Shell Energy Paths 2050

Evolving sources or revolutionary technology

– exploring alternative energy paths to 2050

Ged Davis Vice President, Global Business Environment

Shell International

Oil & Money Conference, London October 29, 2001

Ged Davis is Vice President, Global Business Environment in Shell International Limited and head of Shell’s Scenarios Team. He has been a scenario practitioner for over 20 years, engaged in the building and use of scenarios at the country, industry and global level. From 1997 to 2000 he was facilita-tor and Lead Author of the Intergovernmental Panel on Cli-mate Change’s Emissions scenarios 2000-2100 and in 1996/97 was Director of the World Business Council for Sustainable Development’s Global Scenarios 2000 - 2050.

Prior positions in Shell International include Head, Sce-nario Processes and Applications and Head, Socio-Politics and Technology, with special responsibility for regional sce-narios. From November 1990 to the middle of September 1994 he was Head of Group Investor Relations for the Royal Dutch/Shell Group. From 1986 to 1990 he was Head of En-ergy in Group Planning responsible for world-wide energy analysis, including global energy scenarios.

He has postgraduate degrees in economics/engineering from the London School of Economics and Stanford Univer-sity, California and graduated in Mining Engineering at Impe-rial College, London.

Ged Davis – Evolving sources or revolutionary technology

The world’s energy system was trans-formed in the course of the 20th cen-tury – from one dominated by coal and steam power to a diverse mix of compet-ing fuels and technologies (figure 1). It is likely to change at least as fundamentally in this century. But how?

Exploring the possibilities for change is essential for informing action today – for business people judging where to invest, for policy makers framing regula-tion, for citizens considering what is best for the future of their families, commu-nities and world. How the energy system develops is fundamental for that future.

Of course it is always exploration without hope of discovery. We can’t know the future before it arrives. But we can think about it – challenging our as-sumptions, recognising critical uncer-tainties, reaching for new possibilities, understanding the dynamics.

In Shell we have been using scenarios to help us think about the future – among ourselves and with others – for over 30 years. Scenarios are credible, relevant and challenging alternative sto-ries about how things might develop.

Credibility is essential. We harness our experience in energy businesses and technology development – as well as a wide range of outside expertise – to achieve this.

So is relevancy. We can’t explore every aspect of the future. We have to focus on the questions that matter for informing our decisions today.

And scenarios have to be challenging. They are not an end in themselves but tools for encouraging and focusing thinking. In our experience that is best done by having just two thought-provoking stories.

Today I want to talk about our latest long-term energy scenarios – looking out over the first half of the century. In the time available I can only touch on as-pects of the material. A booklet explain-ing the work in more details is available.

Key energy questions What questions do the long-term energy scenarios seek to answer?

First, there is an overarching question about the ability of a dynamic energy system to respond to the threat of cli-mate change. What will shape a system which halts the rise in human-induced

The latest Shell long-term energy scenarios explore how the global energy system may change over the first half of this century. They con-sider alternative paths which halt human-induced carbon dioxide emis-sions by 2050. These paths are influenced by population growth, urbani-sation, increasing wealth and market liberalisation. But the critical fac-tors are resource constraints, technology development and changing social and political priorities. Oil and gas resources are unlikely to become scarce before 2025. Renewable energy resources are adequate to meet energy needs but require new forms of energy storage. Solar photo-voltaics and hydrogen fuels cells could transform energy systems. But picking winners is very difficult in a highly innovative period. The two scenarios contrast an evolutionary progression from coal, to gas, to renewables (or possibly nuclear) against the potential for a hydrogen economy – supported by revolutionary developments in fuel cells, advanced hydrocarbon technologies and carbon dioxide sequestration.

1

% of Primary Energy

new renewables

coal

nuclear0%

20%

40%

60%

80%

1850 1875 1900 1925 1950 1975 2000

oil

gas

hydro

traditional

Figure 1: Evolution of the energy system

1850-2000


carbon dioxide emissions within the next 50 years – leading to a stabilising of at-mospheric carbon levels below 550 ppmv – without jeopardising economic development?

We chose this level because it has often been cited as a safe maximum. According to the latest IPCC data it would lead to a 2ºC warming (in the range 1.4º to 3.2º) and 30cm sea level rise (in the range 10 to 55cm) by 2100. But we don’t know the safe level for at-mospheric carbon, and probably never will. We can only recognise the uncer-tainty under which we have to act, and be prepared to adjust as understanding develops.

