Category: Low carbon economy

The pencil problem

dchone October 9, 2023

Many years ago the well know economist Milton Friedman made a short film about pencils that continues to resonate today. While the film can be interpreted as simply a defence for capitalism, which Friedman was famous for defending, it nevertheless does make a good point about the complexity of the world we live in. The manufacture of an item as simple as a pencil requires such a wide range of resources, skills, machines and knowledge that no one person could easily craft a pencil as refined as the product we can buy for not very much money in a local shop or online.

The steps to make a pencil are many, but at least the basics are outlined in this short video.

What is missing however, from both Friedman’s and the manufacturing video, is any reference to the energy (and hydrocarbon materials) required and where that energy (and hydrocarbons) might come from. There’s almost an underlying assumption that the energy is just there, available in abundance. But the complexity of the system to deliver the pencil relies entirely on a complex energy system that we are collectively now trying to change. Unfortunately a rhetoric has emerged that this change will be both simple and quick, yet neither are true. The energy system that delivered the pencil took over 150 years to evolve, and it continues to do so even without the more recent changes related to renewable energy. But the pencil that emerges has CO₂ emissions related both directly and indirectly to its manufacture, largely because of the energy system used to power the manufacturing steps, which of course is why that energy system needs to change. However, that energy system is only there because we need pencils, and other manufactured goods and energy services.

Within the pencil the most visible material is wood, which is often cedar as noted in the above video. While this is entirely natural, sourcing it requires considerable amounts of energy to fell trees, transport the logs, cut and shape the wood, then move the final wood pieces to the pencil manufacturing plant. While some of this energy is electricity, there is considerable use of diesel for transport.

The pencil lead is noted as being a mixture of graphite and clay, baked at over 800°C in a furnace. The world’s largest graphite producers are China, Madagascar, Mozambique and Brazil, so there will almost always be considerable transport involved, probably by sea using marine fuel oil or marine diesel. As well as the energy used in the mining and refining process, baking the graphite with clay will likely require natural gas. But there is also synthetic graphite as an alternative. Synthetic graphite is produced through a complex process of baking petroleum coke at very high temperatures. Synthetic graphite can have a purity of over 99% carbon, and it is used in manufactured products where extremely pure material is required, which includes pencils.

Then there is the glue. Modern wood glues are largely synthetic, made from petroleum-derived plastics like polyvinyl acetate (PVA). Almost all vinyl acetate monomer is now produced via the vapor-phase reaction of ethylene and acetic acid over a noble-metal catalyst, usually palladium. The reaction is typically carried out at 175–200 ºC and 5–9 bar pressure. The ethylene might come from an ethane cracker, such as the Shell facility in Pennsylvania which uses the ethane in natural gas to produce ethylene for the further manufacture of chemicals and plastics (like polyethylene). But along the way considerable energy is required for the synthesis process, also coming from fuels such as natural gas, but some electricity as well which could be sourced renewably.

The ferrule at the end of the pencil is made of aluminium, which is also an energy intensive mining, refining, electrolysis based process with multiple transport steps. Much of this requires liquid fuels and natural gas, although the electrolysis step often uses renewable electricity in places of abundance, like Iceland. However, the electrolysis currently requires graphite in the anode and cathode, with the anode being consumed during the electrolysis process (producing CO₂) and needing constant replacement.

Finally there is the pencil eraser, which may be made from natural rubber sourced from a country such as Malaysia and transported on ships using marine fuels. But much of the global rubber industry is now based on synthetic rubber, which derives from yet another complex chemical process. Synthetic rubber production begins with the refining of oil or other hydrocarbons. During the refining process, naphtha is produced. The naphtha is then used to produce monomers such as styrene and isoprene, which are necessary for the production of synthetic rubber. The most common synthetic rubber is styrene-butadiene rubber (SBR) derived from the copolymerization of styrene and 1,3-butadiene.

The paint used to decorate the pencil may also have various components in it derived from crude oil and the manufacturing process will require energy as well.

So far I have only discussed the pencil itself, but there is an enormous dependency on milling machines, cutting devices, refineries, pipes, ships, trucks, tanks, storage depots, roads, trains and various other pieces of infrastructure, many of which are made of steel and therefore require iron ore mining and coal fired smelting for production. And all the roads used for transport, including the final delivery of the pencil to a shop or to a home to fulfil an online order, are largely made of bitumen, derived from crude oil.

While the pencil itself is a relatively simple implement, as Milton Friedman points out it requires the cooperation of thousands of people to produce. But it also requires the operation of hundreds of different mining, chemical and energy production facilities, not to mention factories making machines, trucks, ships and other pieces of equipment. All of these run on energy and most will use coal, oil or natural gas to do so. Only a fraction have been fully converted to renewable power, although many more may use some renewable energy as part of the electricity the facility uses or the final delivery may be in an electric van. Some of the processes required to ultimately make a pencil may not yet have an alternative that doesn’t use oil or natural gas as a feedstock for the carbon in the final product.

The job ahead is to convert all of these, or rebuild them, to facilities that don’t use coal, oil products or natural gas for energy. In our recently released Sky 2050 scenario, the near 80 years between now and the end of the century sees a world largely achieve this, but at a pace of change that is unprecedented. In the Sky 2050 scenario, in the year 2100, fossil fuels make up less than 5% of primary energy demand, with a good portion of that going into products like pencils rather than being used for energy. But this is not the case at all in 2050, when fossil fuels are still about a third of primary energy and therefore emissions from their use must be managed through land use mechanisms and geological storage of CO₂. This is what net zero is all about, since zero use of fossil energy is much more a 22^nd century possibility than it is a 21^st century reality.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Developing countries hold the key to reaching Net Zero Emissions

dchone September 1, 2023

A guest post by my scenario team colleagues Thomas Akkerhuis and Georgios Bonias

In a few days, leaders from the world’s largest economies will gather in India for the 2023 G20 summit. The G20 Presidency has included Green Development as one of the main themes of the summit with a specific mention on ‘ensuring just energy transitions for developing countries’. At the same time, given the volatility and uncertainty in energy markets, many countries are looking to secure their own energy sources, with fossil fuel extraction as part of plan. Looking forwards, how might the emerging and least developed parts of the global economy respond to the call for green development, net-zero emissions and much lower use of fossil fuels? Looking back, it’s important not to forget that today’s developed economies largely sprang to life on the back of coal, then oil, and later naturl gas, with no CO₂ emission constraints to consider.

A few months ago, Shell published The Energy Security Scenarios, which explore two different pathways for the energy transition, driven by the global shift towards a security mindset.

Sky 2050 – a very rapid transition where global climate security overcomes shorter-term national concerns.
Archipelagos – where national security concerns create ongoing headwinds in an otherwise rapid transition.

