Select Committee on Science and Technology Appendices to the Minutes of Evidence


APPENDIX 35

Memorandum submitted by the Royal Dutch/Shell Group of Companies

  1.  Shell has a long history in research and development of new technologies, which are an important element of the Group's strategic direction all round the world. The creation of cutting edge technologies is essential to developing our future business, as we believe that the implementation of new technologies will differentiate us from our competitors.

  2.  Based in the UK is Shell Global Solutions, operating as a unique network of technical companies within Shell, which has one of the world's leading centres for research and development of oil products as Cheshire Innovation Park (CIP).Shell Global Solutions is running a number of leading edge research projects in the UK, focused on developing the standards and codes necessary to develop hydrogen as a mass-market fuel. This work includes safety work in partnership with the DTI and a hydrogen refueling project at CIP.

  3.  Shell Hydrogen was established early in 1999 to pursue and develop business opportunities related to hydrogen and fuel cells on a global basis. The business, which is based in The Netherlands, is currently focusing on two main areas: automotive; and power generation. In partnership with Johnson Matthey and Mitsubishi, Shell Hydrogen has created a UK-based venture capital fund focused on fuel cells and related hydrogen technologies in Europe and North America.

  4.  Shell Hydrogen's strategy has been to develop a range of demonstration projects (for example a fuelling project in Tokyo (100% funded by the Japanese Government) and an offshore project in Norway) with various funding options.

  5.  While the success of hydrogen is by no means clear (and conventional fuels continue to deliver increased efficiency and emissions reductions in conjunction with improved engine technology) it is a good bet for the future and has the potential to deliver. However the path to hydrogen is currently uncertain, ie will it be via on-board reforming of hydrocarbons for use in fuel cells or the use of hydrogen in an internal combustion engine?

  6.  Shell frequently sponsors important studies which look into the future of a non-carbon fuel economy. In the UK we are currently sponsoring some work by the Institute for Public Policy Research (IPPR) on "Motoring towards Sustainability" [Car, Society and Environment]. This follows on from an earlier project which they undertook last year on hydrogen and mobility ("H2 Driving the Future") which we also supported.

  7.  Further details of some of these activities and studies are listed at Appendix A and copies are attached for the Committee's information.

  8.  On a shorter time frame, Shell has invested in IOGEN, a Canadian company, whose technology allows renewable ethanol fuels to be made from not just the seeds of plants but also from the lignocellulosic stems and leaves. Shell's objectives are to upscale this technology, which has the potential of producing almost carbon neutral fuels, to the industrial and commercial sectors.

  9.  Shell's response to a carbon constrained future also means a greater strategic emphasis on gas. Shell's proprietary Gas to Liquids technology, the Shell Middle Distillates Synthesis (SMDS), has been developed through a 25-year research programme, and implemented in the first generation commercial SMDS facility in Bintulu, Malaysia. Shell is actively pursuing a portfolio of second-generation Gas to Liquids projects around the world. (see Speech: Fuelling the future: the shift to gas at Appendix A).

  10.  Advances in carbon sequestration technology (CO2 sequestrated at source) may dramatically alter the debate about the environmental impact of fossil fuels and Shell is actively pursuing development of this technology both in-house and through international research in partnership with other companies (see the Carbon Capture Project below). However, the success of this technology is not assured and many technical challenges remain.

  11.  The CO2 Capture Project (CCP) is a consortium of eight energy companies and has entered into a 2.1 million Euro (US$1.8 million) agreement with the European Union's Research Directorate (DGRES) to study innovative technology for reducing CO2 emissions. The project entitled "GRangemouth Advanced CapturE" (GRACE) started 1 January 2002 and will run for two years. The total programme cost will be 3.2 million Euros (US$2.8 million), with research work carried out by several leading European universities and scientific institutions.

  12.  The CCP is a global venture formed in 2000 to research and develop technologies aimed at reducing the cost of CO2 separation, capture and geologic storage. This EU contribution is one of several, which will leverage an international commitment totalling approximately US$28 million over the next two years. The CCP has a similar agreement with the United States (Department of Energy) and is also working with the Government of Norway (Klimatek programme).

  13.  The GRACE project will address two generic areas of research:

    —  (i)  The development of chemical looping combustion technology; and

    —  (ii)  New materials for hydrogen membrane reactors.

  14.  Members of the CO2 Capture Project are: BP, Chevron Texaco, Eni, Norsk Hydro, PanCanadian, the Royal Dutch/Shell Group of Companies, Statoil and Suncor Energy.

Further information is available at www.co2captureproject.org

INDUSTRY REQUIREMENTS

  15.  Some of the essential supporting elements required to support low carbon fuel options are:

    —  the development of specific skills, for example engineers and scientists with the right technical background;

    —  the development of key-enabling technologies and knowledge base, for example detailed inventories of renewable feedstocks, gasification, cleansing of gas, CO2 sequestration, storage of hydrogen, fermentation of C5 sugars and tools to sort the various household wastes;

    —  the development of impartial industry tools assessing the greenhouse gas balance of process and fuel pathways, including building the understanding of the Nitrogen and carbon balance of biomass.

