Energy Transition Now Podcast – Episode 4 with Jo Coleman

DL:   Hello, everyone. I’m your host, David Linden, the Head of Energy Transition for Westwood Global Energy Group, and you’re listening to Energy Transition Now where we discuss what the transition really means for the oil and gas and the broader energy industry. In the first part of our series, we looked at the macro themes driving the transition and the industry’s response to this. This next series of podcasts will be focused on individual companies, themes or technologies and the role they’re all playing. To kick this off, I’m excited to have Jo Coleman, Shell’s Energy Transition Manager for the UK, here with me today. Jo initially worked in Shell’s upstream business for 20 years before joining the Energy Technologies Institute, leading the work that explored energy transition pathways, including the opportunities and challenges in delivering them. Returning to Shell in 2018. She took on the role of UK Energy Transition Manager, where she oversees all of Shell’s energy transition related activities in the UK. Jo is also an independent member of the UK government’s Net Zero Innovation Board and sits on a number of academic and research advisory boards. On top of all of that, she was awarded an OBE in 2018 and is a chartered engineer and a fellow of the Institute for Mechanical Engineers. Welcome, Jo, it’s a real pleasure to have you here.

JC:   Thank you for inviting me, David. I’ve enjoyed the series so far and the contributions from Will, Iman and Julian, so it’s a great pleasure to be here.

DL:   Perfect, perfect, looking for a similar input from you.

JC:   No pressure then!

DL:   I think before we get into the meat of the conversation, I think there’s a lot to discuss today. But I did want to ask you something about your background first. I mean, what is particularly striking, I guess, about is you left Big Oil, something that a number of conversations I have with maybe the younger generation in particular, something they’re looking to do. But you joined the Energy Technologies Institute, which is a public private partnership that was all about, I guess, about supporting, accelerating or making the UK’s energy transition a reality. What ultimately made you then return back to an oil company?

JC:   Yes, it’s a good question, David, and a number of people have commented to me that, you know, it looks like a bit of a backward move to return to an oil and gas company. But, you know, the reality is that the oil and gas sector needs to be part of the energy transition. And I firmly believe it has a strong role to play. And I felt that I could have more impact by being on the inside of a company that wanted to be part of that transition than on the outside, and hence my decision.

DL:   Yes, it’s an important message, I think that people often forget is being, or call it may be a change agent within a company as much as working in the broader economy as well. OK, look, I mean, you’ve seen the evolution of Shell’s approach to climate and the energy transition for a good number of years, if I may say that. It, maybe as an opener, if you could talk us through today, you know, what is what is Shell’s role or maybe approach to the energy transition?

JC:   Yes, thanks, David, thanks for the question. So, we see our purpose in Shell as Powering Progress, providing more and cleaner energy solutions to meet the needs of a growing global population, but also a population that needs to reduce its impact on the climate. And we recently announced further details of our Powering Progress strategy, which supports the more ambitious goal of the Paris agreement, that being to limit the rise in average global temperatures to 1.5 degrees Celsius. And there are four main goals of Powering Progress. The first being to generate value for our shareholders, providing the financial strength to transform our company as the world makes the transition to cleaner energy. It also focuses on working with our customers and across sectors to accelerate the transition to net zero emissions in step with society. And it means powering lives through our products and activities and by supporting an inclusive society. And finally, or fourth, it means respecting nature by protecting the environment, reducing waste and making a positive contribution to biodiversity. I’d like to just come back, though, to the net zero goal, because I think that’s really what we’re going to be talking mainly about today, and just provide a bit more detail. So, our net zero target covers emissions from all of our own operations, which actually make up less than 10% of our total emissions, and emissions from all of the fuels and other energy products that we sell to our customers. So, it includes all scope one, two and three of all the energy products we sell, not just those we produce ourselves. And this is really important for a company like Shell because we sell roughly three times as many energy products as we produce. Now, we believe that our emissions peaked in 2018 and we’ve set short term carbon and energy transition targets that are linked to the pay of more than 16,500 staff globally to support our longer term net zero target.

