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Shell plans Australian solar plants that can switch to gas

MATT CHAMBERS Resources reporter: Melbourne4 Feb 2017

Anglo-Dutch oil giant Shell is looking to invest in Australian solar plants that can switch to gas when needed to deliver baseload power supply as debate rages over renewable energy security in the wake of South Australia’s ­crippling power outages.

Shell, which is Australia’s biggest LNG exporter and one of the world’s largest oil companies, has revealed that Australia was one of three global locations, along with Oman and Brunei, where it was studying pairing renewable energy with gas, after last year flagging “new energies” would be a potential major source of growth for the fossil fuel company beyond 2020.

“We believe we are in the ­middle of an energy transition that is unstoppable and we want to be in the vanguard of that,” Shell’s global chief Ben van Beurden said after the company’s fourth-­quarter earnings release in Britain on Thursday.

He said renewables alone would not be enough to provide the world with cleaner power.

“An integrated offering of gas and renewables, which cannot only deal with interruptibility and everything else of renewables but also give that second leg that a growing economy needs, is a ­sensible offering,” Mr van Beurden said.

Chief financial officer Simon Henry confirmed Australia was one of the regions where combined gas and renewables were being studied.

This week Malcolm Turnbull declared that dealing with the east coast’s energy turmoil was a ­priority as states pursue individual renewable policies, east coast gas prices surge on LNG export ­demand and state gas production ­restrictions, and in the wake of South Australian power outages that have cost hundreds of ­millions of dollars.

The Prime Minister says modern clean-coal technologies would be a key plank in his platform, but the nation’s biggest energy providers, including AGL and Origin, have said this is unlikely to happen because it is currently too expensive. At the same time, investors are too scared of policy changes to commit investments with long lead times that could run into the billions of dollars.

Even so, Mr Turnbull has flagged using funds from the Clean Energy Development Fund to build modern coal-powered generators, while government has convinced the $100 billion Asia Infrastructure Investment Bank to lend for coal-fired electricity generation in Asia.

Shell’s plan, to develop economically viable renewable power stations where a gas switch could be flicked when needed, could ­reduce the need for both coal-­baseload power and expensive gas-only peaking plants.

One of the hurdles Shell would have to overcome is the economics of using Australian gas, where east coast prices have risen partly on the back of LNG development in which Shell has played a big part.

While Shell’s renewables focus has been on wind farms so far —,it won a bid in December to build a 700MW wind farm off the coast of Holland — it is understood Shell is investigating solar power, paired with gas, in Australia.

Apart from its abundant sunshine, Australia is seen as having receptive governments and public and has a relatively connected grid. The oil major is also sitting on Australia’s biggest undeveloped onshore gas resources in the Arrow coal-seam gas joint venture it has with PetroChina in Queensland, which it is trying to find a development path for.

As well as vast untapped ­resources in the Bowen and Surat Basins, Arrow delivers 20 per cent of Queensland’s domestic gas and owns the Braemer 2 power station near Dalby.

While wind and solar plants are growing at a rapid pace as costs come down and government policy around the world supports them, battery technology has not advanced to the stage where large amounts of energy can be stored to be used when the wind stops blowing and the sun stops shining.

By promoting renewable plants that would draw on gas when wind and solar power are not available, Shell is trying to ­create a new market for its gas and promote its use as a transition fuel from coal to renewables. “Shell is preparing for and investing in the challenges and the opportunities that we see in the energy transition,” Mr van Beurden said.

In July last year, Shell revealed it would focus on two new potential longer-term growth engines — US shale and new energies — where it saw the potential to spend significant amounts of ­capital beyond 2020.

On Thursday, Mr van Beurden hinted that things could be ­moving quicker than that.

“By around the end of the ­decade, in shales and new energies, the portfolios will be ready for or maybe even already slightly entering into a much more substantial growth investment from the available resources,” he said.


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