Transformation in the energy business.
I wish I knew more about the full story behind Shell’s decision to pull out of investing in solar and wind energy in favour of biofuels. The immediate response is to chalk it up to corporate greed and shortsightedness. Indeed a Shell spokeswoman is quoted as saying:
“If there aren’t investment opportunities which compete with other projects we won’t put money into it. We are businessmen and women. If there were renewables [which made money] we would put money into it.”
However, it can’t be shortsightedness. Shell, like all of the major energy companies is forced to take extremely long timeframes in thinking about their business and they’ve set up futures departments within their companies to scenario plan up to 50 years into the future.
So on face value the answer is purely economic. As they say, the numbers just don’t add up.
But that runs counter to a lot of other information including published government reports like this one (pdf link) which show solar electricity prices falling below conventional electricity prices by 2015. This leads me to wonder if it’s Shell’s interpretation of the future that’s leading them down this path. Or in other words, if it’s their framework for thinking that’s behind this.
It’s pretty clear there’s a massive transformation taking place within the energy industry as they are forced to shift from fossil fuels towards renewables. But perhaps the bigger shifts taking place are more subtle and more difficult to handle. It seems to me that there’s also a shift
From: a business based upon hoarding and controlling a valuable and scarce resource.
To: a business based upon being better at creating value from something that’s abundant and free.
This is a cultural and structural shift from controlling to enabling; from protecting to creating; from being materials focused to being customer-focused. The winners in solar and wind won’t be the ones who control the source, they’ll be the ones who create the most value for their customers. I’d think this would be a pretty terrifying prospect for many companies.
So I wonder if, rather than actually face up to the magnitude of this shift they’ve approached renewable energy from the same lens that they approach fossil fuels? If you were looking for a renewable resource that could still be limited, biofuels would definitely fit the bill. I don’t know if this is the reason for their decision but it’s the only one I can come up with that makes any sense whatsoever.