DL:   Thanks for walking through that, I mean, a follow up question I do have to that, though, is so you talk about, you know, it’s a fine balancing act between all of these things, whether it’s the classic question of how do you keep your shareholders happy while also transitioning, is I think it’s a question that all of the different oil and gas companies are going through at the moment, and particularly the IOC and the European IOCs in particular. And your point around customers and in step with society, as well as taking responsibility for scope three. Could you maybe just briefly touch on that? Are you saying that, you know, it’s a joint responsibility in that sense between society and let’s say, a company like Shell or is it something that, you know, it is solely down to Shell to make sure the scope three goes down? Just for clarity, I guess.

JC:   Yes, that’s a great question. And I think it really brings out a really strong message about partnership and collaboration. So, the changes that are required to deliver the goals of Paris are going to impact everyone on our planet, not just our sector. And society is going to have to make changes. So, we need to work in partnership with governments and with our customers and broader society to make that change happen and to make it happen more rapidly than current trajectories and policy suggests it will. And that is not to put the blame for climate change on our customers. Nothing like it, but we need to work with our customers to offer them solutions that they like, you know, that are affordable and convenient and low carbon to help them make those lower carbon choices.

DL:   OK, but in terms of, you know, that strategy has been, I guess, now been approved and has gone through some iterations over the years as we get to here, and I guess as we listen more to shareholders, the customers and society, that strategy has evolved. But I guess in particular in the last few weeks or certainly prior to the recording that we’re doing now, it certainly feels like the pressure to change and the pressure to sort of increase the pace of change has increased. And, you know, there are things like the IEA report around net zero, certain legal cases have sprung up, investors pressuring to have individuals on boards that are maybe more about changing how those companies are working, et cetera. It feels like there’s a bit of a pivotal moment going on to try, to create more change more quickly. Is that a view you share as well?

JC:   Yes, I think so, David. I mean, there’s increasing evidence of, the well, actually, I was going to say the potential, but also the very real impacts of climate change and the fragility of our planet. And Will spoke to these in your first podcast and the urgency of accelerating action. And so, society’s expectations do change and, you know, as do our own as part of society. And that is why in our strategy, we refer to moving in step with society. Some people think that’s almost an excuse for delay, but actually it isn’t. And it’s why we’ve increased our ambition, which was previously aligned to the less than 2 degrees C goal of Paris. It’s now aligned to the more ambitious 1.5 degrees goal of Paris. And that’s what we mean by moving in step with society. But, you know, all of this comes back down to kind of my response to your previous question about working in partnership. There is so much more we need to do and that governments need to do to achieve those goals, because current policies and current trajectories do not put us on a pathway towards 1.5 degrees.

DL:   OK, Yes. I mean, I think one of the discussions I’ve been having a lot recently is around, you know, there’s more than one pathway to get to 1.5. And getting everyone aligned to that is not easy. And you’re right, you know, society and companies and governments need to work together to achieve that. But let’s briefly turn maybe to the UK, you know, your focus in particular, and also maybe as you know, a self-styled climate leader, as such as a country to get us to net zero 1.5 itself. So, would you be able to just talk about what the UK itself is committing to and trying to achieve over the next few decades?

JC:   Yes, so in 2019, the UK government increased its climate change target to achieve net zero emissions by 2050. Prior to that, it had an 80% reduction in emissions target. And the UK government has a series of interim five yearly targets, which are called climate budgets, that are legislated as part of the 2008 Climate Change Act. And the fifth carbon budget, which covers the period 2028 to 2032, has effectively now been superseded by the UK’s nationally determined contribution to the Paris agreement. And this is to achieve a 68% reduction in emissions by 2030 vs. a 1990 baseline. This 2030 target will then be followed by the sixth carbon budget, which effectively sets the target for 2035 of a 78% reduction in emissions vs. 1990. So, in summary, it’s net zero by 2050, with intermediate targets of a 68% reduction by 2030 and 78% by 2035, all against a 1990 baseline.

DL:   Very interesting. I think there’s a there’s another whole podcast around which baseline you use and what it takes to get to net zero. But I think you, maybe in the UK’s context specifically, you know, there’s a lot of discussion that we’ve had, this applies across many you know, it’s very live in the US, for example, this debate in particular, but also in the UK and others who set these targets. It’s the question is, is target setting in itself, which sure, there is a series of milestones to look at here, but is it not what I would call, the easy bit? So, saying that you’ll get there is great, but is this actually a practical thing that we can actually achieve in the UK?