Other key questions explored in those scenarios include:

• When will oil and gas resources be unable to meet rising demand? And what will replace oil in trans-port?

• Which technology will win the race to improve vehicles?

• Who will drive the expansion of renewables necessary for cost re-ductions? And how will energy storage for intermittent renew-ables like solar and wind be solved?

• How will demand for distributed power shape the energy system?

• How might a hydrogen infrastruc-ture develop?

• How will China and India balance rapidly growing energy needs with concerns about rising import de-pendence and environmental deg-radation?

• How will the choices of consum-ers and citizens affect energy paths?

Shaping factors What factors which will shape the future of energy? Just as with the questions, we need to focus on those which really mat-ter – which are likely to determine the choice of energy path to 2050.

Let me start with four important in-fluences:

• demography • urbanization

• incomes, and • liberalisation. Recent UN population forecasts

point to 8.5 billion people by 2050 – when over 80% are likely live in cities – and a maximum global population of 10 billion by 2075. This clearly represents a great increase in energy needs.

Wealth is rising and spreading. Even economic growth considerably slower than in the past half century could bring widespread affluence by 2050. But energy consumption would grow less slowly – as the relationship between energy demand and wealth changes as incomes rise and countries climb the ‘energy ladder’.

But we should remember that many people haven’t even got on the bottom rung. Perhaps two billion are still de-pendent on traditional forms of energy – suffering from the physical burden of collecting it, damage to their health from using it, and exclusion from amenities others take for granted. Another three billion are just meeting basic energy re-quirements. Enabling these people to start climbing the energy ladder is a fun-damental challenge – of development and energy provision.

Comparing the growth in energy demand with that of per capita incomes shows a common pattern in many coun-tries (figure 2):

• around $3,000 a head energy demand explodes as industrialisa-tion and personal mobility take off,

• around $10,000 demand growth slows as the main spurt of indus-trialisation is completed,

• around $15,000 it grows more slowly than income as basic household energy needs are met and services dominate economic growth,

• around $25,000 economic growth requires little additional energy as energy markets become saturated.

Over the next half century the energy system is likely to confront its major challenge as most of the world’s people pass through the initial stage of rapid in-dustrialisation.

2

“The relationship

between energy

demand and wealth changes as incomes rise

and countries climb the

energy ladder.”

“Over the next half century the

energy system is likely to

confront its major

challenge as most of the

world’s people pass through

the initial stage of rapid

industrial- isation.”


3

“Access to proved new

technologies enables later

developers to climb the

energy ladder more quickly

and to need less energy.”

Figure 2: Climbing the energy ladder—a continuously changing relationship

Figure 3: Technology determines energy quantity

GJ/capita

Japan

EU

Australia

US

Korea

Malaysia

ThailandChina

BrazilIndia0

50

150

250

350

GDP/capita (‘000 1997$ PPP)0 5 10 15 20 25 30

Source: IMF, BP

lbs coal per hp-hr % efficiency

0

10

20

30

40

1750 1800 1850 1900 1950

Newcomen

Watt, pumpWatt, mill

Cornish

CompoundTurbine

Maximumthermal efficiency

0

10

20

30

40

Source: Grubler 1998 from Ayres 1989

Energy needs are reduced as techno-logical improvements increase efficiency. The huge increases in steam engine effi-ciency over two centuries gives an idea of the importance of these improve-ments (figure 3).

The best available technology is typi-cally 25% more efficient than the installed average – although much energy using equipment is long-lived and low energy costs discourage investment in ef-ficiency. Access to proved new technolo-gies enables later developers to climb the energy ladder more quickly and to need less energy.

Liberalised markets drive greater effi-ciency and open new energy possibilities.

What does all this mean for energy demand? Assuming no significant new energy use and depending on the drive to invest in efficiency, we think global consumption could ultimately saturate at between 100 and 200 GJ per capita. To put that in perspective, in Western Europe today we consume on average some 160 GJ per head.

By 2050 the world would require between two and three times as much energy as now. The difference is signifi-cant but we don’t think it will determine the energy path – only its timing.

The critical drivers What then are the decisive factors? We see three:

• resource constraints, • technology development, and

• changing social and personal pri-orities.

Some people see imminent con-straints on the ability of fossil fuel resources to continue meeting growth in energy demand.

