Energy transitions are not new
The world’s energy system is entering a major transition. Transitions have happened before. The nineteenth and twentieth centuries saw growth in the use of coal, and then oil and natural gas when the modern combustion engine took off. But since around the 1970s, whilst there’s been plenty of growth in the use of energy, the mix of fuels has been relatively static. More recently, with additional concerns over local and atmospheric emissions, the world is seeing impressive rates of growth in wind and solar power—a new era of transition.
Shell Scenarios help to navigate uncertainties about the future
Shell has been using scenario planning for over 40 years to help deepen its strategic thinking. The scenarios help decision-makers to explore the features, uncertainties, and boundaries shaping the future landscape, and to engage with alternative points of view.
Our scenarios consider long-term trends in economics, geopolitical shifts and social change as well as technological progress and the availability of natural resources. They are based on plausible assumptions about future development, and include the impact of different patterns of individual and collective choices.
Shell’s Energy Scenarios are underpinned by quantitative modelling
Shell’s World Energy Model (WEM) provides a rigorous quantitative framework to underpin the logic of our scenarios. Together with Shell’s Global Supply Model, the WEM is a core tool exploring alternative evolutions of energy demand in different countries and in different sectors, helping to maintain system consistency, to explore the most significant factors in policy, technology and consumer choices, and to examine the impacts in one part of the world made by shifts in another.
Shell’s latest Scenarios publication, “A Better Life with a Healthy Planet. Pathways to Net-Zero Emissions,” takes the most optimistic features of our 2013 “New Lens Scenarios” – Mountains and Oceans – and combines them with individually plausible further shifts in policy, technology deployment, circumstances, and events that might move the world onto a new, even lower-emission trajectory, resulting in net-zero emissions on a timescale consistent with global aspirations.
Future energy demand will at least double
This work starts by attempting to quantify the magnitude of future energy demand. As we consider the future development of economies, and assume significant energy efficiency improvements, we estimate that an average of about 28,000 kWh of primary energy per person is approximately required to support the decent quality of life to which people naturally aspire.
And if we assume a future population of around 10 billion people by the end of the century, and multiply it by 28,000 kWh per capita, we see that the global energy need would be about 280 trillion kWh a year – roughly twice the size of the current energy system.
Hydrocarbons alongside renewables
Across the energy system, it’s likely that different degrees of decarbonisation and energy efficiency will be achieved at different paces, in different places, and in different sectors of the economy.
To arrest the accumulation of greenhouse gases in the atmosphere, the world will eventually need to see overall emissions to drop to net-zero. In a net-zero emissions world with a decent quality of life enjoyed by the majority of the population, renewable energies will dominate, and together with nuclear could make about three quarters of the energy supply carbon neutral. But renewables primarily produce electricity, which currently counts for less than one-fifth of energy use. The production of chemicals and plastics would continue to rely on feedstock from oil and gas, and where high temperatures or dense energy storage are required – such as in many industrial processes like iron/steel/cement manufacture or heavy freight or air transport, we will see the continued need for hydrocarbon fuels.
Electrification is key for low CO2 and high efficiency
In order to achieve both low emissions and high efficiency, the electricity market share will need to grow from one fifth of the energy consumed to at least a half. Electrification needs be particularly high in households and service sectors, but needs to extend further into other sectors such as food processing and light manufacturing. For passenger transport, hydrogen fuel cell and electric drives should become common, while for aviation, shipping and freight hydrocarbons will likely remain important.
Carbon Capture and Storage is indispensable
It’s important to note that a net-zero emissions world is not necessarily a world without any emissions anywhere. It’s a world where remaining emissions are offset elsewhere in the system. To both mop up remaining emissions and provide opportunities for ‘negative’ emissions, the world will need widespread deployment of carbon capture and storage (CCS).
Incentivising the transition
Achieving a net-zero emissions world at pace will require significant developments in new technology deployment; industrial, agricultural and urban practices; consumer behaviour; and policy frameworks which shape, incentivise or mandate these transitions. It will also entail high levels of collaboration between policymakers, businesses and civil society.
Governments need to provide financial incentives via carbon prices or taxes for avoiding emissions and remove energy subsidies where they still exist. This allows the market to find the optimal energy mix at lowest costs.
Sensible measures for progress towards a net-zero emissions world
Analysing the likely evolution of demand across key areas of the economy, something of a logical order-of-priority of actions emerges:
- Stimulating efficiency measures and extending electrification across the economy wherever and whenever possible;
- Sustaining momentum of renewables growth, particularly solar PV and wind, and maximising the ability of the grid to handle their intermittency;
- Accelerating the switch from coal to gas to immediately reduce power sector emissions while ensuring supply to meet demand – a way of keeping cumulative emissions to a minimum during the transition;
- Improving buildings and city infrastructure to lower energy service demand significantly;
- Accelerating government-directed efforts to promote low-carbon technologies and infrastructures, including nuclear, CCS, hydrogen transport, responsible bioenergy and sustainable forestry, agriculture and land-use practices.
We hope that our latest Scenarios work will help build shared insights and perspectives among businesses, national governments and civil society more broadly. A shared understanding would not only accelerate the near-term actions to reduce CO2 emissions, but also the deeper structural transformations required to sustain decarbonisation and economic growth in the longer term.
For more information visit: www.shell.com/scenarios
Note: Shell Scenarios are part of an ongoing process used in Shell for 40 years to challenge executives on the future business environment. We base them on plausible assumptions and quantification, and they are designed to stretch management to consider even events that may be only remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. While we seek to enhance our operations’ average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years.
Wim Thomas is Shell’s Chief Energy Advisor and also leads the Energy Analysis Team in Shell’s Global Scenario Group. He has been with Shell for over 30 years. Wim is also Chairman of World Petroleum Council UK National Committee, a Distinguished Fellow of the Institute of Energy Economics Japan, and a former chairman of the British Institute of Energy Economics in 2005. He holds a postgraduate degree in Maritime Technology, Delft University, the Netherlands.
 A world in which the amount of carbon released is balanced by an equivalent amount sequestered or offset.