JC:   So I absolutely think we can. Yes, target setting is the easy bit, but the UK has already made significant progress and most notably the falling carbon emissions from the power sector in the order of a 75% reduction since 1990. And that’s been achieved through the use of a carbon floor price on top of the emissions trading scheme to drive coal off the system, in combination with subsidies for renewables. And in 2020, renewables and nuclear power together generated more than 50% of the UK’s electricity, with gas playing an important role in providing flexibility that the system very much needs as it increases in the amount of intermittent renewables. But Yes, decarbonising power is in many ways the low hanging fruit, and the UK needs to continue decarbonising the power sector. But attention now needs to turn to other parts of the economy, such as transport, homes and industry. And I think this gets more challenging because it comes back to your earlier question about energy customers and consumers, because as we move towards these other parts of the economy, consumers now need to take action. So, we need to remove barriers to rapid deployment of electric vehicles and technologies like carbon capture and storage, and hydrogen, which are now very much short-term priorities for the government. It’s probably worth saying as well, although government setting targets is only part of the answer, and it does provide industry with some clarity on the direction of travel, which in turn provides confidence in what we should be investing in. And this is one reason why we called last year on the UK government to bring forward the ban on the sale of new internal combustion engines from 2040 to 2030, a policy the government subsequently adopted because it provides confidence to us to underpin our investments in electric vehicle infrastructure. So, I think, you know, target setting is part of the answer, but it is in itself an important part.

DL:   I mean, maybe to build on your point around target setting and partnerships and to allow a transition to happen, you know, one of the things that I know we’ve had a lot of discussion with our clients on is around, you know, how do you ensure that – it can be wrapped up, I guess, under ‘just transition’ – occurs, but also that sort of existing capabilities are utilised and transferred to ensure this this transition can happen effectively. And specifically, that comes to the North Sea transition deal that we’ve seen, which is, you know, which is about ensuring that the oil and gas sector has a role to play, and its role and its skills are recognised. So, what you know, could you maybe just give me a view of Shell’s position on the North Sea transition deal and your views as to its effectiveness?

JC:   Yes, thanks, David. So, the North Sea transition deal is a really important deal between the UK government and the sector operating in the North Sea. As you say, the world is not going to switch overnight to low carbon energy sources. So, we need to continue providing the energy that the world needs today, whilst investing in the energy of the future. And the North Sea transition deal recognises this. But it also means that the energy we continue to provide needs to come with lower emissions, and that’s why the sector, the companies operating in the North Sea, have committed to achieving a 50% reduction in emissions by 2030 and becoming a net zero basin by 2050. The North Sea transition deal also commits the UK government to working with the sector to develop CCS and hydrogen, both of which will be critical to achieving the UK’s goals that I mentioned earlier. And we have been, as Shell, we’ve been very active in both driving towards this agreement and also now looking at how it gets implemented because having agreement is one thing, but of course we have to move rapidly towards the implementation of that agreement. And it’s pretty clear that these targets are not going to be easy yet pretty aggressive targets, but we believe that our sector working with government has the skills and the ingenuity and the capabilities in order to do so.

DL:  Indeed, and the one thing you do say there is, is that it is about implementing this this deal now. Is it fair to say, you know, this is a deal which recognises, as you say, that there’s a role to play, but the final details still need sorting out? So, things maybe like, I don’t know, the climate checkpoints that are being talked about haven’t been fleshed out yet, so, what that looks like for exploration, for example, isn’t clear just yet.

JC:   So, it does actually have interim targets for 2025. And I think you know, the Oil and Gas Authority recently reviewed its remit to align with net zero. And so, I think actually it does set out, you know, the appropriate framework for continuing to review the progress the industry makes. But, Yes, there are details still to be worked out, you know, not least how some of this, and I think in particular how the UK government can support the industry further in this transition.

DL:   Yes, interesting. Lots of interesting more discussion to come on that, I’m sure. But let’s turn to sort of Shell in the UK specifically, if I may. You know, there’s a lot of to dos for the government, there’s a lot of things still to achieve, and a number of companies are on an early stage of their development of their strategies. But I’ve seen Shell been quite active, obviously, in the UK for a while through its history and has had its own energy transition strategy for that. Maybe just to begin with, could you maybe just talk me through what is Shell’s, call it energy transition strategy for the UK actually look like?