To help explore how different countries might navigate through the transition, four different archetypes were identified, with nations behaving in similar ways when they share similar vulnerabilities to energy supply disruption and energy price volatility. In both scenarios, the security mindset leads to aggressively competitive, rather than co-operative, decarbonisation.

The archetypes are:

Green Dream – which can be observed in the European Union. The EU’s wealth enables it to deal with energy price volatility, but its advanced economies and depleted oil and gas resources make it highly vulnerable to energy supply failures. These countries seek security by driving hard to end the use of fossil fuels.
Innovation Wins – which can be seen in countries like the USA and major energy resource holders like the United Arab Emirates. These countries are often self-sufficient in energy so are not vulnerable to supply failures, but their political systems are exposed to swings in the energy price. These countries do not feel so threatened in the short term, but invest heavily in innovation and infrastructure as longer-term solutions to their energy needs and the needs of their energy customers.
Great Wall of Change – which is mainly relevant to China. China is insulated from both supply and price concerns by several factors: the size of its economy, its large coal reserves, and the scale of the investments it is making in its own energy supply and infrastructure. China takes a cautious approach, aware of the need to move away from coal – by far the most emissions-intensive fossil fuel – and carefully monitoring global energy market developments. It looks to use its manufacturing strength to grow its position as a global low-carbon energy powerhouse.
Surfers – which subdivides into Emergent Surfers, like India and Brazil, and Rising Surfers being the world’s least developed economies. The latter includes most countries from the African continent, and they are more focused on establishing the basic foundations for development, such as infrastructure. Surfers countries do not produce significant amounts of energy and so they are vulnerable to both energy supply disruption and price swings. Emergent Surfers quickly adopt new technologies while Rising Surfers focus more on access to energy. Surfers seek out partnerships and try to ride the waves of opportunity created by other archetype groups.

We have used the archetypes to explore how people, wealth and energy are distributed. The Green Dream and Innovation Wins archetypes currently account for 23% of the global population but almost 60% of global energy demand and 63% of the global GDP. On the other hand, Surfers countries make up more than half of the world population but only about a third of the global energy demand and GDP.

The skewness of GDP distribution, favouring Innovation Wins and Green Dream, comes at a cost, being the large contribution to global anthropogenic CO₂ emissions that these countries have made. Based on our analysis of data from 1850 onwards, the cumulative CO₂ emissions for countries in these archetypes are more than 600 tonnes per current inhabitant, while for the Great Wall of Change archetype they are about 140 tonnes. For Emergent Surfers countries the number is just above 100 tonnes of CO₂ and for Rising Surfers around 30 tonnes.

The share of the different archetypes in annual CO₂ emissions has been going through significant changes in recent decades, reflecting the changing dynamics in the global economy. In practice, CO₂ shares are even more skewed. For example, China’s emissions are partially due to product demand in Innovation Wins and Green Dream. The same is true for land use change emissions, where Brazilian deforestation is partially a result of global food demand.

Given that countries in the Great Wall of Change and particularly in the Surfers archetypes are expected to have strong economic growth in the coming years and decades, we looked at the CO₂ profiles that these countries will need to have, according to the Sky 2050 scenario, in order for the world to be at NZE by 2050. Historical data for all archetypes are shown in grey lines and the possible future pathways, based on the Sky 2050 scenario analysis, are shown in colour.

The key message coming from this analysis is that developing countries will need to achieve their projected economic growth following pathways of much lower CO₂ emissions than today’s developed countries did over the last 100 years. If countries in the Great Wall of Change and Surfers archetypes were to follow similar CO₂ emissions pathways as the Green Dream and Innovation Wins countries when reaching similar levels of GDP/capita, then global CO₂ emissions at 2050 would be close to 80 Gt per year, which is double of today’s levels, instead of NZE as is required to stop global warming. Much lower CO₂ pathways can be achieved in three ways:

Use fewer energy services compared to developed economies at a similar level of income.
Use energy services that consume less energy (higher efficiency).
Use energy services that make use of cleaner energy (lower fossil fuel share)

The first is not a viable option and therefore we do not make use of it. However, some economies may appear to follow this pathway, but in reality a modal shift is taking place. For example, shared ownership of vehicles has never been established at scale in the USA or EU, but it could emerge in parts of Africa. However, this doesn’t mean that people travel less. Clean electricity will address both the second and third points: electrified energy services are often much more energy efficient, and when the electricity is clean, that brings the additional benefit of emissions reduction. For the non-electrified parts of the energy system, low life-cycle emission hydrocarbons (such as biofuels) and hydrogen can still address the third point.

So what happens in the two scenarios?

Sky 2050 must, by necessity, embrace an energy system leapfrog for developing counties simply to reach net-zero globally by 2050. But despite national security interests prevailing in Archipelagos, broadly the same trend is followed. For the Rising Surfers group in Archipelagos, per capita fossil fuel use never gets to the levels seen in any of the other archetypes due to the growing availability and falling cost of alternative energy technologies. For example, as Rising Surfers develop in Archipelagos:

Coal never dominates the electricity sector as it has in most other developed regions. This is further supported by the high potential for solar energy production that many countries in the Rising Surfers group have.

The use of hydrocarbon fuels for mobility in Rising Surfers will peak far below the Green Dream / Innovation Wins levels.

The buildings sector in Rising Surfers will switch directly from traditional biomass to clean electricity – skipping phases of coal-fired power and gas-fired boilers.

In theory, the transition is possible given the progress in technology and the lower carbon energy options which are becoming available nowadays. Rising Surfers are well positioned in some important ways. For example, Africa, having less than 30% of the global land area, has an estimated 58% of the global resource potential for solar energy. This is a useful contrast with Innovations Wins and Green Dream who have built their wealth on traditional sources of energy. In Sky 2050, by 2100, almost 30% of global direct air capture capacity is located in these countries, potentially generating huge revenue through removals trade under Article 6 of the Paris Agreement. From an energy demand perspective, their climate will eliminate an important portion of heating demand in buildings sectors which is often provided by direct combustion of natural gas. By contrast, air cooling is already an electricity based energy service. Efficiency will grow due to urbanization trends, with over 80% of the Rising Surfers’ population living in cities in the second half of the century (vs. less than half today).

