Aug-2022

Energy transition technology scenarios

How the technology landscape may change in the short, medium and long term of the energy transition.

Nick Flinn and Chris Egby
Shell Catalysts & Technologies

Article Summary

To meet their decarbonisation goals, energy companies may need to rethink their business models and apply suites of technologies and tools, all while maintaining their competitiveness. In recent years, the sector has developed a wide range of highly effective decarbonisation technology solutions. These will be crucial, but it will also require technologies that are still in development and need complex engineering challenges to be resolved.

At Shell Catalysts & Technologies, we have a unique perspective on energy-transition-related technologies; our corporate heritage is that of an energy provider, and we also provide tools, technologies, and insights to help Shell and others meet their energy transition objectives. So, this article explores technologies that may play a key role and discusses some of the engineering challenges that must be overcome.

This report is broken down into short-, medium- and long-term trends, but no dates are given because the pace of change will vary around the world. Although each phase may be shorter or longer in different regions, the overall sequence is likely to be broadly applicable to most countries.

In addition, it must be emphasised that, although these insights describe what the world may look like in each period, these are not forecasts or predictions. The intention is to provide context for the technologies through plausible representations of how things could play out. Much of this aligns with Shell’s Sky scenario, but of course there are other possible, credible futures.

Interestingly, you will notice that many future technology solutions are likely to involve repurposing or integrating existing, tried-and-tested technologies.

Clearly, further scientific advances are necessary, for example to open new routes for re-engineering hydrocarbon molecules — and Shell continues to invest heavily here — but one should not overlook the opportunities that repurposing can provide.

Two new Shell technology solutions illustrate this point. The recently introduced Shell Blue Hydrogen Process is based on the Shell Gasification Process, which has a 70-year track record. And our new hydrotreated vegetable oil (HVO) technology, the Shell Renewable Refining Process, is based on fundamental, decades-old hydrotreating and isomerisation catalyst technologies. That is not to say there was no ingenuity involved in its commercialisation, though: it took a great deal of innovation to understand the implications of the changing feed qualities, reaction kinetics, and product qualities, for example, and to manage the risks appropriately. But ultimately the heart of the technology already existed.

This is highlighted for two reasons. First, the need for retraining in the oil and gas industry is high on the agendas of policymakers worldwide, but, from a technology perspective, the skills gap could be smaller than it may seem.

Second, energy companies, often seen as risk averse, may be reassured that many emerging technologies draw on long track records.

Part 1: Technology trends in the short term
In this period, the energy transition is gathering pace. Driven by the need to meet the goals of the Paris Agreement on climate change and achieve a world of net-zero emissions, oil demand stagnates, coal use declines, and use of natural gas and solar both grow. Government policies begin to crystallise and, as energy companies develop their energy-transition-related ambitions, technologies such as blue hydrogen, HVO, and carbon capture are adopted.

Adapting to the new energy landscape
In the short term, it will be critical for energy companies to begin to adapt or reposition their businesses while concurrently maintaining their competitiveness. Flexibility will be key, so there will be a need for incrementally moving molecules to the most profitable paths. For example, many refiners’ profitability will depend on their ability to find ways to shift increasingly heavy, low-value, bottom-of-the-barrel molecules into lighter aromatics and olefins to make intermediates for the growing manufacturing and chemicals industries.

To maximise margins, it will also be important for them to supply the increasing global demand for kerosene molecules, which has almost recovered to pre-pandemic levels, while diesel and gasoline may start to decline in certain geographical markets.

As the market changes, there will likely also be a need for repurposing existing assets through revamps. Important technology solutions may be revamping a hydrocracker to capture new business opportunities in petrochemicals or lubricant base oils, revamping a fluidised catalytic cracker to maximise propylene for polypropylene production, or revamping newly built HVO units to increase the yield of sustainable aviation fuel (SAF) or extend the catalyst cycle life.

Decarbonisation pathways
Energy companies will likely need to act in each of the three classic decarbonisation pathways: they will need to increase energy efficiency, make lower-carbon energy products, and store the remaining emissions.

Many will probably begin with energy efficiency studies, as these are low-cost solutions. In addition, carbon pricing, which may be adopted by governments globally during this period, would lead to a meaningful cost for carbon being embedded into consumer goods and services and help justify more developments.

Essentially, this would change the evaluation criteria for energy efficiency improvements. In the past, the main criterion was the cost of energy, but the economic case is likely to be strongly enhanced when the cost of carbon is factored in.

Although it is imperative for energy companies to ensure that their own operations use energy as efficiently as possible, the reality is that most of their emissions come from their customers’ use of the energy products they sell. So, drives to achieve net-zero emissions will likely also require the introduction of low-carbon energy products such as biofuels. Incremental government mandates may provide further stimulus during this period.

Consequently, to reduce the carbon intensity of liquid fuel products, one of the most important solutions may be a phased investment programme with an initial period of co-processing up to 20% renewable feedstock in an existing hydrotreating unit for little or no capital expenditure. As biofuel mandates become more stringent in the future, a dedicated HVO unit for processing 100% renewable feeds could follow.

Such a strategy would be highly capital efficient, but there are challenges. For example, co-processing renewable feed can affect unit operation in several ways.

Hydrogen consumption and heat release will increase, for example, and there are the risks of increased corrosion and fouling. Nevertheless, although it is vital to identify all the risks for a specific unit, the mitigation measures are well established.