Future Fuels: The Implications of a Decarbonised Energy System - - PowerPoint PPT Presentation

Future Fuels: The Implications of a Decarbonised Energy System

Brian Worrall September 26h, 2019

Group Strategy & Development

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Agenda

▪ About DCC ▪ The Global Energy Challenge ▪ Decarbonised Liquid Fuels ▪ Implications for Government ▪ Implications for Industry ▪ Next Steps

About DCC

• Dublin based
• Founded in 1979
• Strong growth: organic and M&A
• FTSE top 60 company
• Energy and other sectors balancing sector knowledge and

diversity

• Operated under a number of well known brands:
• Gulf in retail
• Certas Energy in fuel distribution and European retail
• Partners with global brands in energy, technology and

healthcare

• Significant infrastructure assets in Oil and LPG

Our business today

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44% 29% 14% 13%

DCC LPG DCC Retail & Oil DCC Technology DCC Healthcare

12,500+

Employees countries across 3 continents

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Locations

£15.2bn

Revenue

£6.5bn

Market cap

£460.5m

Operating profit

17.0%

ROCE

0.1x

Net debt/EBITDA

DCC is a leading international sales, marketing and support services group operating across four divisions

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Profit by geography

45% 41% 10% 4%

Continental Europe UK RoW Ireland

Profit by division

0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Why diversity works for DCC

Significant operating profit growth across all divisions since 2008

‘08 – ‘19 CAGR +14.2% +22.7% +7.9% +12.5% DCC Healthcare DCC Technology DCC Retail & Oil DCC LPG

Operating profit FY08 – FY19 (£’m) CAGR: 15.2%

Organic and acquisitive growth Optionality in capital allocation Maintaining returns discipline Facilitates geographic expansion across the Group Growing our

• pportunity set in

attractive markets

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18.6% 17.1% 14.3% 16.6% ROCE ‘19

The Global Energy Challenge

Global challenges…

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Our Energy system is facing challenges…

Global population Growth in Oil & Gas demand

Energy system in transition Customer choice

Continued

• il price

volatility

Changing resource access

From 7 to 9 billion by 2050 with 75% living in cities Global Energy demand to double between 2000 & 2050 World needs more energy; less CO2 New sources New energy carriers New business models OPEC, shales, shorter price cycles New value creation models

Government challenges…

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Clean Air Strategy Industrial Strategy

Domestic Heating Improving Business and Industry Low Carbon transport Cleaner, smarter and more flexible power Renewables Public Sector Government Leadership NRMM & Red Diesel Ultra Low Emission bus scheme Ultra low emission zones Low Carbon Tech

Reduce emissions from transport Reduce emissions at home Reduce emissions in farming Reduce emission from industry Protect the environment Protect the nations health Secure clean growth and driving innovation

❖ Paris Agreement ❖ UK 2050 Net Zero Commitment ❖ UK and Ireland ban on fossil fuel boilers in new homes from 2025 ❖ France ambition to phase out heating oil by 2027 ❖ UK to start with off-grid - phase out high carbon fuels during 2020s ❖ Norway ban on the sale of new petrol and diesel cars by 2025

The Climate Change Agenda

Desire and Reality: this will take a while

The EU’s own forecasts show a high penetration of fossil fuel in 2050……….

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The size and scale of the energy transition is huge

Governmental approach

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BANS DIESEL / PETROL IN DIFFERENT COUNTRIES & CITIES

Ban on new ICE vehicles. All new vehicles emission-free (virtually banning petrol and diesel) Phase out new petrol and diesel cars and vans by 2032. Ban sale of fossil-fuel- powered vehicles All new cars and vans sold should be zero-emission vehicles. Ban all new petrol and diesel cars & vans (Clean Air Plan) Ban on new ICE vehicles,

• nly electric.

Ban on new ICE vehicles (no legally binding) Ban on production and sale of fossil fuel cars (date not yet decided) Oxford Paris London Copenhagen

2019 2020 2025 2030 2035 2040

Madrid Rome

Decarbonised Liquid Fuels

Many different decarbonised liquid technologies………….