But here will also be barriers. Although some green technologies are cheaper than their fossil fuel counterparts, many are not, or require significant upfront investment. Building an electricity grid that can handle increasing electrification and the intermittency of solar will be a challenge. It will be critical and fair to have mechanisms through which developing countries can be supported in this alternative pathway and the new energy technologies made widely available as quickly as possible. This will be one of the many challenges faced by the G20 when they meet in India. The world’s ambition to reach net zero emissions by 2050 will depend on it.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

It’s climate target season, but one more target is needed

dchone July 31, 2023

One of the features of an upcoming COP is that the months prior often bring with them a slew of proposals for new global targets and initiatives. This year is no different, perhaps also driven by the extreme heat and precipitation that has been challenging the Northern Hemisphere. In July, COP 28 President, Dr. Sultan al-Jaber, put forward a proposed COP28 action plan in a letter to the Parties. Along with a number of calls for increasingly rapid transformation and improved financing for developing countries, the plan includes the following three specific energy system targets which were also widely reported on in the media:

Reach a global tripling of renewables capacity by 2030.
Doubling of the average global rate of energy efficiency improvements by 2030.
A dramatic scale up of new low-carbon hydrogen production and decarbonization of existing hydrogen production to reach an overall doubling of hydrogen production.

The plan also includes emission reduction targets for the oil and gas industry to achieve by 2030 and includes a call to transform heavy-emitting sectors, including scaling up use of low-carbon hydrogen, carbon capture and storage, and carbon dioxide removal, aligned with science. However, no specific targets are included for these heavy-emitting sectors. This all represents quite a formidable ambition, but to put these three energy system targets into context the recent Shell Energy Security Scenarios provide a useful backdrop.

The scenarios comprise two different stories for the decades ahead, but both are built from the security-focused world in which we currently find ourselves. In Sky 2050, the troubles of the 2020s give way to intense global competition in a race to gain market share in the delivery of clean energy systems. Mutual interest prevails and net-zero emissions is achieved in 2050. But in the second scenario, Archipelagos, distrust, self-interest and security concerns prevail. Although a rapid transition takes place and emissions fall throughout the century, the net-zero goal isn’t realised until early in the 22^nd century. Nevertheless, warming is limited to 2.2°C above the 1850-1900 baseline period.

The Energy Security Scenarios data shows global renewable capacity at around 3,500 GW in 2023, implying a 2030 goal of around 10,000 GW. The 2023 capacity is comprised of 1,200 GW hydroelectricity, 1,200 GW solar PV (commercial at 800 GW and rooftop at 400 GW) and 1,100 GW wind power. There’s also 100 GW of commercial biomass burning, but not everyone considers this as renewable energy. While hydro and biomass show only modest increases over the remainder of this decade, wind and solar increase substantially in both scenarios. In 2023, solar PV looks to be increasing by about 300 GW and wind by 100 GW, although some of this may be related to COVID delayed projects now coming online. With seven full years before the end of 2030, delivery at these scales could mean some 3,300 GW of solar in total and 1800 GW of wind in 2030, but this is well below the goal of some 10,000 GW even with hydro and biomass included. The deployment rate needs to substantially increase and that is exactly what is happening in Sky 2050.

In Sky 2050 and Archipelagos, the growth to 2035 is shown below.

In Sky 2050 the goal is reached in 2030 but, in Archipelagos, it’s not until about 2035. This isn’t about different levels of ambition across the scenarios, but instead represents the very real headwinds that rapid deployment could face, particularly in the circumstances of Archipelagos. Trade disruption is a major outcome of the story, yet there is an important dependency on trade within the solar PV story. The minerals required, the manufacture of the panels, the grid expansion (including across borders) and even the labour required for installation all depend on good trading relationships and the free movement of people for work. For a goal of 10,000+ GW, which might include 5,000 GW of solar PV, the current global manufacturing capacity and installation capability of around 300+ GW per year would have to at least triple to around 1000 GW per year, which means adding 100 GW of new production and installation capability each and every year between now and 2030. The project pipeline for new manufacturing facilities looks robust, with the limitation on deployment in many locations being grid connectivity.

The second goal is the desire to double the average global rate of energy efficiency improvements across sectors. This is quite hard to unpick without further details, but it certainly doesn’t mean ‘doubling energy efficiency’ as reported by some media outlets. The goal could be in relation to the energy intensity of the global economy, which would be measured in energy use per unit of GDP, or on the provision of energy services, i.e. a true efficiency measure, which could be in units such as tonne-km/MJ for road freight. For this discussion I will focus on the former.

In 2022 global energy use was about 4.6 GJ per US$1000 (2016) GDP. This had improved from 5.64 GJ in 2010, meaning an improvement of some 20% or about 1.5% per year. Presumably the ambition means shifting this to 3% per annum. If this were the case then energy use would fall to around 3.7 GJ per USS$1000 by 2030. Both Sky 2050 and Archipelagos are within this range, sitting respectively 0.1 GJ either side in 2030. Apart from general societal improvements in energy efficiency, which have been ongoing for decades (9.5 GJ per US$1000 (2016) GDP back in 1960), the main driver of change in this decade will be electrification of energy services. For example, using gasoline to power a car has a well-to-wheel efficiency of about 25%, but using electricity derived from solar or wind has a turbine-(or panel)-to-wheel efficiency of around 70% or more (losses in transmission and storage of electricity combined with the efficiency of the vehicle itself). This COP28 goal is a proxy for electrification, in all its forms. That means road transport, home cooking and heating and industrial use of electricity for heat. It looks quite possible, even in the slower Archipelagos transition.

Finally there is the goal relating to hydrogen production, which seems very ambitious, but perhaps this depends on how it is interpreted. The letter calls for an overall doubling of hydrogen production, without a year being given. The Financial Times reported this as ‘Double hydrogen production to 180mn tonnes per year by 2030’. This number relates to the current global production of hydrogen which is about 90 million tonnes per year, but most of this sits within industrial processes such as the Haber process to make ammonia. The Haber process starts with natural gas, and hydrogen is an intermediate product in the production. Most global hydrogen production today comes from natural gas, releasing carbon dioxide as part of the conversion process. Some also comes from coal, with significantly increased emissions as a result.

Hydrogen is also produced as a final energy product where it is then sold for other uses, such as in a fuel cell to power a truck or within a subsequent industrial process. This is where the future lies, with final energy green hydrogen replacing fuels such as diesel in trucks, Jet A1 in planes and coal in iron ore smelting. These applications amount to a small production of final energy hydrogen today, perhaps only 100,000 tonnes per annum. So doubling this number wouldn’t be ambitious at all and is almost certainly not what the letter is calling for.

If we use the current overall global production of hydrogen and wish to double that by 2030, then the COP28 target would have the world at 180 million tonnes per year (as the Financial Times noted), which presumably means about 80 million tonnes for new final energy applications such as fuel cells in transport and iron ore smelting. This is considerably in excess of even the Sky 2050 scenario, which sees 10 million tonnes in 2030 and doesn’t reach 80 million tonnes of final energy hydrogen until 2040. In Archipelagos that date moves out to 2055.

