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
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
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
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
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
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
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
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.
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.