We think scarcity of oil supplies – including from unconventional sources and natural gas liquids – is unlikely before 2025, and could be delayed even longer. This is based on some the USGS estimate of some 3 trillion barrels of ulti-mately recoverable conventional oil and over a further trillion in heavy oils and NGLs (figure 4). Prices should continue to be constrained by improvements in our ability to access new supplies and de-velop substitutes.

Gas resources are much more uncer-tain. Scarcity could occur as early as 2025, or well after 2050. The more im-mediate issue is whether we can develop the infrastructure to deliver remote gas economically.

There is no shortage of coal. How-ever large resources are concentrated in a few countries and are becoming increas-ingly costly to exploit and use.

Renewable resources are adequate to meet needs, despite competing with food and leisure for land use (figure 5). But widespread use of solar and wind will require new forms of energy storage.

Technology advances are central to energy transitions – the steam engine, electric dynamo, internal combustion, nuclear fusion, combined-cycle gas tur-


bines. They succeed by offering superior or new qualities – often transforming lifestyles as well as energy supplies.

Two potentially transforming energy technologies are waiting in the wings. Solar photovoltaics offers the possibility of abundant direct and widely distributed energy. Hydrogen fuel cells offers the possibility of high performance and clean final energy from a variety of fuels.

Both are in the early stages of devel-opment – in the process from invention to commercialisation – and face large challenges. Energy storage is the funda-mental problem. But both still have a long way to go on costs, although they will benefit from manufacturing econo-mies.

We appear to be entering a very inno-vative period for energy development. More resources than ever before are devoted to scientific research and tech-nological development. Information and communications technology offers new ways of analysing information and shar-ing knowledge.

Advances in biotechnology, materials technology such as carbon nano-fibres and computing will support develop-ment of bio-fuels, fuel cells, new energy carriers such as hydrogen, micro-power networks, and new generations of solar technologies (figure 6).

Each of these has the potential to have major impacts on the energy sys-tem. However, it is very difficult to pick winners. Early last century the internal

combustion engine looked an unlikely choice until Henry Ford transformed its manufacturing dynamics.

People’s choices affect energy devel-opments in two ways – through their personal preferences as consumers and their priorities as citizens. Personal choices of lifestyle and consumption pat-terns drive the energy system. They do so within frameworks shaped by social attitudes to such issues as energy secu-rity, air quality and the climate threat.

Alternative paths We offer two alternative paths for the development of a sustainable energy sys-tem over the first half of this century (figure 7).

Dynamics as Usual focuses on the choices of citizens for clean, secure and increasingly sustainable energy which – with growing resource scarcities – drives the evolution of supplies towards reli-ance on renewable sources. However, this transition is anything but smooth and reflects intense competition between priorities and between technologies.

It explores the continuation of the dynamic which has shaped the evolution of energy supplies towards lower-carbon fuels – with electricity as the carrier – in response to demands for cleaner, more convenient energy.

Spirit of the Coming Age focuses on the energy choices made by consumers in response to revolutionary new technolo-gies – emerging from unexpected areas –

4

Figure 5: Renewables are adequate to meet all energy needs of 10 billion people

Figure 4: The oil mountain

mln bbl per day

0

25

50

75

100

125

1950 1975 2000 2025 2050

2% per annum

7.5% per annum

Based on USGS mean estimates, June 2000

GJ per capita

demandrange

Solar

Wind

Biomass

Hydro

Geothermal0

200

400

600

800

1000

N. Ameri

ca

S. Ameri

ca

EuropeFSU

Africa

Middle Eas

t

& N.Africa Asia Total

Adapted from UN 2000, WEC 1994, ABB 1998

“Solar photovoltaics

offers the possibility of

abundant direct and

widely distributed

energy. Hydrogen fuel cells offers the

possibility of high

performance and clean final energy from a

variety of fuels.”


5

Figure 6: Energy technology discontinuities Figure 7: Energy branching points

Fuel CellHydrogen

Direct ElectricitySolar

Direct - Wood, Wind, Water, Animals

Steam engine - Coal 1830-1900

Internal combustion engine - Oil1910-1970

CCGT - Gas 1990-?