The challenge for hydrogen may not be the ability to produce it, given that electrolyser manufacturing capacity is ramping up very quickly. 80 million tonnes per annum of green hydrogen would require some 600 GW of electrolyser capacity to produce. According to the IEA, global electrolyser manufacturing capacity reached almost 11 GW per year in 2022, and based on company announcements, the global manufacturing capacity for electrolysers could reach more than 130 GW per year by 2030. This could deliver nearly 400 GW of capacity by 2030, still short of the COP28 goal but not markedly so. It’s also possible that significant electrolyser capacity could be introduced to replace the existing steam reforming of natural gas for ammonia production and this would certainly reduce emissions; but it wouldn’t create new demand for hydrogen as required by the target.

The real issue for hydrogen as final energy (or a hydrogen carrier such as ammonia which is being looked at for ships) is creating that demand. There is almost none today. There are very few trucks that use hydrogen fuel cells – no planes, no ships and almost no industrial processes (other than those where it is an intermediate product now). In natural gas-based direct reduction ironmaking hydrogen does play a role, though this is in combination with carbon. Pure hydrogen is not currently used in ironmaking applications apart from a handful of pilot plants. The 10 million tonnes of new hydrogen final energy demand in Sky 2050 by 2030 is largely split between industry and road freight. Shipping is only just emerging in 2030 and aviation not until the 2040s.

While the hydrogen goal seems almost misplaced in its ambition or perhaps has simply been misinterpreted, the package of targets still represents an important step to achieve by the end of this decade. But what is puzzling is why the package didn’t include a specific target for carbon capture and storage given that the UAE and Dr. Sultan al-Jaber have discussed the importance of the technology on many occasions. Irrespective of the objections of some environmental groups, repeated analyses by multiple organisations (including the Shell scenarios) show that without carbon capture and storage technology the 1.5°C goal cannot be realised. We also shouldn’t forget that while CCS projects can take a few years to deliver, their scale is significant at 1+ million tonnes CO₂ per year per project once operational.

A substantial but not unachievable goal for 2030 would be to see the construction of 500 large scale (> 1 million tonnes per annum CO₂) CCS facilities. As of late 2022, the Global Carbon Capture and Storage Institute reported 30 facilities in operation, 11 under construction and about 150 in various stages of planning.

Business schools and climate change

dchone February 6, 2023

For quite a few years now I have found myself in front of a class of MBA students at a number of different institutions giving a talk on climate change and the energy transition. Each has their own take on how to tackle the subject. Some leave it up to me but at Harvard University the talk was entitled ‘The Future of Fossil Fuels in the Energy System’ and the session included a presentation from a well placed analyst in the finance sector. One common feature is the high level of interest in the class and the diverse and sometimes difficult range of questions that come my way. As such, the sessions are always enjoyable and something of a highlight of my job.

But another common feature is that my lecture was typically part of a module within the course that is optional and as such often populated by students who may have worked in the energy industry or have a close association with it. At least until recently, I didn’t get the impression that the bulk of the students saw energy and climate as pivotal to their future business success. But that appears to be changing.

In my experience, one of the leading business schools in promoting the climate issue as a much more important component of an MBA course is Tuck School of Business at Dartmouth College in Hanover, New Hampshire. I am particularly fortunate to have spoken there in person a few times, although more recently it has been a Zoom experience for the students. Professor Anant K. Sundaram leads in this area for Tuck and he and Robert Hansen are to be commended for elevating the subject further, with the publication in January of The Handbook of Business and Climate Change.

The Handbook is a weighty document, some 560 pages long, and covers a swathe of subjects from decarbonising electricity and managing aviation to carbon pricing, green bonds and ESG investing – to name but a few of the many subjects. Sundaram and Hansen haven’t written the book in entirety themselves, but instead sought out numerous authors to write the various chapters. I was honoured when Professor Sundaram asked me to write one of the opening chapters, helping set the scene for the book.

After some thought, I decided to call the chapter ‘The End of Combustion?’, perhaps to challenge the orthodoxy that is emerging around the future role of fossil fuels throughout society. In the chapter I explore the transition pathways that have appeared in recent years and where they may be taking us and the extent to which fossil fuel use might end by 2050. Regular readers of this blog may notice a few extracts from my posts or should at least recognise some regular themes. Perhaps not surprisingly the chapter raises the issue of natural and engineered carbon sinks and the many challenges society faces in creating a vast industry that few seem to actually want yet many recognise we desperately need.

This may not be a book for everyone and as a university textbook it’s unlikely to appear on the New York Times Best Seller list, but as an aide for business school students it should prove invaluable. Accelerating the energy transition will require all of the skills that a good business school seeks to impart on its students and all of the talented people that graduate as well. ‘Energy and climate change’ is no longer an optional module for the interested, but an essential part of a business background. There isn’t a company in the world that doesn’t use energy in one form or another and there’s unlikely to be a company that isn’t impacted by the transition or climate change or both.

Thanks to Tuck and Dartmouth for leading the way. And in case you missed it above, here is the link to the handbook and here is a Chapter 1 teaser link along with the detailed contents.

Electric vehicles and 2030

dchone December 7, 2020

Over a decade ago in one of my very first posts in this blog, I responded to what appeared to be a working assumption in government that there would be between 1 and 2 million electric cars on the road in the UK by 2020. It was hard to imagine that this would be the case and harder to calculate a pathway that would deliver such an outcome. I noted at the time that after a dozen years and some significant stimulus, the number of hybrid vehicles on UK roads had risen to 300,000. So here we are in late 2020 and the number of battery electric vehicles on the road in the UK is around 200,000. There are plug-in hybrids in addition to this, roughly doubling the total population of plug-in vehicles to just under 400,000.

In recent weeks the UK government has significantly stepped up its ambition regarding passenger electric vehicle deployment, with a decision to ban the sale of internal combustion engine vehicles in 2030, albeit with some relaxation to 2035 for plug-in hybrid vehicles. The announcement prompted me to look back at the decade old post and to look at how the numbers stack up this time around.

With a population of some 67 million people, the UK has about 33 million cars or just under one car for every two people. This ratio has been rising slowly over the past few years, even as new car sales have edged downwards so we might expect something like 37 million cars in the UK fleet by 2030 for a population of 70 million. Assuming there isn’t a mad rush for internal combustion engine vehicles (ICE) in the years just prior to 2030, then in 2030 we could see some 2.6 million cars sold; more than in 2019 but only reaching the levels seen in 2015 and 2016 despite having 15-20% more cars on the road in total.

This means that in 2030, 2.6 million cars with a battery must be available for UK buyers. They could be pure battery electric (BEV) or plug-in hybrid (PHEV). While the PHEVs are popular today, will that still be the case in 2030? It could be that manufacturers are already abandoning that class of vehicle to simplify production lines, with a focus on ICE production for legacy markets and BEV production for the future. After all, there would be no place for the PHEV in the UK after 2035.

