Oil giant Shell is currently making few investments in renewable energy because the sector is fundamentally unprofitable, chief executive Ben van Beurden told a green-energy conference today.
“Of course, the growth of renewables has been remarkable, but the capacity of the industry to make money in that segment has been remarkably absent,” he told baffled delegates — including many green-energy investors and chief executives of profitable renewables companies — at The New York Times Energy for Tomorrow conference in Paris.
“It’s very hard to come up with a sufficient number of [green-energy] investment propositions that actually make sense,” he explained.
“At this point in time, of the $30bn we invest each year, I cannot find a significant percentage to invest in [profitable] renewables projects, simply because they are not there.”
To support his argument, van Beurden declared that the “ten largest solar companies in the world… have never paid a cent of dividend [to shareholders] and never made a positive return on their capital employed.”
The reason that renewables companies did not provide dividends for shareholders was not because their income was being re-invested in their business, but rather because of the “absence of profits”, he said.
Nevertheless, the Dutchman — who joined Shell in 1983 — was optimistic that the renewables industry would become profitable in the near future and that Shell would play its part in the energy transition.
“I think we need to experiment with new types of business models to show that you can actually make money in renewables,” he said, adding that integrated energy solutions such as hybrid gas/renewables plants “can be a major business for us”.
He went on to explain that Shell shareholders were fully aware that the company needs to reduce its carbon emissions and move to a greener future. “We do hear a lot from our shareholders on this,” he said. “And most of the things that we hear are ‘whatever you do, make sure you keep paying these dividends’. And many of our shareholders take a somewhat dim view on the dividend-paying capacity of the renewables industry.”
Many delegates at the conference were perplexed by van Beurden’s assertions.
“I did talk to him for a few minutes as he was leaving to point out that we are investing and we are making profits,” said Paddy Padmanathan, chief executive of Saudi Arabia-based developer ACWA Power. “And we are making profits with solar energy priced at $0.05 per kWh.”
Wal van Lierop, chief executive of Canadian investor Chrysalix Venture Capital, added: “With all due respect, Mr van Beurden is not even informed about what is happening in his own company.”
He pointed out that Shell — together with Chrysalix — has invested heavily in a company called GlassPoint that is using solar thermal for enhanced oil recovery in Oman. “We are in it with Shell and this is very profitable. We are bringing this to California now, and because of the Clean Air Act in California, even if gas prices dropped to zero it would [still] be in the money.
“You have to teach big investors that it really is possible to make money [in renewables] — and we are doing this today together with Shell as we speak.”