JC:   Thanks for the question, David, because as you say, it’s important to get beneath targets and look at strategies and plans and actions. So, in the UK, we believe that our strategy in combination with strong government policy, can deliver a 40% reduction in Shell UK’s emissions, and that’s scope one, two and three by 2030 versus the 2019 baseline, which supports both our own global net zero targets as well as the UK’s climate change targets. And there are four key ways in which we get there. The first of these is about reducing emissions in our own operations. Now, we already supply all of our offices and our retail sites and actually our onshore facilities with 100% renewable electricity. So, this is primarily about further reducing emissions from oil and gas production, as we were just talking to about the North Sea transition deal. But the other three ways are about helping our customers to decarbonise. So, the first of these is delivering electric vehicle charging infrastructure that our consumers need to make the switch to electric vehicles. And that’s whether they’re at their homes, at their workplaces, on the street or rapid on the go charging at destinations, such as supermarkets. We’re already leading the way in this through Shell owned New Motion and Ubitricity, each of which today provide access to a public charging network in the UK of roughly 4,000 charge points. And we intend to grow all of the segments I’ve just mentioned, for example, aiming for 5,000 rapid chargers by 2025 and up to 11,000 by 2030 at Shell service stations and destinations. So, the second way in which we help our customers is by growing an integrated power value chain and helping our customers to switch to quick green power and providing clean power as a service to all parts of the power value chain. So, in the UK, Shell provides electricity today to industrial and commercial customers, and we support renewable generators, for example, through multi-year power purchase agreements, such as the 480 megawatt power purchase agreement we have with the operators of the world’s largest offshore wind farm at Dogger Bank. And also, in the UK our subsidiary Limejump optimises routes to market for customers with electricity generating, or consuming assets. And an example of its activity is that it will optimise the use of Europe’s largest battery, which is currently being commissioned at Minety in southwest England. And so, there’s a number of roles in which we want to play in the power sector. And the third way in which we are very much working with our customers is working also with partners and government to deliver carbon capture and storage, and hydrogen. We are proud to be part, or to be partners, in three of the UK’s industrial CCS clusters to drive the decarbonisation of heavy industry, produce clean, flexible power and low carbon hydrogen. And we also operate here three hydrogen refuelling stations, which generate hydrogen from renewable electricity, and we operate them with our partner ITM Power. And we have two more to follow, hopefully by the end of 2021. So, just to summarise, because there’s quite a lot in there, I know, but our strategy in the UK is to reduce our own operations, but then also to support our customers decarbonisation journeys by providing EV infrastructure, growing our integrated power business and delivering CCS and hydrogen solutions.

DL:   OK, that’s a super interesting I mean, as you say, you’re doing a number of things to help your customers in that sense to decarbonise. But there’s obviously a number of challenges to making some of these developments come to life. This is not just about aiming to put more charge points in place, et cetera, et cetera. You know, a number of different areas like this have their own regulatory or financial barriers to make them come to fruition. Now, you’ve talked about, I guess, the electric mobility side of things before, in terms of encouraging the government to bring that target forward. That’s a good signal. And it looks like you’re investing in, you know, charge points, et cetera. But what are the sort of the barriers to making that kind of thing a reality?

JC:   Yes, so, I mean, you’re right, customers are at the heart of what we do, and we very much take a customer back approach to our strategy, starting with the customer’s needs and working backwards along the value chain. So, we’re very excited by the mobility opportunity and we talk to our customers about what, how they see the barriers, because what matters is what they think, not what we think, in many respects. So, our customers tell us that they have two main concerns about buying an EV, and these are the upfront capital cost and range anxiety. And range anxiety comes in a number of forms, but that could be concern about the battery range or not knowing where the nearest charge point is, or for that matter, not knowing whether that charge point will be available, whether it will be working or whether they’ll be a queue at it or whether there’ll be something called ICEing, where an internal combustion engine car is just used it as a parking place. So, in this, you know, these are the barriers that need to be overcome. And in particular, we see our role, and the barrier that we can most readily support, being to provide the charging infrastructure wherever the customer wants to charge. And I think, you know, I talked previously about all the different types of charging solutions we can offer to customers, be they individual customers or whether they be businesses. We can also combine those charging systems into a single payment system, and that can potentially also be linked to their energy supply. So, I think, you know, the sort of the charging infrastructure and the businesses we have in place today, combined with the footprint of our thousand UK service stations in the UK, provide us with a really strong foundation on which to grow that infrastructure that our customers really need.

