In a significant move toward decarbonization, oil giant Shell has announced its plan to invest up to $1 billion annually in hydrogen and carbon capture and storage (CCS) technologies in 2024 and 2025.

The capital expenditure will primarily target regions such as Northwest Europe, the Middle East, and North America, where Shell has an existing presence, policy support is in place, customer demand is expected to be strong, and a pathway to profitability is visible.

Huibert Vigeveno, Shell’s Downstream Director, emphasized the need for stronger policy and regulatory support to foster the development of these technologies. Vigeveno cited the Inflation Reduction Act (IRA) in the United States as an example, which offers tax credits and subsidies for green hydrogen production and CCS projects. The IRA provides tax credits of up to $3 per kilogram of green hydrogen produced, supporting the commercial viability of such initiatives.

While specific details regarding the proportion of funding allocated to hydrogen and CCS were not disclosed, Vigeveno mentioned the Holland Hydrogen 1 project in the Netherlands as a hydrogen production facility that would source its energy from a Shell offshore wind farm. However, further information regarding Shell’s plans for hydrogen remains to be seen.

Shell’s investment strategy aligns with its aim to prioritize hard-to-abate sectors, including biofuels and electric vehicles, where profitable opportunities for emission reduction exist. The company recognizes that the transition to a low-carbon future will not follow a linear path, but Shell aims to position itself as a resilient and profitable investment case throughout the energy transition process.

Looking ahead, Shell is expected to provide an update on its energy transition strategy in early 2024, outlining its comprehensive approach to addressing climate change and achieving long-term sustainability goals.