G20 Executive Talk Series

September 2016

Sustainable Energy

Authored by: Chad Holliday

Energy’s Part in the Global Path to Prosperity

The explorer Marco Polo thought that Hangzhou was “the finest and most splendid city in the world”. For three hundred years before him, and for seven hundred years after, it has been one of China’s most prosperous cities.

This makes it an ideal setting for this year’s G20 and B20 summits, during which government and business leaders will discuss how best to achieve similar sustained growth throughout the world. One thing’s for sure: energy will be needed, and lots of it. After all, economic development goes hand-in-hand with an increase in energy consumption.

By the end of this century the global energy system is set to double, even if huge steps are taken to improve efficiency. Making this leap will be a significant undertaking. But it is possible. It has to be, as every single person on the planet should have access to energy. As UN Secretary-General, Ban Ki-moon frequently states: “Energy is the golden thread connecting economic growth, increased social equity and a healthy environment.” But universal access is far from a reality. More than one billion people in the world currently do not turn out a light when they go to bed at night. It’s not because they forgot. It’s because they don’t have electricity.

Dual challenge
Energy is needed for every one of these individuals. It’s also needed to continue powering all other lives on the planet, and for the additional three billion who will live on earth by 2100. All this future demand has to be met while addressing climate change, which is also on the G20’s agenda in Hangzhou.

Many of the world leaders attending this G20 meeting were in Paris late last year for the UN climate summit. It was there that they agreed to keep the global average temperature below 2°C from its pre-industrial level. To make this happen, the International Energy Agency estimates energy related emissions need to be 19 gigatonnes a year by 2040. But current energy policies would take the world to 44 gigatonnes a year by then. That’s a difference of 25 gigatonnes a year. This reduction is a major task considering that abandoning 211 million cars – that’s almost twice the number of passenger vehicles in the USA – would save 1 gigatonne a year.

Transforming the energy system
So what’s to be done? A transformation of the entire global economy is required, especially in the four key sectors of the energy system: power, buildings, transport and industry. They are responsible for a hefty portion of energy-related carbon dioxide emissions. Transforming these sectors means taking huge strides forward to improve energy efficiency – of homes, businesses and cities. It means more government-led initiatives that promote low-carbon technologies and infrastructures, such as carbon pricing and carbon capture and storage. And it means investing in multiples sources of energy.

Renewables, such as solar and wind, must play a fundamental part in the future energy system. For them to fulfil their potential, the industrial, transport and buildings sectors need to rely more on electricity. But as things stand, electricity accounts for less than one-fifth of the world’s total energy use.

The switch to using electricity will be relatively straightforward for activities such as the manufacture of clothes and food, which require low-temperature processes and mechanical activities. But for other sectors, including industries that produce steel, iron and cement, the shift will take much longer as these processes require extremely high temperatures and dense energy storage.

Ultimately, it’s about making the best use of different energy sources. In the Philippines, the Malampaya offshore gas field, which Shell operates, generates around 20% of the country’s electricity needs. Separately, a Shell pilot project has provided a hybrid power system for a community on Palawan Island, which had no energy supply. Life has changed for people there. “We are happy because we have light every night now,” says Marcela Magno, from the Batak tribe. The system combines solar and hydro energy, and calls on a diesel generator for when these renewable sources are low.

Energy is needed for every one of these individuals. It’s also needed to continue powering all other lives on the planet, and for the additional three billion who will live on earth by 2100. All this future demand has to be met while addressing climate change, which is also on the G20’s agenda in Hangzhou.

Government and industry priorities
Government and business leaders meeting in Hangzhou all have critical roles to play during the transition to a low carbon future, as do their counterparts throughout the world. For the energy industry, investment in research and development has never been more important. Engineers and scientists must pursue ideas rigorously, right to the end. Consider Tim Berners-Lee. Back in 1989, he wrote a document called Information Management: A Proposal. The response from his supervisor at CERN, the science research centre, was “vague, but exciting” and Berners-Lee was told to develop the idea. A year later, the World Wide Web was born. If the supervisor had mothballed the idea, how many years later would the internet have arrived?

For governments, it’s vital to factor all parts of the economy into their energy policies. This is China’s approach. Policies promote the role of gas – the cleanest-burning fossil fuel – in meeting peak demand for power. And in the transport sector, China is working hard to encourage the use of LNG, which is cleaner-burning than diesel. There are currently around 200,000 heavy-duty trucks and buses powered by LNG in the country. That’s more than 130 times the number of LNG-fuelled trucks in Europe.

If many more such efforts are made throughout the world, it should be possible to provide energy to everyone, while lowering greenhouse gas emissions. In doing so, economic prosperity can spread throughout the world. That’s why energy has to continue being a big part of the conversation about the world’s economy. In Hangzhou and beyond.

Chad Holliday was appointed Chairman of Royal Dutch Shell plc with effect from May 2015, having previously served as a Non-executive Director since September 2010.

He was Chief Executive Officer of DuPont from 1998 to 2009, and Chairman from 1999 to 2009.

He has previously served as Chairman of the Bank of America Corporation, The Business Council, Catalyst, the National Academy of Engineering, the Society of Chemical Industry – American Section and the World Business Council for Sustainable Development, and is a founding member of the International Business Council.

He is a Director of Deere & Company and HCA Holdings, Inc.