After three years of carbon reduction, Shell and its friends have handed in a new answer

Three years ago, China officially proposed its "dual carbon" goal, and for the first time since then, many companies have calculated their "carbon reduction accounts". Three years later, China's green energy transition has deepened, and the penetration rate of new energy has increased significantly. However, how to seek a set of systematic, refined and innovative solutions under the premise of ensuring safety is still inconclusive.

On October 20, 2023, the Shell China 2023 "Empowering Progress for a More Balanced and Robust Energy Transition" Summit was held in Beijing. The forum brought together experts from governments, businesses, think tanks, as well as energy, industry and transport, to discuss how to build a more balanced and robust energy transition with Shell representatives.

During the more than five hours of sharing and discussion at the forum, the core questions that were repeatedly mentioned were: What are the difficulties for different industries to gnaw on the "hard bone" of decarbonization? What kind of energy products or technologies can be used to effectively reduce carbon emissions, and what are the business opportunities that we have overlooked?

After three years of thinking and practice, the consensus reached is that transformation is not achieved overnight, and requires determination and scientific methodology.

As Shell Chief of Staff Noonan said, "China needs to strike a good balance between the elements of a safe, reliable, affordable and clean and low-carbon energy transition, and while this means a lot of challenges, I always see a 'do-it' attitude that can overcome the challenges, which is critical in today's world." At the same time, Noonan reaffirmed Shell's value of keeping it open, and in the face of the huge potential of the Chinese market, a number of entrepreneurs jointly called on more companies to work together to explore win-win results.

Chen Lin, Executive Vice President of Shell Group, said that Shell has been committed to expanding the "low-carbon ecological circle of friends", innovating cooperation models with customers, suppliers and partners, creating a "you have me, I have you" relationship, and working together to help all walks of life save energy and reduce emissions. In the future, Shell will continue to leverage its own strengths to jointly promote "enabling progress" and create a "net-zero future".

Opening the "toolbox" of the energy transition

In the eyes of pessimists, the subversion of the energy structure from fossil energy to renewable energy is tantamount to an elephant turning around in a difficult and unknown way. But for optimists, a drop of lubricant, a tank of natural gas, or a gram of carbon dioxide captured from the air is the key to the energy transition.

"It's not just new energy that can contribute to carbon reduction, but efficient lubricants can also do it. Huang Zhichang, Executive Vice President of Shell Group and President of Global Lubricants Business, took the lead in raising a common misconception at the forum. The logic behind this is that the more efficiently the lubricant keeps the machinery running, the less fossil energy will be burned and emitted.

This exceptional quality has already been validated in tests on Ferrari racing cars, with data showing that Shell lubricants have improved reliability and performance for Ferrari, which has helped them win the championship. As the leader of the world's leading lubricant sales business for the past 16 years, Wong proudly attributes his unique strengths to five points: scale, brand, differentiation, technology and collaboration.

Fortunately, this advantage will also carry over to the cause of carbon reduction. For example, Shell's own R&D centers and factories are able to provide different maintenance solutions for machinery and equipment under different working conditions to reduce downtime, Shell acquired a company that specializes in biodegradable base oils last year, which means that the oil source is sustainable, and some products are already produced using this sustainable base oil as a source, Shell has installed photovoltaics in 11 lubricant blending plants around the world to use clean energy for electricity supply, and together with partners, Shell actively recovers and recycles packaging materials for sales。

Abundant resource elements have given rise to a steady stream of innovation. For example, Huang Zhichang said that China's energy transition, especially electric vehicles, is developing rapidly, and Shell has seen the market and launched a new immersion refrigerant that can effectively support the thermal management of power batteries, energy storage batteries and data centers. This is not a simple R&D work, but requires good compatibility with batteries and machines, so Shell has reached joint R&D cooperation with multinational companies such as Intel and Microsoft, which has played a key role in supporting the improvement of performance indicators.

"It is foreseeable that with the development of the economy, the pursuit of efficiency and safety will become higher and higher in the future, whether it is the logistics and transportation of commercial vehicles in the transportation field, or the data center and machinery and equipment in the industrial field. Shell has its own unique strengths, but it also has its own limitations. We hope to work with governments, industries and partners to build an ecosystem where you have me, I have you. Only in this way will we be able to achieve our goal of net zero emissions as soon as possible. Huang Zhichang said.