The UK buys about 3.5 – 4.0 % of global passenger vehicle production, so the purchase of 2.6 million vehicles would notionally require 70 million BEVs in production globally, or all passenger vehicle production. However, with a leading policy position on BEV uptake and local vehicle production of some 1.3 million vehicles per annum, the UK could be commanding a relatively higher percentage of the BEV market. This has been the case in Norway in recent years. Of course, other jurisdictions are also declaring earlier dates for the BEV transition, so there could be competition for the available vehicles. But let’s assume the UK can command 8% of BEV production in 2030, which would imply the need for global BEV production of 35 million vehicles in 2030.

Current global BEV production is 2-2.5 million per year, or 3.2% of total passenger vehicle production. That will need to grow by a factor of at least fifteen in ten years for the UK to meet its goal. If there is a limitation in the supply chain for BEVs it is most likely to be the battery. It won’t be the car body, wheels, suspension, electronics, steering system or even the motor (but it is a very different component to ICE) as the capacity for these exists today in one form or another. But large scale Li-Ion battery production is a new and growing industry that requires new supply chains, new sources of critical minerals like cobalt and new processing facilities to make compounds such as lithium hexafluorophosphate.

Cobalt supply might be challenging as most global production comes from one country, the Democratic Republic of the Congo. It is an important component of Li-Ion battery chemistry although battery manufacturers are taking steps to minimize the requirement. Early battery cathodes contained nickel, manganese and cobalt in equal proportions, but companies such as LG Chem are close to producing cathodes with 80% nickel and only 10% cobalt. Tesla’s first Model S, launched in 2012, was built with an average of 11 kg of cobalt per vehicle, but according to Benchmark Minerals that was down to about 4.5 kg in its successor car, the Model 3, which launched in 2018. Nevertheless, if production were to hit 35 million vehicles in 2030 and each vehicle required 5 kg of cobalt, that still amounts to 175,000 tonnes of cobalt. Current global cobalt production capacity is 150,000 tonnes but it is a widely used mineral.

BEVs aren’t the only products competing for Li-Ion batteries. By 2030 we should be seeing a variety of haulage trucks in the market, more electric buses, a continued escalation of consumer devices running on batteries and a surge in demand for grid scale battery packs to help manage renewable intermittency. While battery recycling will be a large industry in the decades ahead, this won’t be the case in 2030 as society will only just be starting the recycle the batteries being produced today, which represent a tiny fraction of 2030s demand.

Other factors will also come into play, but the size of the battery in every car will be important. Early BEV models were relatively small with limited range and had battery storage of around 25 kWh – the Nissan Leaf is a good example. That’s because batteries were very expensive. Today with battery prices falling rapidly, one Nissan variant known as the Leaf e+ has a 62 kWh battery pack. A review of multiple models from several manufacturers shows battery sizes heading towards 75-100 kWh. So let’s assume the average 2030 car has an 80 kWh battery with a range of around 500 kms.

Global Li-Ion battery manufacturing capacity today is around 400 GWh, or enough to make 6 million BEVs with a 62 kWh battery onboard. However, half that capacity is being split between consumer electronics, larger vehicles such as electric buses and home or grid energy storage. In the 2030 world of 80 kWh battery packs and production of at least 35 million vehicles, nearly 3 TWh of battery manufacturing capacity will be needed just for the BEVs. That might mean 5 TWh in total to cater for all the other applications. And therein lies the potential issue.

There is no doubt that battery manufacturing capacity is ramping up rapidly, but where might we be in 2030? A recent analysis by Wood Mackenzie looks at the current project pipeline for new manufacturing facilities and expects a quadrupling to 1.3 TWh by 2030. The same article that discusses the analysis also notes that this is not the most bullish forecast. Bloomberg New Energy Finance expects 1 TWh of battery production capacity by 2025, while Benchmark Minerals expects 1 TWh of capacity by 2022/2023, 1.35 TWh by 2025, and 2.5 TWh by 2030, with China’s CATL accounting for 332 GWh and Tesla, the fourth-largest producer, with 148 GWh of capacity in 2030. Based on current forecasts, nobody is expecting 5 TWh of capacity by 2030, although it is also fair to say that few in 2010 expected solar PV manufacturing capacity to be 160 GW per year by 2020.

So the bottom line for the UK government and its ambitious plans means that not only must the UK command an outsize proportion of the BEV market, but that Li-Ion battery production is at least double the most ambitious current estimates for 2030.

Finally, assuming the needed rapid growth in BEV sales takes place and the UK reaches 100% sales by 2030, the number of vehicles on the road in that year would still be less than 10 million, out of a total of perhaps 37 million. It will take another decade or more beyond 2030 to turn over the whole fleet, which makes the recently announced 2030 goal of a 68% reduction against 1990 all the more difficult.

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.

In the shadow of Apollo

dchone August 2, 2019

The recent 50^th anniversary of the first moon landing brought with it many calls for an “Apollo Project” approach to address climate change. Such an approach is never defined in detail by those calling for it, but it presumably means marshaling government funds, establishing more energy research organisations and focusing all efforts on getting a handful of key energy technologies up and running in a short space of time.

There is no doubt that the Apollo programme was an amazing technical and engineering achievement, but is it the right recipe for success for dealing with the climate issue?

Behind the Apollo programme and the broader NASA effort in the 1960s was an immense research effort, which included a great deal of energy system research. After all, space flight is a voracious consumer of energy but storing energy and carrying energy for the journey is challenging. The 1960s saw significant NASA backed research into a technology that we now pin great hopes on for the 21^st century, solar PV. In both the USA and USSR solar was fitted to various space vehicles, starting with the Telstar communication satellite in 1962 and Soyuz 1 in 1967. The first orbiting space station, Skylab, was powered by solar PV in 1973.

Skylab (Source: NASA)

As the 1970s unfolded and oil price shocks hit the global energy system, interest in solar PV picked up. In 1977 the U.S. Department of Energy launched the Solar Energy Research Institute, which later becomes known as the National Renewable Energy Laboratory (NREL). By 1980 ARCO Solar became the first panel manufacturer to hit 1 MW of yearly production. Two years later, the solar company installed the first megawatt-scale solar project in California. Today solar PV is deploying rapidly with current global solar generation (including thermal) now at 600 TWh, which represents about 2% of global electricity generation, which in turn is about 20% of all final energy use (Source: BP Statisitical Review of World Energy). Solar generation increased by 29% from 2017 to 2018 but remains a minor part of the energy system despite an average growth rate over the last decade of around 50% per year.

But this development from first invention at Bell Labs in 1954 and first use in 1962 has taken over 65 years to scale to 2% of the electricity system, yet it was born out of the Apollo project. While solar may be entirely fit for purpose in space based systems, that still isn’t the case on earth, where the day-night cycle, seasons, latitude and weather all factor into its usefulness. A large scale (e.g. big city, >1 million people) generation system that can rely on solar PV for 100% of its energy doesn’t exist yet, although a smaller solar thermal system with molten salt storage now operates in Morocco.