DL:   OK, and then is the plan to use your integrated green power excuse me, your integrate green power together with let’s say that outlook for that power, so your traditional integrated view where you traditionally say, you sell your own molecules, produce and sell your molecules. Is this the same idea on the, the electricity, the electron side of things as well?

JC:   Yes, absolutely. So, our EV charge points today are already provided with 100% renewable power, but it is very much about growing that power business, not just for EV charging, but also, you know, thinking in the future about electrifying heat, thinking about the role electricity plays in industry, so it is about helping our customers wherever they are, to move to renewable and low carbon power, and to increase the role that power plays in the energy system. So, scenarios such as ours, but also many others, show that electrification of end use demand needs to increase by roughly 20% of end use today to over 60% in the future. And we very much want to play, you know, our role in that, but just to my comment earlier, that we sell three times as many, many energy products as we produce. You know, that is also our strategy in power. We don’t have to generate all of the electrons ourselves. We can play a critical role in integrating between generation, with trading and with retail and commercial energy solutions.

DL:   So, is that maybe one of the one of the explanations why we don’t see Shell maybe as active in the offshore wind sector as maybe some of the other European IOCs that we’ve seen, certainly in the UK.

JC:   So, we are active, very active in offshore wind. We are operating in developing offshore wind farms in the Netherlands and in the US. But you’re right, we haven’t yet been successful in the UK. I don’t think there’s any secret in the fact that we have been trying to enter the market, but it’s extremely competitive and we haven’t been successful in it. But we still are in a position to be able to support renewable generators through power purchase agreements and also by buying the renewable energy guarantees of origin that renewable generators are issued with. So, we very much see ourselves playing an integral part in the system, even though, as you say, we haven’t yet been successful in entering generation in the UK.

DL:   So, maybe sort of a closing question for you then, Jo, in terms of, you know, you’ve sat in the UK and, you know, you’re focused on the UK now, and your energy systems work with was also UK focused. There’s obviously a lot of exciting things going on in that part of the world. But in terms of, you know, if you were to look at, you know, abroad, further afield and also, you know, what Shell is doing there, is the UK kind of special, different in that sense, and everyone else is still catching up, or can the story that’s sort of unfolding in the UK be replicated elsewhere and is, you know, Shell also replicating that story elsewhere?

JC:   Yes, really good question, David. So, it’s not for me to say that the UK is special at all, but I think we can all learn from each other in this space. So, you know, I talked about the UK’s relatively modest carbon price that it applied in the power sector to effectively eliminate coal over less than a decade from the power system. So, I think there are things that other countries can very much learn from what the UK has done. But there are also ways in which the UK can learn from others. And I think each country has a unique set of opportunities that it’s presented with. In the UK. We talk very much about the opportunity of offshore wind and we’re certainly a leader in offshore wind and that’s something that we can replicate in other places. You know, other countries will lead and will have more opportunity and things like solar. The UK is also blessed with a fantastic opportunity around carbon capture and storage. And whilst it isn’t leading today, and we all know it’s had many false starts, at carbon capture and storage, it is now looking to be very, very serious in that place. And I think the capabilities and the skills and the knowledge that is learnt through deployment of carbon capture at storage, and carbon capture and storage at, you know, at least two of the UK’s industrial clusters in the next decade, that knowledge and learning will be critical to share and deploy around the rest of the world if we are to achieve the goals of Paris. So, I think, in summary, we all need to be learning from each other. This isn’t this isn’t a journey where one country, or one company, can have all of the answers. We very much need to, we need to be modest, we need to we need to learn from each other. We need to listen to others. And we need to work in collaboration and find the ultimate pathway that will deliver the goals that we all want to see achieved.

DL:   Thank you, Jo. I think it is a very important point, as you say, you’ve mentioned it a few times during our discussion. But Yes, the collaboration point and also having different pathways for different companies and countries is an important one to recognise and keep that discussion going, I’m sure. Great, thanks for joining us today, Jo. It’s been a really good discussion, so thank you for your time.

JC:   And thank you for having me, David, and I look forward to continuing to listen to the series as it progresses.

DL:   And thanks everyone for listening as well. I hope you enjoyed it. Please make sure you subscribe and give us a good rating and share with your friends and talk to you next time.

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