Another well-known tool for carbon reduction is natural gas. It is the main force in the "transition" of Europe and the United States from traditional energy sources such as coal and oil to new energy sources such as wind power and photovoltaics. But in China, the situation is different. In 2022, China's apparent natural gas consumption was 366.3 billion cubic meters, down 1.7% year-on-year. This is the first year-on-year decline in China's natural gas consumption since 2005, when the West-East Gas Transmission Line was put into operation, which has cast a shadow on the confidence of investors in some industries.

Lu Ruquan, president of the China National Petroleum Corporation Economic and Technical Research Institute, believes that in the context of intensified geopolitical games, the energy transition has surpassed energy security to become a national concern, and natural gas is still a bridge, a link and an intermediate energy source for China's energy structure to move from high carbon to zero carbon.

In Lu Ruquan's view, to evaluate whether an energy variety has a future, we should return to several basic issues: whether it is sufficient, whether it is economical, whether it is clean, whether it is flexible, and whether it is safe. Natural gas has a combination of these five attributes and excellent overall performance, so it has a full competitive advantage. "I noticed a particular trend that the price of natural gas used to flow regionally, but now it has converged at least in Europe and East Asia, which shows that natural gas is becoming a globally flowing commodity and bodes well for a better future. ”

What role will natural gas play in each major field in the future? By comparing the characteristics of other energy products, Lu Ruquan believes that natural gas will play a unique advantage in at least the following areas.

First of all, in the field of urban gas, natural gas will continue to play a role in promoting China's urbanization process as a clean energy booster, gradually replacing coal gas as the main energy source of China's city gas; In the field of power generation, natural gas will continue to serve as a growth pole for clean electricity and a stabilizer for peak shaving, and he predicts that China's installed natural gas capacity will grow from 114 million to 300 million kilowatt hours in the next decade.

Overall, the industry generally believes that from 2035 to 2040, China will reach a plateau and peak period of natural gas consumption, with consumption of about 550 billion cubic meters to 600 billion cubic meters. "It should be noted that the above premise is that natural gas itself must be clean, low energy consumption and low emissions. For example, in the process of exploration and development, pipeline transportation, and oil refining and chemical industry, oil companies should make full use of wind and solar energy in their own energy consumption, accelerate the consumption of new energy nearby, and replace the energy consumption in the traditional oil and gas production process. Lu Ruquan added.

In addition to improving operational efficiency and finding clean energy, there is a more direct technical tool on the way to carbon reduction, CCUS (carbon capture, utilization, and storage).

In his keynote speech, Lv Haodong, a postdoctoral fellow at China's Agenda 21 Management Center, said that in recent years, China's dual control of energy consumption has gradually shifted to dual control of carbon emissions, and carbon has become a constraint hard indicator. Some energy infrastructure that does not meet emissions standards is at risk of stranded assets, and CCUS is in the spotlight.

However, the high cost of emission reduction is the key factor restricting its large-scale application. At present, the marginal abatement cost of CCUS engineering application in coal-fired power, steel, cement, chemical and other industries is still higher than that of renewable energy utilization technologies such as onshore wind power, photovoltaic and hydropower. For example, the installation of CCUS equipment in a coal-fired power plant has increased the cost by about 61%, according to the team's estimates.

In addition, CCUS also has problems such as source and sink mismatch, tight deployment time, lack of business model, and lack of incentive policies. At present, China's coal-fired power plants and industrial parks and other emission sources are basically distributed east of the Hu Huanyong Line, but the suitable storage sites are mainly in the northwest region. At the same time, CCUS is a process in which all technical links participate, but not all enterprises can undertake the process from capture, transportation to final oilfield storage alone, so in the future, they will face the problem of defining the rights, responsibilities and interests between enterprises.

"Because the upfront investment cost of CCUS itself is very high, enterprises should grasp the window period for transformation. If you deploy too early, it's hard to reduce costs because of low technology maturity, and if you deploy too late, much of your infrastructure is about to be retired and there's no room for retrofit. After the research of our central team, assuming that it has a payback period of ten to fifteen years, then 2030 to 2035 will be an optimal period for the industry to deploy CCUS. Lu Haodong said.

In terms of policy, foreign CCUS technology systems and policy systems are relatively mature and have greater incentives. At present, domestic CCUS mainly focuses on the macro top-level design, and the operability needs to be further strengthened. He revealed that in the future, China may introduce some special fiscal and tax subsidies or mandatory measures for green finance, in conjunction with the carbon market mechanism, to jointly promote the implementation of China's CCUS policy incentives.