Of course the most visible outcome of Apollo was the big step forward in manned space travel, with huge hopes as the 1960s came to a close of a golden age emerging. In his 1968 film 2001: a Space Odyssey, Stanley Kubrick imagined vast space stations, a Pan Am shuttle service and manned bases on the moon.

By 2012, with solar PV growing rapidly, not only had Pan Am long vanished, but the USA had no manned launch capacity given that the Space Shuttle programme was at an end. It would have been a brave futurist that made such a statement back in 1969. Rather, the USA currently relies on the launch capacity of Russia, using technology that has changed little since the 1960s. However, a new generation of advanced heavy lift rocketry is emerging from the private sector in the USA.

Nevertheless, the space programme and related government and private efforts within the USA in the 1960s contributed enormously to human technical progress, with the computing developments at the time giving rise to the internet revolution which shows every sign of being as trans-formative as the industrial revolution in the 1800s. That revolution could yet have a significant impact on the energy system, but such a change is not yet clear.

What is apparent from the Apollo programme is that big focused efforts do not necessarily give rise to expected outcomes, even if they achieve their short term goals. Such efforts can certainly be game changing, and Apollo was, but in areas not necessarily targeted in the first instance. The other key factor is that large scale change doesn’t come quickly, as has been the case with solar PV. From a climate change perspective, there simply isn’t the time to allow new technologies to germinate and grow on a 60+ year timeline.

All the above raises the question as to what type of approach is needed to deliver broad energy system change over the coming decades. The Sky Scenario, released by Shell in 2018, attempts to illustrate this. It highlights the need for change across multiple fronts, using technologies that largely exist today or at least have a clear line of sight and driven by a strong policy framework. Sky relies on six key factors, with an important underpinning licence for change from society. It requires;

The adoption of carbon-pricing mechanisms by governments globally over the 2020s,
A step-change in the efficiency of energy use leads to gains above historical trends.
The rate of electrification of final energy tripling, with global electricity generation reaching a level nearly five times today’s level.
New energy sources growing up to fifty-fold, with primary energy from renewables eclipsing fossil fuels in the 2050s.
Some 10,000 large carbon capture and storage facilities are built, compared to fewer than 50 in operation in 2020.
Net-zero deforestation by 2070. In addition, an area the size of Brazil being reforested offers the possibility of limiting warming to 1.5°C, the ultimate ambition of the Paris Agreement.

Embedded within this are perhaps multiple Apollo programmes, across many countries and sectors, also requiring some level of collaboration across national borders and utilising well-funded public-private-partnerships . Those programmes must cover all the key sectors and engage at every aspect of the technology cycle, but particularly the need to take technologies across the so-called ‘valley of death’ by ensuring sufficient early deployment to achieve significant cost reductions. This was done very effectively for solar PV within the German Energiewende over the last decade, although that programme relied on the rapid scale-up of PV-Cell manufacture in China.

The ‘Apollo programme’ for climate is global in nature and is illustrated below.

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.

Getting to net-zero emissions in the UK

dchone May 9, 2019

Last week the Climate Change Committee (CCC) in the UK released its much anticipated report which is recommending that the government revise its emissions goal to net-zero in 2050. The Committee notes that this is an appropriate UK contribution towards the global need of meeting the goals of the Paris Agreement. The recommendation also follows in the wake of the IPCC Special Report on 1.5°C, which identified 2050 as the year in which the global economy should attempt to reach net-zero emissions in order to limit warming to 1.5°C with a 66% probability.

The recommendation is a shift from the current UK target which would see the country reach an 80% reduction by 2050, in support of which the country is broadly on track to deliver the first 3 interim carbon budgets to 2022. However, as it looks past 2022 the CCC notes there is insufficient early development of some technologies for the heavy lifting ahead. Examples of this include carbon capture and storage (CCS) and hydrogen for a variety of uses.

Nevertheless, the state of technology development, deployment and availability has shifted since the time of the first UK target back in 2008. The cost of wind and solar has dropped significantly, offshore wind is now a viable proposition, many electric car models are available and while not in the UK, some 20 CCS facilities are now running in various parts of the world. All of the technologies required to do the job set out by the CCC are in plain sight, although a number still require significant UK development for deployment in this country. The CCC report is also very clear on this issue.

2050 is just over thirty years away and that same time period reflecting backwards marks the time that I first arrived in the UK with Shell. In the next 30 years the whole energy system will need to shift to achieve net-zero emissions, but how does that compare with the changes seen over the last 30 years. While two thirds of that period has not been covered by the Climate Change Act and its carbon budgets, all but three years have been covered by the UK ratification of the UN Framework Convention on Climate Change.

The Sankey diagrams below reflect the change over the period, although the most recent from the IEA are 2016, so they won’t show the last two years of renewable energy development.

Overall primary energy consumption has fallen, with the most visible change being the shift away from coal and towards natural gas in power generation. Both bioenergy and renewables have also added to the generation mix. Nuclear plays an important and steady base load function. Natural gas is now the dominant contributor to the current power generation sector and in the past year there have been periods where coal has not played a role at all. Back in 1989 coal made up most of the generating capacity. Oil demand within the UK has hardly changed over thirty years (slightly up) although production has halved.

As noted above, one feature that has surged since 2016 is the proportion of renewable energy in the generation mix. Recent figures from BEIS show that wind and solar have now exceeded nuclear on a quarterly basis.

In the final energy system, the changes are more nuanced. The overall share of electricity has moved from 16.7% of final energy to 20.4%, or a shift of 3.7% points in 27 years. The global rate of change is tracking at 2% points per decade, so the UK is well short of that pace of transition. A net zero emissions economy would likely need electricity to be the major component of final energy, say around 60%, so the UK rate of change will need to shift from 1.37% points per decade to around 11% points in each of the coming decades.

Transport hasn’t shifted at all in the past 30 years, with oil use in transport slightly increasing. Electricity is just starting to creep into this mix, but pure electric vehicles have reached only 0.7% (2018) of new car sales. Worryingly, the total number of petrol and diesel cars registered in the UK in 2018 was unchanged from 2013, a period which has seen the first major push to get consumers to go electric. Reaching net-zero emissions by 2050 will not just mean seeing all new purchases as electric, but seeing all new purchases from about 2035 onwards as electric. It can take up to 15 years to completely turn over the entire on-the-road fleet, although a future government could presumably accelerate this process with a buy-back-and-scrap scheme.

In the industrial sector, energy consumption has dropped by nearly a third, presumably through efficiency improvements as industrial output has hardly changed (see chart below). Importantly, electricity use has stayed largely the same. This means that the sector is gradually electrifying, although again the pace of change is below that required.
UK Industrial Production (1970-2019).