Nuclear 1970-1990

MANUFACTURING ADVANTAGE

Electric dynamo - Coal 1900-1940

18001800

18501850

19001900

20002000

20502050

demographics

urbanisation

incomes & demand

liberalisationThe Spirit of the

Coming Age

Energy Choices - consumers

Revolutionary developments

Dynamics as Usual

Energy choices- citizens

Evolutionary system Resourceconstraints

Technologies

Social & personalPriorities

Innovationand

competition

which transform the system. Such possi-bilities are less often explored.

The two scenarios reflect differences in energy resources, the timing and nature of technology developments and social and personal priorities. These will determine the choice of path over the next two or three decades – although the underlying elements could eventually come together in the second half of the century.

However, the scenarios also have im-portant common features, including:

• the vital role of natural gas as a bridge fuel over at least the next two decades,

• the pressures on the oil market as new vehicle technologies diffuse,

• the shift towards distributed heat and power supply for economic and social reasons, and

• the potential for renewables to be the eventual primary source of energy if robust energy storage so-lutions are found.

Scenario: Dynamics as Usual Let me focus on some of the main ele-ments of Dynamics as Usual:

• existing technologies respond, • ‘dash for gas’, • renewables boom and bust, and • the oil transition and renewables

renaissance. EXISTING TECHNOLOGIES RESPOND The demand for clean, secure and sus-tainable energy stimulates a drive for energy efficiency within existing tech-

nologies, particularly the internal com-bustion engine. Advanced internal com-bustion and hybrid engines are devel-oped to deliver the same performance as standard vehicles – but using as little as a third of the fuel. Fuelling inconvenience limits the appeal of fuel cell vehicles.

The spread of high-efficiency vehicles disrupts oil markets. Prices are depressed until firmed by growing developing country demand for transport and heat-ing fuels after 2015. Oil consumption grows steadily – but weakly – for 25 years. DASH FOR GAS Natural gas use expands rapidly early in the century – reflecting its economic and environmental advantages in liberalised markets. Where gas is available it fuels most new power generation and ac-counts for three-quarters of incremental OECD capacity up to 2015. Older coal plants cannot meet tightening emissions standards and are increasingly replaced by gas.

The rising costs and logistical com-plexity of expanding coal deliveries from northern mines prompts China to em-bark on major gas import projects. Pan-Asian and Latin American gas grids emerge. Large-scale LNG trade is in-creasingly competitive. By 2020 gas is challenging oil as the dominant source of primary energy. However, expansion is constrained by concerns for supply secu-rity and low prices.

New nuclear plants have trouble competing in deregulated markets. Most

“Natural gas use expands

rapidly early in the century – reflecting its

economic and environmental advantages in

liberalised markets.”


6

Figure 9: A tale of two eras—renewables growth and plateau

0

1

2

3

4

5

6

20 MW Plant 1999

200 MW Plant

$ per peak watt

Materials and balance of System 3 fold reduction

other BOS

inverter

other panel

overhead

materials

labour

plant

Plant8 fold reduction

Source: KPMG 1999

• strong government support

• environment and security

• green power niches open

• intermittence constraints

• saturated OECD demand

• planning blockages

EJ

0

25

50

75

2000 2010 2020 2030

“By 2050 renewables

reach a third of world primary

energy and are supplying most

incremental energy.”

Figure 8: The benefits of scale—200 MW photovoltaic factories

existing nuclear capacity is maintained. But nuclear steadily loses market share in OECD countries. RENEWABLES BOOM AND BUST Strong government support in OECD countries enables renewable energy to grow rapidly for two decades through es-tablished electricity grids. The costs of wind energy continues to fall as turbines exceed 3 MW. The commissioning of a 200 MW photovoltaic manufacturing plant before 2010 dramatically improves productivity (figure 8). Deregulated mar-kets provide opportunities for branded ‘green energy’.

By 2020 a wide variety of renewable sources is supplying a fifth of electricity in many OECD markets and nearly a tenth of global primary energy. Then growth stalls (figure 9).

Rural communities that accepted a few windmills reject thousands. Logistic costs, availability of land and environ-mental concerns prevent large-scale de-velopment of biomass electricity. With little progress on energy storage, con-cerns about power grid reliability block further growth of wind and solar.

Although the public supports renew-ables, limited electricity growth con-strains expansion in OECD countries. In developing countries, renewables do not fully compete with low-cost conven-tional resources.

Investment stagnates. The boom has spawned a set of diverse technologies – for wind, solar, biomass and geother-

mal – which benefit little from each other’s advances.