What is the "difficulty" in carbon reduction?

Industry and transportation are the "two mountains" of China's carbon emissions, and the volume of carbon emissions is second only to the power industry. In the past three years, these two areas have successively issued timetables and roadmaps, forcing companies to act, and some companies have taken the initiative to embrace the upcoming changes.

Ding Zhimin, vice chairman of the Energy Investment Committee of the China Investment Association and former deputy director of the National Energy Administration, emphasized that "balance and stability" is also the principle to follow in the pursuit of the "dual carbon" goal. At present, almost the world has fallen into the "impossible triangle" of energy, that is, the three goals of energy supply security, environmental friendliness and low price cannot be achieved at the same time, and they must be sorted and selected in different forms. In the past two years, China's coal power approval has accelerated, which is the need to ensure energy security. "Our experience is that rich in coal and poor in oil and gas is China's national condition, which is dominated by coal, and it is difficult to fundamentally change it in the short term. Green transformation is a process, it is necessary to establish and then break, not to break before it is established, not to break before it is established, and you can't throw away the food guy in your hand first, and the new food guy has not yet got it. ”

Baosteel is the world's leading modern steel conglomerate and the "vanguard" of carbon reduction in the steel industry. Previously, it took the lead in proposing: based on 2020, the phased goal of reducing carbon emissions by 8% in 2025, 15% in 2030, and 30% in 2035, and achieving practical results through various ways.

Fu Jianguo, deputy general manager of Baoshan Iron and Steel Co., Ltd., said that the company's ability to achieve actual results is inseparable from the triple strategy. The first is to implement the priority of conservation, energy conservation and carbon reduction, in less than three years, the first stage has achieved the task of 3.2% carbon reduction; the second is the energy transition, the plant uses a large number of green and low-carbon energy, including the transformation from coal to electrification, and the purchase of green electricity; and then the development of new metallurgical technology, through technology research and development, the carbon in the blast furnace is recycled to the greatest extent, and the current stage has achieved certain results, basically achieving the goal of 20% carbon reduction.

"The steel industry is a big carbon emitter, but steel products can be a low-carbon product and can be recycled to the greatest extent. In the early stage, we have also cooperated with companies such as Shell to provide some carbon-reducing products using scrap recycling, coupled with electric furnace technology, and will gradually expand the supply base in the future. Of course, even so, steel production will inevitably produce carbon dioxide, which is where CCUS is needed. Fu Jianguo said.

Adam Prince, Shell's General Manager of Global CCS Strategy and Business Development, is a business unit dedicated to delivering CCUS business services to our clients. He said that Shell's carbon capture and storage facilities in Canada have been operating for seven years, using certified carbon capture technologies and creating a lot of value across the value chain. Currently, Shell has two CCUS projects in China that are in the joint research phase.

"For a company that wants to reduce carbon emissions, the best choice is to renovate existing facilities or build new carbon reduction facilities, whether it needs to change the process or raw materials, in fact, there is no fixed answer, and it needs to be considered in combination with carbon reduction goals and decarbonization costs. In this process, we are happy to explore more technologies and opportunities with our customers and partners. Adam Prince said.

Although many industrial enterprises have released their own mission maps to explore their own carbon reduction paths, in the eyes of industry insiders, more carbon reduction potential still needs to be explored.

Wang Huifeng, vice president and chief engineer of Offshore Oil Engineering Co., Ltd., said that the design leading role of the EPC general contracting industry is very obvious, and the design development is endless. Taking new energy as an example, the current offshore floating power generation, especially the large-scale model of wind farms, has not been fixed, and the lack of design is one of the main reasons. If original and disruptive design contributions cannot be made to reduce costs, then offshore wind power in many places does not have the commercial value to be promoted, which will affect the scale expansion speed of new energy itself. Another trouble is that even with a good design, there are still problems in the manufacturing process. The management mode and production mode formed by many manufacturing enterprises for many years are oriented to traditional industries, and how to adapt to the needs of rapid cost reduction in the development of new energy requires more enterprises to take the initiative to change. In addition, the resilience of the supply chain is also a major challenge.