Then there are the tricky bits, where the UK has made only limited progress. The CCC notes that radical change is needed in home heating, including a shift to hydrogen and heat pumps, with support from much better home insulation. But residential natural gas use has marginally increased in 30 years, despite significant improvements in boiler efficiency and the use of electricity instead of gas for new apartment buildings. One highlight in this area is the recent milestone of one million homes now being supplied with biomethane.

The overall change in 30 years has been one of continually falling greenhouse gas emissions, with much of the gain coming from natural gas replacing coal and a fall in industrial energy use. While the impetus for change over the last 30 years was perhaps not as great as it is now, the overall shift is symptomatic of typical energy system dynamics; rapid adjustment has never been a feature, primarily due to the large capital stock involved. Outside the energy sector change over the same period has been dramatic. In 1989 there was no internet, no social media, hardly a mobile phone to be seen and televisions were defined more by their depth than their width. So can the UK reach these sorts of transition rates and achieve the goal of net-zero emissions by 2050?

In the power generation sector, zero emissions should be entirely achievable in that time frame. Renewables are surging and new nuclear capacity is now under construction (although even getting that started took a decade). Similarly, with the models on offer or on their way, passenger vehicles could be entirely electric and various cities across the UK have demonstrated that electric buses are now a viable option. But there is no real sign of change for heavy goods vehicles, shipping or aviation. Perhaps the biggest challenge sits with the use of natural gas in homes and industry. It is easy to use, clean, provides a very high heat load and is backed by extensive infrastructure. Hydrogen and electrification are potential pathways forward, but as noted the electrification rate of change has to shift by nearly an order of magnitude. For hydrogen there are promising signs of change with the government now funding a major programme on supply and conversion of existing facilities away from natural gas.

Finally, there is carbon capture and storage (CCS), which may be a simpler solution in many applications than attempting to dislodge natural gas. CCS in combination with direct air capture (still a nascent technology) may also be needed to balance out emissions in sectors such as aviation. Even the production of hydrogen may be easiest at scale from natural gas, which would then also require CCS. The UK has tried and tried again with CCS, but there is still no operational facility to show for all the efforts made. Yet the UK is both pipeline dense and geologically gifted in terms of storage potential, so deployment could proceed given the right incentives to begin.

The Climate Change Committee have put forward a bold recommendation, but it is not without immense challenge. It ought to be possible to achieve the 2050 goal of net-zero emissions, but it won’t happen without some significant nudging by the government in a number of key areas. Policy decisions over the coming five years may well set the scene for the next twenty, so there is everything to play for.

Powering remote activities

dchone March 28, 2019

Over the past three weeks I have been on a voyage from Cape Horn to the Cape of Good Hope, specifically Ushuaia to Cape Town. With good weather for most of the trip, we were fortunate to stop in the Falkland Islands, South Georgia and Tristan da Cunha (some pictures below). Each of these have communities ranging from a few people to two thousand in the case of Stanley and each has found its own solution to providing energy. Of course the other remote activity out here is the need of the ship itself which will have travelled for some 20 days without refuelling and carried 400 passengers and crew across the South Atlantic.

The Falkland Islands has the major settlement of Stanley, a couple of very small towns, a military garrison and numerous remote farms. The Islands have settled on wind power to displace diesel generators, achieving an average of 35-40% displacement and a peak of 54%. Rural wind power has also been a success for the remote farms. The next step is to look at the potential offered by modern energy storage technologies, although flywheels have been used since 2010 for some storage in association with the wind turbines. Given the geography and climate, neither solar or hydro have been a success, apart from some niche applications. But the Falkland Islanders also have a history of burning peat for heat, although this is in decline. Kerosine and diesel are the most common fuels used today.

South Georgia is completely different. Since 2008 South Georgia’s two settlements Grytviken and King Edward Point (KEP) have been powered by hydro electricity. On the slopes above Grytviken there is a dam, originally built by the whalers at the turn of the 20th century. The dam increased the capacity of Gull Lake to feed water to the first hydroelectric power plant in 1914. The electricity produced then was mainly used for lighting the whaling station. The plant was expanded in 1928 to reduce the station’s reliance on imported coal for steam to power the factory. The electricity produced was then used to power winches and other factory equipment. The new turbine house has been built just off the pathway from the settlement to Shackleton’s grave, with the only visible sign of it as a generating station being the small stream of water seemingly running from under the building and into the bay.

Tristan da Cunha has a single settlement of about 270 people and an export factory to process the fish and lobster that are caught around the island. Although much of the electricity system was replaced about a decade ago after a fire, an entirely diesel based system was rebuilt. In recent years some changes have taken place with the installation of a few home solar water heaters, saving on bottled LPG which is used to heat water in Tristan houses. A small solar farm was also constructed west of the fishing factory. It consists of 26 solar panels, aligned to face the northern midday sun and each capable of generating 250 watts, so a combined capacity of 6.5kW. The connection to Tristan’s electricity grid was made on 30th April 2015. There are further plans for change, but the logistics of getting equipment to Tristan is enormously challenging. The island can only be approached by sea and few ships stop there. As we discovered on a second stop there (to pick up a local government person so we could land on Inaccessible Island), weather can quickly close the port and conditions can persist for days. But the case for further change is strong, given the community dependency on the import of diesel fuel and LPG. The eventual solution for Tristan may be a combination of parts. Although there is excellent wind, it can be ferocious at times, bordering on hurricane conditions, which perhaps isn’t ideal for turbine operation. Solar can also be challenging, with thick cloud shrouding the island at times. And although there is ample rainfall, collecting this and channelling it through a hydro plant would also be very difficult given the geography.

This then brings the focus to the key dependency for all remote activities, the transport to get there and transport once there. As was the case for our vessel, all these locations are completely dependent on long distance, self-powered transport and that remains almost entirely powered by liquid fuels coming from petroleum. While renewables are starting to provide local energy solutions for remote activities, the energy for the transport associated with such activities has no immediate zero emission alternatives. Synthetic fuels, either from a biomass / biowaste starting point or formulated from hydrogen and carbon dioxide offer a simple drop-in possibility, but the bio-alternatives are still relatively small scale and the pure synthesis route is still at the pilot plant stage of development. It should be noted that large scale synthesis of fuels from hydrogen and carbon monoxide does exist, but the starting points are coal (SASOL in South Africa) or natural gas (Shell in Qatar). For a net-zero emission synthetic fuel, the hydrogen would need to be produced by electrolysis of water using renewable energy and the carbon extracted from the air as carbon dioxide.