As renewables stagnate and gas secu-rity concerns grow, it is not clear what will fuel future energy supplies. Nuclear makes a partial comeback, particularly in Asia. Investing in energy efficiency buys time. But established technologies find it increasingly difficult to meet rising envi-ronmental standards.

It is a decade of great energy policy dilemmas. THE OIL TRANSITION AND RENEWABLES RENAISSANCE Around 2040, as oil becomes scarce, ad-vances in biotechnology together with vastly improved vehicle efficiency allow a relatively smooth transition to liquid biofuels. The existing transport can be modified at low cost.

A new generation of renewable tech-nologies emerge. The most important is organic and thin film embedded solar materials, even wallpaper. New ways of storing and utilising distributed solar en-ergy are developed.

By 2050 renewables reach a third of world primary energy and are supplying most incremental energy (figure 10).

Scenario: Spirit of the Coming Age The key elements of Spirit of the Coming Age are:

• breaking paradigms, • the ubiquitous fuel cell, • a Chinese leapfrog, • a hydrogen economy.


7

Figure 10: Incremental energy supply Figure 11: Watch the fringes

Mb/doe

-50

0

50

100

2000-2020 2020-2040

2040-2060

GasNuclear

Oil

Renewables

Coal

“Such developments

often come from niche

market fringes where physical

constraints force

innovation and consumers are

willing to pay a premium.”

BREAKING PARADIGMS The Sony Walkman – which was repeat-edly dismissed by focus groups – port-able computers and mobile phones are examples of innovations which broke existing paradigms. Such developments often come from niche market fringes – ignored by incumbent suppliers – where physical constraints force innovation and consumers are willing to pay a premium (figure 11).

Automobiles manufacturers know that hydrogen fuel cell vehicles fit the public mood because they are cleaner, quieter and offer high performance. They can also support more electrical services – digital communications, pre-entry heating and cooling, and in-car en-tertainment – which consumers want but which require too much power for many traditional engines. The constraint is the fuel infrastructure and the potential health hazards of alternative fuels.

This is overcome by the development of a new ‘fuel in a box’ for fuel cell vehi-cles – emerging from small scale applica-tions in powered bicycles, computers and mobile phones. Sealed boxes pre-vent health hazards. The liquid fuel – from oil, gas or biomass – is reformu-lated into hydrogen in the vehicles. This reflects the much greater efficiency of liquid fuels – in terms of the power de-livered for the space taken up – over gas and batteries (figure 12).

Boxed fuels break the distribution paradigm. A six-pack of fuel (12 litres) is

sufficient for 400 km. They can be sold through a wide range of channels – even in dispensing machines like soft drinks – or delivered directly to consumers.

They are also popular in developing countries with limited fuel infrastructure and constraints on urban space – where many consumers can only afford small amounts of fuel at a time. THE UBIQUITOUS FUEL CELL Demand for stationary fuel cells – for businesses willing to pay a premium to ensure highly reliable power – helps drive fuel cell system costs below $500 per kW. This provides a platform for transport uses, stimulating further cost reductions – well below conventional power and heat technologies.

Suppliers of home appliances com-pensate for saturating OECD markets for their own products by turning to fuel cells. Commercial and residential build-ings install low costs systems – fuelled from the established natural gas grid – and trade spare peak-time electricity through internet markets. Hot water is provided by surplus fuel cell heat (figure 13).

Cars no longer need to be idle for 95% of the time. Using ‘docking sta-tions’ they can provide energy to homes and buildings.

These developments meet the needs of emerging economies – replacing LPG, kerosene and traditional lamps and cook-ers. Trucks are able to double as power sources.


8

Figure 13: Fuel cells – one size fits all Figure 12: The liquid space advantage

kWh/litre

LeadAcid

LIQUIDS BATTERIES

Sodium/Sulphur

0.1

1

10

Methanol

LNG

LH2

CNG

Hydride

CH4

LPGEthanol

GasolineDiesel

GASES1

10

100

1,000

10,000

100,000

1960 1980 2000 2020 2040

PEM Fuel Cell $ per kW

gas turbine

2060

By 2025 a quarter of the OECD vehi-cle fleet uses fuel cells. They account for half the new vehicles in OECD coun-tries and a quarter of worldwide. The global automobile industry rapidly con-solidates around the new platform.