  16.  We see the role of Government as carrying out a set of structural responsibilities which are key to facilitating the smooth and early development, introduction and take-up of successive new vehicle technologies and fuels, whatever they may prove to be.

  17.  We believe the Government should take an active part in raising public awareness of challenges and technology solutions, especially regarding fuel cell vehicles and hydrogen manufacture, distribution and handling.

  18.  It should support industry statements that the technology is safe, reliable and convenient, and that the environmental performance of new technology vehicles/fuels does not outweigh consideration on drive ability, general performance and price of mobility.

  19.  We suggest that the Government can give clear signals by using public vehicles to pilot hydrogen technology and by investigating financial and other incentives to encourage the use of hydrogen in its early stages.

  20.  The Government may consider using subsidies as a tool for getting wider usage of new fuels and vehicle technology, although we do not generally support tax incentives where they distort market forces. We believe that customer demand and vehicle/equipment requirements should be the main market drivers for determining the qualities and quantities of fuels produced. However once a technology is commercialised some fiscal incentives could effect a rapid switchover to make it more affordable.

  21.  UK policy should be outward looking, open minded and focused on co-operation with other countries. The challenge is global and participation in European initiatives and beyond is essential to ensure that ultimately the best solutions are retained and that the UK is not placed at a competitive disadvantage. Codes and standards for hydrogen safety and other regulatory issues should be addressed at an EU or even global level to ensure common standards. Shell is actively engaged in this debate.

  22.  Significant fuel efficiency gains for mobility will come from new engine technology, where new fuels will be enablers of new engines.

  23.  There are still significant efficiency gains to be made from internal combustion engines (gasoline and diesel). The car manufacturers' voluntary agreement to decrease CO2 emissions from 180 g/km down to 140 g/km will build on this platform. "Sulphur free" fuels are key enablers for lean burn direct injection internal combustion engines, as they will allow efficient use of NoX traps and DeNoX catalysts which are needed to solve the NoX emissions concerns resulting from these enhanced technologies.

  24.  Hybrid (diesel or gasoline/electric) vehicles offer major efficiency gains. Although, ultimately, fuel cell vehicles running on hydrogen from renewable sources will become the lowest greenhouse gases and local pollutant emitters, diesel hybrids may achieve lower life cycle greenhouse gas emissions than fuel cells, where hydrogen is sourced from natural gas or other fossil fuels.

  25.  New fuels that can be delivered by grade substitution in the existing distribution infrastructure are more easily introduced than those that require new infrastructure. An anticipated critical mass of the number of vehicles, which would require new types of fuels, would be needed to consider investing in the necessary new distribution network.

  26.  LPG and CNG have been advocated as cleaner alternatives, especially in niche applications where urban air quality is problematic. In the medium term these niche fuels will help to bridge the gap to future fuels, but their attractiveness decreases as gasoline and diesel quality improves.

  27.  Hydrogen demonstration projects are happening: Daimler Chrysler will send three fuel cell buses to London in 2003 as part of the EC funded CUTE project (nine European cities with three buses each). The London FC taxi feasibility study is looking into converting London taxis to fuel cell/hydrogen operation. These will help in assessing all routes of the hydrogen supply chain (on site generation from gas or renewables, eg solar, cryogenic or pressure distribution issues).

  28.  There are a significant number of economical and technical issues to overcome for fuel cells and fuel cell vehicles development, as well as hydrogen network and filling stations' infrastructure development before contemplating a mass-market implementation.

  29.  On-board reforming of gasoline-type fuel for fuel cells features a good intermediate step which could be made widely available and allow commercial development of suitable hydrogen storage systems on board fuel cell vehicles.

  30.  In the medium term, whilst a refueling infrastructure is being established, biofuels and natural gas could provide a bridge to a wholly renewable and emissions-free energy source from hydrogen, produced by renewable energy.

  31.  Biomass has and will continue to play a role in energy production (including biofuels for engines). Transport (via biofuels) may not be the most efficient way to use renewables, despite the European Union's efforts to mandate the use of biofuels in increasing proportion. The UK should avoid prescriptive regulation of the energy mix and let the market decide where each fuel is best used.

CONCLUSIONS

  32.  Among the possible scenarios for the future of fuels are:

    —  Improvements in internal combustion engine technology and cleaner fuels will continue to reduce emissions and can contribute to reduced carbon dioxide.

    —  Over the next 20 years, improvements in internal combustion engines and hybrids will probably generate greater benefits than the introduction of fuel cell technology, although longer term the fuel cell offers considerable potential for the future.

    —  The introduction of new fuel qualities needs to happen in a practical time frame, taking into account local environmental, vehicle population and market factors, as well as being aligned with advances in engine developments.

October 2002



 
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