Apart from synthetic fuels, the best prospect for change is perhaps hydrogen itself, in that there is good experience containing and carrying it and fuel cells can power even large motorised vessels such as ships. Nuclear exists on ships in the military, but after an attempt to demonstrate the feasibility of nuclear powered commercial ships in the 1960s, nothing more has come from this form of propulsion. The challenge will lie with the providers of heavy transport; shipping companies, airlines and aerospace companies and large road haulage entities. Perhaps like the remote activities themselves, different solutions will emerge over time for the various requirements faced. Some remote locations may even be well placed to provide hydrogen in that they could have an abundance of renewable electricity to put towards hydrogen production via electrolysis. Scotland’s Orkney Islands are starting to experiment with such a route forward, as recently reported by the BBC.

Albatross chick on West Falkland

King penguins on South Georgia

A king penguin colony on South Georgia

King penguins on South Georgia

Me on Tristan da Cunha

The worlds most remote inhabited island, Tristan da Cunha

Northern rockhopper penguins on Gough Island

Fur seal on Gough Island

Fur seals on Gough Island

Inaccessible Island

Birds returning in the evening to Nightingale Island

Has climate change run its course??

dchone June 14, 2018

A curious article appeared in the Wall Street Journal recently, written by Steven Hayward from the University of California, Berkeley, arguing that the climate change issue had run out of political steam.

The author notes early on;

A good indicator of why climate change as an issue is over can be found early in the text of the Paris Agreement. The “nonbinding” pact declares that climate action must include concern for “gender equality, empowerment of women, and intergenerational equity” as well as “the importance for some of the concept of ‘climate justice.’

Hayward claims that the descent into the abyss of social-justice identity politics represents the last gasp of a cause that has lost its vitality. But it’s hard to agree with this as a piece of evidence in favour of the argument. Climate change is a problem related to the global commons, so confronting it and finding a way forwards will always require the broadest range of actors and at least some consideration of all views. Further, the Paris Agreement itself doesn’t actually seek gender equality, it simply lays out what the Parties to the Agreement must do to manage emissions and adapt to change. The above references to gender equality come from the accompanying Decision text, in effect the preamble to the Agreement which sets out the context and provides instructions for implementation. Given the range of governments and interest groups involved in the Paris Agreement, it is hardly a surprise that inclusive language appears in the Decision text, but the Agreement text remains almost completely untouched by such wording.

The author also argues that ‘most national governments are backing away from forced-marched decarbonization’, a claim that is difficult to align with what can be observed in the world. Certainly, the intended actions set out by national governments fall short of the actions required to see global emissions immediately fall, but as each day passes small steps forward are being made, quite the opposite of backing away. Various carbon taxes, vehicle mandates, coal levies and assorted carbon related policies continue to emerge, albeit at levels not yet sufficient for major change, but nevertheless still being implemented. In the United States, a new tax credit has been legislated which will offer direct support for carbon capture and storage and may well result in substantial developments over the coming decade.

The author then states that the high cost of action will ultimately lead to the undoing of the issue, yet here again the evidence does not support the proposition. The cost of many of the energy technologies required over the coming decades has fallen dramatically, or is in the process of falling. Solar PV, offshore wind, batteries and even carbon capture and storage have all seen cost reductions, with some renewable power generation technologies now out-competing fossil energy systems. As recently as the publication of the Wall Street Journal article itself, a group involved in the development of air capture of carbon dioxide announced a steep fall in cost to as little $100 per tonne of CO2. While air capture remains a nascent technology, such articles and findings are becoming increasingly common across a broad range of mitigation technologies. Even for CO2 capture and storage technologies which will always be seen as an immediate cost to society, that cost over time will remain small when compared to the total cost of providing energy for the global economy.

Nevertheless, there may be one aspect of climate change that is over, although the author didn’t mention it in the article. Such is the change in energy technology costs over the past decade in combination with an underlying growth in low carbon and air quality related energy policies, that the potential extent of change in the climate itself could now be limited. In other words, the prospect of runaway change might have passed.

While the policy landscape is far from complete in terms of meeting the goals of the Paris Agreement, the IEA New Policies Scenario indicates that global emissions have little remaining upside before reaching a plateau. In the Shell Oceans scenario, which sees widespread adoption of solar as costs fall, a plateau in global emissions in the 2030s is followed by a gradual fall from 2040 to 2060, with an acceleration thereafter towards net-zero emissions shortly after 2100. While these scenarios do not encompass sufficient change to meet the goals of the Paris Agreement, they nevertheless indicate that energy system emissions could fall to very low levels simply through the combination of technology development and some policy implementation.

This has important implications for the climate system. Early scenarios published in the IPCC 3rd Assessment Report included cases such as the A1F1 and A2 scenarios, which saw CO2 emissions rise towards 100 Gt per annum late in the century, but with the more optimistic scenario (A1T) seeing a plateau and then slow fall in emissions that is similar to, albeit even a little above, what now looks very plausible. A1T sees a temperature rise of just over 2.5°C in 2100, with a range from several models of 1.8-3.3°C.

High fossil fuel use scenarios such as A1F1 and A2 led to the very real concern of not just 3-4+°C temperature rise by 2100, but conceivably 5-6+°C of temperature rise or possibly more, which in turn could result in changes in the climate that would be very difficult or even impossible to manage and adapt to. This in turn led to climate alarmism, which the author of the Wall Street Journal article compares to a continually blaring car alarm which people then ignore.

In 2009 the MIT Joint Program on the Science and Policy of Global Change published an analysis of climate policy targets under uncertainty. The analysis demonstrated that even a modest attempt to mitigate emissions could profoundly affect the risk profile for equilibrium surface temperature. They looked at five mitigation scenarios, from a ‘no mitigation action’ approach to a very stringent climate regime (Level 1, akin to a 2°C case). In the ‘no mitigation action’ approach, mid-range warming by the end of the century is some 5°C compared to the late 20th century, but with a wide distribution, which means that there is a small probability of warming up to 8°C or more – an unacceptably high outcome even when accounting for the small probability that it might occur. But even modest mitigation efforts, while not shifting the mid-range sufficiently for an outcome close to 2°C, nevertheless radically change the shape of the distribution curve such that the spread narrows considerably, with the highest impact outcome dropping by some 3-4°C. As mitigation effort increases and the mid-range approaches 2°C, the distribution narrows further such that the highest possible outcome is limited to 3°C.

Quite possibly, through the current actions of governments, the advance of technology and the first steps along the path laid out by the Paris Agreement, the ‘no mitigation action’ outcome is now off the table and the future risk profile is quite different to the one faced in 2001 when the IPCC 3rd Assessment report was published. While this is good news, it isn’t yet cause to stop and celebrate, given that there is now greater clarity on long term impacts such as sea level rise, which could be several metres even at 2+°C. But it could usher in a more matter-of-fact debate about climate change and mitigation, without the background cacophony.

Arguably, the space between 1.5 and 3°C may be where the real story now lies.

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.