Technical advances in transport and power services feed off each other, solv-ing mutual problems. Fuel cells also benefit from broader developments in material technology. Carbon nano-tubes are widely used by 2025 because of their superior strength, supporting the devel-opment of carbon nano-fibres as the ul-timate hydrogen storage medium. But this storage is not essential and the even-tual transition from liquid fuels to ‘solid’ hydrogen is largely unnoticed. A CHINESE LEAPFROG In the second quarter of the century, China uses advanced hydrocarbon tech-nologies as a bridge to a hydrogen econ-omy (figure 14).

By 2025, China’s huge and growing vehicle use is creating an unacceptable dependence on imported oil imports. Concerns about the sustainability of re-gional gas resources and the reliability of external suppliers encourage the use of indigenous coal. But this is becoming lo-gistically and environmentally prob-lematic. Land scarcity limits biofuel op-portunities. India faces similar problems.

Growing global demand for gas and hydrogen spurs advances in in-situ ex-traction of methane and hydrogen from coal and oil shales. These advanced hy-drocarbon developments build on estab-

lished infrastructure and technologies, as well as on the cash flow and resources of existing fuel suppliers. China is able to make use of these technologies – as well as indigenous advances – to extract energy from its coal resources and de-liver it by pipeline rather than thousands of trains. This enables the development of transport and power systems based on fuel cells. A HYDROGEN ECONOMY The advantages of the new technology push the transition to hydrogen well be-fore oil becomes scarce. The higher the demand for fuel cells, the less oil fetches. It is cheap enough to be preferred for heat and power in some developing countries but this does not compensate for the declining transport market.

Renewable energy makes steady but unspectacular progress until 2025. ‘Green energy’ niches remain small in most regions. Sales of photovoltaics to rural communities in developing coun-tries grow fast at first. People are willing to pay extra for the convenience and access to television, but their needs soon exceed what photovoltaics can offer. Fuel cells prove a better option. Urbani-sation reduces rural energy demand.

After 2025 the growing use of fuel cells for heat and power creates a rapidly expanding demand for hydrogen (figure 15). It is widely produced from coal, oil and gas fields, with carbon dioxide ex-tracted and sequestered cheaply at source. By 2050 a fifth of carbon dioxide emissions from the production and use

“In the second quarter of the

century, China uses advanced

hydrocarbon technologies as

a bridge to a hydrogen

economy.”


9

Figure 15: Emergence of the hydrogen economy

Figure 14: A Chinese leapfrog

China HydrogenEconomy

Land scarcity limits bio-fuels

Mass transport &electric drive for uneven terrain

Large coal resourceLogistic constraints

Air quality concernsand weak

regulatory control

Water scarcityin the North

Global price for CO2

CH4 and H2 from coal Advanced membranes

Fuel cells

Supply securityconcerns

- oil, gas, fertiliser

102

101

100

10-1

10-2

Rat

io o

f Hyd

roge

n (H

) to

Car

bon

(C)

1800 1850 1900 1950 2000 2050 2100

0.90

0.80

0.67

0.50

0.09

H /

(H+C

)

Wood: H/C = 0.1

Methane: H/C = 4Oil: H/C = 2Coal: H/C = 1

t = 300 years (length of process)

methaneeconomy

hydrogeneconomynon-fossil

hydrogen

Including traditional biomass

“By 2050 a fifth of carbon

dioxide emissions from the production

and use of energy are

being sequestered.”

Figure 17: Spirit of the Coming Age—energy mix

Figure 16: Energy transitions—Dynamics as Usual

% of primary energy

coal

nuclear0%

20%

40%

60%

80%

1850 1900 1950 2000 2050

oilgas

newrenewables

biofuelshydro

traditional

% of total

Solids

LiquidsGases (CH4 and H2)

Direct Electricity(hydro, nuclear, new renewables)

0

20

40

60

80

100

1850 1900 1950 2000 2050

low-carbon fuels and towards electricity as the dominant energy carrier – from increasingly distributed sources – driven by demands for security, cleanliness and sustainability (figure 16).

Energy needs more than double by 2050, with demand for oil and gas con-tinuing to grow throughout the period. However, renewables become increas-ingly important in the second quarter of the century. By 2050 they account for 27% of primary energy requirements. Biofuels – supplying a growing share of liquid fuels – account for a further 6% of primary energy.

