trading instruments, as emissions fall globally aviation will need to look to a sequestration strategy – i.e. sinks, to use the terminology of the Paris Agreement. ICAO have hinted at this with the inclusion of REDD+ in the portfolio of measures, but a long term reliance on forestry may not be sufficient to meet their needs.

At the Chatham House Climate Conference held in London very recently, the subject of carbon dioxide sinks was on the agenda. The speakers noted that sinks would be an important part of the portfolio of actions to reach net-zero emissions. Within the sinks, there is a portfolio of approaches as well, with the likely outcome that all will have to be used. This includes direct CCS in conjunction with fossil fuel use, but also a variety of atmospheric carbon dioxide removal technologies (see below).

Coming back to the task confronting ICAO, one speaker at the Chatham House Conference noted that the journey to net-zero emissions cannot rely solely on soil carbon and reforestation approaches. This is simply because we cannot hope to get the biosphere back to the state it was in 200+ years ago and yet go forward with a population reaching 10 billion people and the pressures that will put on the expansion of our agricultural system. Hence the argument for a portfolio approach to CCS.

As ICAO moves forward they will also have to consider a portfolio approach. Current carbon trading instruments will work for now, but they also need to consider early investment in nascent technologies such as BECCS (bio-energy with CCS) and DACCS (direct air capture with geological storage). While industrial CCS has emerged as a scalable technology, offshoots such as DACCS operate at pilot scale. Given sufficient attention from ICAO, these could be at a demonstration level in the 2020s, with the goal of scalability by 2030.

“The New Lens Scenarios” and “A Better Life with a Healthy Planet” are part of an ongoing process – scenario-building – used in Shell for more than 40 years to challenge executives’ perspectives on the future business environment. We base them on plausible assumptions and quantification, and they are designed to stretch management thinking and even to consider events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes, and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities.

It is important to note that Shell’s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA’s 450 scenario, it includes assets across a spectrum of energy intensities including some with above –average intensity. While we seek to enhance our operations’ average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years.