Pan Yantian, vice president of business at Goldwind Science & Technology Co., Ltd. and chairman of Goldwind Zero Carbon, is more optimistic about the development of new energy. He proposed that the replacement of traditional energy by new energy is a false proposition in the short term, and the supportiveness, stability, dispatchability and flexibility of traditional energy will continue to play the role of basic guarantee for a long time. Looking ahead to the goal of reaching around 80% renewable energy by 2060, there is ample time and space for new energy practitioners to solve energy efficiency issues through technological advancements in their respective fields.

"In addition to providing zero-carbon products, one of our priorities now is to green thousands of companies upstream in the supply chain. Last year, we completed a 70% green survey of our supply chain, including international leaders such as Shell, and we aim to use 100% green electricity in our entire production chain by 2025. In the future, once offshore wind power is shut down, the cost of carbon consumption for maintenance at sea is very large, so we need clean transportation. All of the above work requires us to build a platform with our partners to work together to solve product design and technological breakthroughs. Pan Yantian said.

If the focus of carbon reduction in the industrial sector is on cooperation between enterprises, then the carbon reduction in the transportation sector is closely related to the choice of each car owner.

Xu Tao, head of business development at Scania China Group, a leading global commercial vehicle company, said that electrification is the only way to achieve 100% zero carbon emissions. However, the electrification cycle of heavy-duty vehicles is very long, and it is urgent to try and make efforts to decarbonize internal combustion engine products at this stage. To this end, Scania has invested in the hardware and operation and maintenance of its vehicles, including working with Shell to use low-drag, low-density lubricants, as well as increasing driver training to improve efficiency, save energy and reduce emissions.

Talking about the challenge of carbon reduction of commercial vehicles, Xu Tao pointed out that the current domestic policy guidance needs to be strengthened, such as the domestic charging and swapping standards are blooming and difficult to unify, resulting in great waste to the initial investment of the industry. Under the premise of technology neutrality, the relevant domestic departments should take into account the comprehensive economic costs of society and enterprises, and introduce operable policies, regulations and standards. In addition, the domestic transportation industry rarely uses biomass fuels, and if it can be expanded, it will have an immediate effect on the logistics industry. When the policy mobilizes a variety of tools to remove these obstacles, the decarbonization of commercial vehicles will no longer put high economic pressure on freight companies and vehicle owners, and the resistance will be greatly reduced.

Wang Boyong, director of Smart Freight Center China, agrees. He boiled down the green transformation of the freight industry to two aspects: one is policy standards and regulations, and the other is the industry's own response. Only when there is a relatively clear expectation can the company adjust its posture flexibly according to the actual situation. He believes that to achieve full electrification of China's transportation sector, especially medium- and long-haul electrification, infrastructure laws are needed, local governments need to provide corresponding facilities, and reliable business models need to be established. This means that everyone must "sit together and discuss" and promote the introduction of policies from the technical route and market performance.

Gao Xiang, Deputy General Manager and Chief Digital Officer of Sinotrans Co., Ltd., is deeply involved in the logistics industry at home and abroad. He believes that in order to practice green logistics, the transmission path of the supply chain is far more important than the policy, because the policy is limited and the long-term subsidy is not realistic. In order to cope with and advance this work, Sinotrans has formed five major solutions to serve customers, from energy to digitalization. In this process, Sinotrans has not only completed its own capacity building, but more importantly, formed an ecosystem and value identity. "In this process, we found that the carbon footprint factors used in China are based on foreign statistical methods, which are orders of magnitude different from those in China. Therefore, in the next step, we will also work with Chinese enterprises and research institutions to study carbon footprint factors that are in line with China's actual situation and reduce the cost of green transformation. ”

As the world's No. 1 brand in the list of new energy vehicles, Wang Junbao, general manager of BYD Group's corporate business department, said that there are three main pain points in the promotion of new energy vehicles: high cost, safety anxiety and difficulty in promoting pure electric vehicles in the logistics and freight market. The cost of an ordinary commercial oil truck is more than 300,000 yuan, but the cost of an electric truck can soar to more than 1 million yuan. Electric trucks belong to the oil-to-electric conversion and do not have a complete forward design, so the cost of upfront products and designs remains high. In terms of safety, in the early days, some domestic car companies and battery factories pursued more work and faster use, using a large number of ternary batteries, etc., which then brought public safety anxiety.

