As momentum continues to build in the global energy transition, challenges persist for industrials to get large-scale decarbonization projects off the starting blocks.
Our New Energy President Gavin Rennick recently sat down with industrial decarbonization expert Julia Atwood from BloombergNEF to talk about the crucial role technology plays in these projects and the barriers that need to be addressed. In this discussion, Gavin emphasizes the need for speed in the energy transition and how more flexible regulations that reflect the uncertainty of new technologies can accelerate innovation. He also emphasizes the importance of having a full value chain and stakeholder alignment to drive large-scale decarbonization projects forward—faster.
Julia: What do you see as SLB’s role in the energy transition?
Gavin: We are a technology company, and this transition needs technology. In fact, when SLB rebranded at the end of 2022, we stated our role in the world was as a technology company driving energy innovation for a balanced planet: I don't think you can say it any more simply or emphatically than that.
The fact is the energy transition does not happen with the technologies that exist today. That's not to say that some of those technologies won't play an important role; I think many of them will in one form or another. But there is a tremendous amount of innovation that needs to happen for the whole world to be able to decarbonize and remove CO2 molecules from the atmosphere and to have an energy system that works in a truly decarbonized way that's safe, reliable and clean, and that does all the things that we need to achieve net zero and balance the planet. We see an opportunity for ourselves to be front and center in participating in that as a technology company.
Julia: What do you see as the big challenges fundamentally to the energy transition?
Gavin: I think there is so much to do in so little time. This is really a global effort that needs to happen across sectors―from the emitters all the way to the technology companies in the value chain that can help them. It also needs to happen through governments that put in place policies, incentives and rules that are applicable and that allow us to have a real impact, but also move fast and be creative.
I know a lot of people talk about how we are starting to see the success of renewables growth; however, everything else that's necessary in the energy transition needs to move and probably at 5 to 10 times the speed as we saw renewables grow. So, I'd say speed is the biggest challenge. And we really need to get comfortable with moving at a much faster speed than we have before.
Julia: Where are you seeing the successes in deploying big projects?
Gavin: We're seeing successes in places where the contextual environment allows things to go forward. So, what does that mean? It means there’s a full value chain and an end user that's bought into the energy transition. It means there’s a government that's not only willing to put in place incentive structures that are material but also to deploy regulations that allow for rapid forward movement. It also means there’s a market big enough to support everyone responsible for making it happen―from the technology players to the large-scale demand side. Today, we’re seeing these elements come together in multiple places. We see it in the U.S. with a ramp up in the amount of interest in carbon capture. We see it in the same space in the Middle East. We're very fortunate to be part of a project in Saudi Arabia that right now is the most advanced, large-scale carbon capture project in the world. We see it in Europe for energy storage and renewables deployment, and then the push on hydrogen. So, there are many parts of the world where things are shifting toward a scaled outcome, but the ones that have the most momentum are the ones where the full value chain is at least starting to be developed.
Julia: You've talked about bringing partners together, having that supportive policy environment. But a lot of these things are still first-of-a-kind projects, and those are incredibly difficult to get off the ground. What do you feel like are the roadblocks that are still holding you back?
Gavin: So, let's assume you're convinced about the technology and its ability to be deployed for a large-scale impact. I think there's a flexibility needed in regulations around intent. Because what we sometimes see is that regulations are written and designed around a particular existing technology, and in order to bring a new technology to the table, there's a challenge because regulators need the flexibility to go outside the set of rules they've been given to be able to move something forward. So, I think that the world needs to become much more sophisticated in saying, “what's the intent?” Take energy storage, for example. Say you're trying to bring a new battery storage technology to market like nickel-hydrogen batteries. Today, the rules are written around lithium batteries, so if your technology is different and doesn't quite fall into the defined characteristics of the existing technology, it can lead to roadblocks. I think the same is true for hydrogen. Recently, there's been some guidance put out within the U.S. around the criteria that need to be met for something to be considered for incentives around low-carbon hydrogen, and those criteria are really biased toward one technology or another. They don't effectively address the fact that we need as much low-carbon hydrogen produced with minimal environmental impact, and that's really what you want to happen. So, I think there are some barriers around regulation and policy that need to continue to be addressed and evolve and get smarter over time. I also think finance is the other big pacesetter. We often see early technology projects being able to attract finance either through venture capital or otherwise. We see the second project being able to attract project finance, but the big, scaled pilot or the first real project is not that attractive somehow. In financial circles and tech circles, they often refer to these projects as the “valley of death.” We need a bridge across that valley to allow these technologies and projects to really get out there and get into the market.
Julia: The first-of-a-kind projects that you are really confident are going to move forward― what are the common characteristics of those? What do you look for?
Gavin: There are a number of things we've done. We've gotten involved in the project either through our own internal innovation, or through working with some sort of technology partner at a deep science level. We've also put a lot of effort into really derisking the fundamentals to determine not only if a project can work technically but also from an energy balance and an economic point of view. When you deploy it at scale, you've got to be convinced that you can do that. I think that's important, and as I touched on before, having the full value chain involved and bought in is key to getting there.
When you’re working on scaling one of these first-of-a-kind projects, it’s an exciting environment to be in, especially when everybody in your organization—and your customers—gets energized by the fact that they're creating something new that's good for the planet. The more we're able to facilitate these projects and to make them go fast, the better it's going to be.
