Shell (LON: RDSA) to invest in wind power with new green energy division

Shell (LON: RDSA) to invest in wind power with new green energy division

The Anglo-Dutch group Royal Dutch Shell (LON:RDSA), which is also Europe’s largest oil company, is on June 7 - on its Capital Markets day – set to announce a new division that will invest in renewable and low-carbon power. 

After an internal company announcement to staff was leaked to the media, the company has confirmed a separate New Energies division with $1.7 billion of capital investment earmarked will serve as a launch-pad for a drive into wind power. It will also bring together Shell’s other existing renewable and low-carbon power activities. 

New Energies is allocated annual capital expenditure of $200 million, and will be run alongside the Integrated Gas division under executive board member Maarten Wetselaar, the company confirmed. 

Shell’s CEO Ben van Beurden said at their annual socially responsible investors event on May 11 in London, “Shell has long recognized the importance of climate change and the critical role energy must play in enabling a decent quality of life for people across the world. The big challenge, both for society and for a company like Shell, is how to provide much more energy while at the same time significantly reducing carbon dioxide emissions in a profitable way. This is the energy transition.” 

The chairman of Royal Dutch Shell, Charles Holliday, recently joined executives from BHP Billiton (LON: BLT), Germany’s RWE (ETR: RWE), Schneider Electric (EPA: SU), General Electric (NYSE: GE) and other big energy companies at the Energy Transitions Commission, a new body exploring whether some of the fossil fuels that businesses such as theirs produce should stay in the ground. 

The scale of the challenge facing not just the energy companies but the entire world is laid out in a recent piece on Project Syndicate by Co-Chairs of the Commission – Ajay Mathur, the Director-General of the Energy and Resources Institute of India, and Adair Turner -- a former chairman of the United Kingdom's Financial Services Authority and former member of the U.K's Financial Policy Committee, who is also Chairman of the Institute for New Economic Thinking. 

The collaborative nature of the response needed is being demonstrated by the involvement of many NGOs working with corporates on disseminating information and re-thinking business strategy. The Carbon Tracker initiative recently came out with a new growth scenario for oil and gas companies in a 2 degree world, covered on Forbes

In terms of annual spending, the cash allocated to the New Energies division by Shell is less than 1 percent of the money allocated to oil and gas ($30 billion). But Mr. van Buerden does talk often about the need for innovation. 

A company program called ‘Shell Springboard’ aims to help U.K. low-carbon enterprises to meet the scale-up challenge via funding. 

London startup Deciwatt was recently named national winner of the 2015 Shell Springboard program to develop GravityLight, a technology which uses the force of gravity to generate electricity that can be used off-grid. 

A new study by Imperial College in partnership with Shell Springboard, ‘Engineering growth – enabling world-class entrepreneurship in the low-carbon economy’ shows that the U.K. low-carbon sector is valued at £130 billion ($186.5 billion). 

However, significant scale-up challenges are hampering entrepreneurs from taking advantage of this opportunity, and failure to address this could see the U.K. miss out on £6.7 billion ($9.6 billion) of annual economic growth in the sector by 2023, it suggests.

Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com

Originally published on May 16, 2016