Wang Junbao introduced that BYD insists on taking two roads in the logistics and freight market: one is pure electric, which is suitable for short-distance transportation between dozens of kilometers of cities; "Technological innovation and development need to be done through everyone's joint efforts, and the market acceptance is relatively low, so we need to find out what they can accept. ”

"BYD has been relatively lonely over the years, in addition to the design of the whole vehicle itself, the battery is made by ourselves, and the mold is made by ourselves. However, as everyone becomes more and more receptive to electrification, our circle of friends is getting wider and wider, and at the same time, we share our technology with upstream and downstream suppliers and customers, and BYD is not as lonely as it used to be. Wang Junbao said with emotion.

Carbon reduction is a "road never traveled" and an "unprecedented market". In this regard, the common choice of many enterprises is to innovate business models and seek partners.

Chen Haifeng, vice president of JD Automobile and general manager of Jingdong Car Maintenance, said that the company is currently trying to lay out JD Auto Super Experience Center products in five core cities in China, with the goal of establishing China's largest open platform for auto parts, bringing all supply chain accessories for passenger cars and commercial vehicles to the closest place to terminals and users, so as to achieve emission reduction, cost reduction and efficient service, which is expected to serve 200 million car owners in China in the next three years.

Hu Chuan, Executive Director of Shell China's Retail and Mobility Joint Venture, also said that starting from the real needs of users, Shell has made many breakthroughs and innovations in gas stations and charging stations. For example, Shell's world's first 10-in-1 integrated energy station, which recently opened in Wuhan, Hubei Province, breaks the concept of traditional gas stations, not only providing vehicles with diversified energy options including refueling, charging and hydrogen refueling, but also bringing together high-quality products or services such as convenience stores, coffee, fast food, car washes, maintenance and driver's homes around the "people and vehicles" scenario, and uniting local clubs to create a "car lover base" for drivers.

"The energy transition requires the joint efforts of all people, and no single entity can accomplish such a difficult task. That's why Shell is very focused on working with its partners, not only in China but also overseas. We have established a partnership with Sinotrans to promote domestic and international carbon peaking and carbon neutrality actions, and seek opportunities to build electrification facilities together. We have a lot of cooperation with Jingdong Car Care in the field of lubricating oil, and the next step may be to cooperate in charging, gasoline and diesel. The list goes on and on. Our greatest desire is to create a service experience that satisfies our customers through our efforts and partners. Hu Chuan said.

Star Field Concept Truck "Blockbuster Official Announcement"

Balanced carbon reduction, steady transformation, and win-win cooperation, at the Shell "Empowering Progress" conference, Shell also demonstrated with practical actions the infinite possibilities that cooperation brings to the cause of carbon reduction.

Five months ago in Changchun, Shell and FAW Jiefang signed a deepening strategic agreement and revealed the concept truck project for the first time. During the forum, the guests witnessed the official release of the pioneer concept truck "Starship China Star Field Concept Truck" project by Shell and FAW Jiefang.

As a pioneering concept truck specially designed for China's road transport industry, the Star Concept Truck can maximize low-carbon emission reduction while improving transportation efficiency, and promote the energy efficiency upgrade and green transformation of China's road transport industry. In the future, the two parties will continue to lead industry innovation, create pioneering solutions in the four dimensions of aerodynamic optimized design, high fuel economy, low-carbon environmental protection and intelligence, and work together to inject more impetus into the sustainable development of China's road transport industry.

Qu Xuemei, President of Global Marketing Department of Shell Lubricants, said that the project was completed by two teams for one year, and cross-departmental and cross-field technology convergence and complementary advantages. At the beginning of next year, a long-term test will be conducted nationwide to showcase the state-of-the-art technology of both companies. The project uses cutting-edge body design, advanced lubrication solutions, and intelligent connected information systems to challenge the low-carbon and energy-saving limits of heavy-duty trucks. What's even more encouraging is that it's not just a concept truck, but that many of the advanced technologies used in it will be commercialized in the near future.

Looking ahead, Li Sheng, deputy general manager of FAW Jiefang and general manager of Qingdao Vehicle Division, is also full of confidence. He said that the Star Domain Concept Truck is not only a carrier for the centralized display of the existing new technologies of the two sides, but also a platform for joint innovation between the two sides in the future. In the future, the two sides will continue to focus on the development trend of green, low-carbon, intelligent and connected technologies, promote the continuous iteration of new technologies in the Star Domain Concept Truck, and hope to work with more industry partners to jointly provide more answers for the green transformation and development of the industry.