In Spirit of the Coming Age, energy sup-plies continue to evolve from solids through liquids to gas (first methane then hydrogen), supplemented by direct electricity from renewables and nuclear

of energy are being sequestered. Large-scale renewable and nuclear

energy schemes to produce hydrogen by electrolysis start to become attractive after 2030. Renewable energy becomes a bulk supply business and starts to expand rapidly. Hydrogen is transported in gas grids until demand justifies dedi-cated hydrogen pipelines.

A century-long process of hydrogen infrastructure development begins. The need for sequestration peaks after 2050 although only a small part of the total sequestration capacity has been used.

Towards a sustainable energy system The two scenarios explore different energy paths.

Dynamics as Usual highlights the evo-lution of energy supplies from high- to


10

Figure 19: Carbon dioxide atmospheric concentrations

Figure 18: Carbon dioxide emissions

billion tonnes carbon

0

2

4

6

8

10

12

14

1975 2000 2025 2050

excluding sequestration

Spirit of the Coming Age

Dynamics as Usual

300

350

400

450

500

550

1975 2000 2025 2050 2075 2100

ppmv

Spirit of the Coming Age

Dynamics as Usual

“… the possibilities for

technological and

commercial innovation and

the need to remain alert for

paradigm breaking advances

emerging from unexpected

quarters.”

and as long-term sources of hydrogen gas (figure 17).

Primary energy needs grow more quickly than in the previous scenario. Demand for oil declines in the second quarter of the century. Gas becomes the dominant fuel and consumption grows more than threefold by 2050. Large-scale renewables grow rapidly in the second quarter of the century.

In both scenarios carbon dioxide emissions turn down by 2040 (figure 18). Emissions slow earlier in Dynamics as Usual in response to social pressures but then accelerate again after 2025. In Spirit of the Coming Age they rise faster initially but then peak earlier – and sharply – with the expansion of carbon sequestra-tion.

Atmospheric concentration remain below 550 ppmv for the remainder of the century and appear on track to stabi-lise below this level (figure 19).

How do we think these scenarios – which are much more detailed than I have been able to reveal here – help us take better business decisions today?

They make us question our assump-tions about the way the energy system will develop and the forces that will drive it. More specifically they remind us of the possibilities for technological and commercial innovation and of the need to remain alert for paradigm breaking ad-vances emerging from unexpected quarters.

I suspect that most oil people, when

they think of energy developments, do so in the context of evolving supplies and traditional competitors. These sce-narios remind us to look elsewhere. It could be the distribution chain … or somewhere else. I also suspect that most of us in the West think that is where new developments will emerge. We shouldn’t be so sure.

They also remind us that change is unlikely to be smooth. Just because a technology appears to be winning today, that doesn’t mean it will do so tomor-row. Understanding our business envi-ronment demands a wide perspective and long view.

We think the advantages of gas are such that it is likely to play an increas-ingly important role whatever the sce-nario. Expanding gas use – delivering competitive and secure supplies to dis-tant customers – is perhaps the most im-portant immediate way of safeguarding the environment. But we should not un-derestimate security of supply concerns.

We develop these scenarios to help our own thinking. But engaging with the views of others is an essential part of that. We also hope they can contribute to the public debate on vital issues.

For governments they illustrate the difficulty of identifying and pushing technological winners – particularly in a period of rampant innovation – and the uncertainty of future energy paths.

They reflect the dichotomy between people’s personal choices and social


11

preferences. But they also demonstrate that

governments have a key role in setting the framework in which a dynamic, commercial system can respond to changing needs, choices and possibilities.

They suggest that the rise in human-

induced carbon dioxide emissions can be halted within the next 50 years – leading to a stabilising of atmospheric carbon di-oxide levels below 550 ppmv – without jeopardising the energy system’s ability to respond to our other needs as citizens and consumers.

“They suggest that the rise in human-induced carbon dioxide emissions can be halted within the next 50 years – leading to a

stabilising of atmospheric carbon dioxide levels below 550 ppmv.”

Recent speeches by Group Managing Directors and other senior executives

The new chemistry Jeroen van der Veer

● Remarks at the launch of Energy needs, choices and possibilities—scenarios to 2050

Philip Watts ●

A new era - of openness and competition

Philip Watts ●

Thoughts generate energy Jeroen van der Veer

● Evolving Asian opportunities

Harry Roels ●

Oil market challenges in the Middle East and Asia Paul Skinner

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