On-Going Efforts to decarbonise Heating Oil in the UK

• Cross industry working group on UK heating oil
• Developing a pathway to decarbonisation
• Involves all parts of the supply chain
• Not easy, but is essential
• Two stage development pathway likely:
• Introduction of FAME to offset fossil
• Replacement of fossil with bio liquid
• Initial evidence suggest this to be a very viable

alternative

The energy mix

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Energy future

Performance Fuels Retrofit to engines Gas

• GTL *
• LPG
• LNG
• CNG

Renewables

• PTL *
• BTL *
• HVO *
• B100
• Biomethane
• Renewable

technology

• Biofuels
• Algae

E-mobility Hydrogen

Performance Fuels OEM

Diversification through Gas

CO2 solutions

What role do all of these play in the future? What learnings can we take from other countries?

* Paraffinic Fuels: GTL / PTL / BTL / HVO

Fuels now and for the future

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Please note a lot of these technologies exist or are being developed and commercialised. (Happy to provide further examples of where there are various European projects)

Biofuels

• B5 - 100

GTL

• (Gas to Liquids)

HVO

• Hydrotreated

vegetable Oil

GTL / HVO blend BTL

• Biomass to

Liquid

PTL

• Power to liquid

HTL

• Hydrothermal

liquefaction

HBO

• Hydrotreated

biofuels

Algae as a feedstock

Now and next 3 – 5 years Brian W to add gas references in addition to liquid

The energy mix: Renewables ICE

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• Paraffinic Fuels

synthetically manufactured liquid fuels from feedstocks such as:

• PTL Power to Liquid
• GTL Gas to Liquid
• BTL Biomass to Liquid
• HVO Hydro-treated Vegetable Oil
• B20 / B100
• Algae (advanced biofuels)
• Biogas / Biomethane (produced from organic waste)
• Renewable technology

Fuel Infrastructure cost Vehicle cost Fuel cost implications Air Quality impact CO2 savings B20 Low Low Cost neutral Negligible 10-15% B100 Low Low Cost neutral Unclear 84-95% Paraffinic Fuels (GTL, HVO currently) None None Cost premium Positive impact 36-91%*

(*HVO)

CNG/LNG High High Cost savings Positive impact Similar Hydrogen High High Cost premium Positive impact 100% (if renewable) Electric Medium Medium Cost savings Positive impact 30-50% PTL, HBO, HTL (evolving technologies) “e-fuels” High None Unknown Positive impact 80 – 100% renewable

Comparison of alternative technologies to standard diesel Renewable liquid fuel alternatives for ICE

Fuel development road map

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2050 Now

2020: >20% GHG <20% energy efficiency <20% renewable energy

CO2 standards: <15% for LDV & HDV

2030: >40% GHG <27% energy efficiency <30% renewable energy

2040: >60% GHG 2050: >80% GHG

HVO / GTL blends & potential small quantities of Algae based distillates. Biofuel blends HVO / GTL blends, Algae, BTL HTL, and PTL to start to become

• available. Biofuel

blends HVO / GTL blends, Algae, BTL, PTL, biofuel blends, HBO & HTL Further development s as technology transforms GTL & Biofuels / blends & Carbon offset programmes

CO2 standards: <30% for LDV & HDV E-mobility CNG (urban areas)

• CNG (TEN-T )
• Hydrogen (optional)
• LNG maritime ports & HDV (TEN-T)

LNG at inland ports (TEN-T)

Deadline for Member States targets on alternative fuels infrastructure

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Feedstocks Primary Process

Biosynthesis Aqueous phase reforming Catalytic deoxygenation Dehydration Glycerol-to-methanol synthesis Flash pyrolysis Hydrothermal liquefaction Gasification HVO

Products Secondary Process

MTG synthesis Hydrotreating Methanol-to-gasoline (MTG) synthesis Fischer-Tropsch Direct synthesis

TRL

Vegetable oils Animal fat/tallow Used cooking oil Glycerol Sugar/starch Waste Lignocellulosic biomass Hydrotreating Hydrotreating BioDME

Bio- isobutene Bio- isobutylene

9 6 5 6 5 6 7 6 4 3 BIO

Vector images sourced from www.vecteezy.com

It’s Not Just Liquid Fuels…………………

Implications for Government

Governments can play their part……

• Create a level playing field
• Encourage all new technologies
• Use life cycle analysis
• Understand the requirement is to move from fossil to renewable not necessarily from the molecule to the electron
• Recognise that ALL technologies are likely to ne needed given the scale of the challenge
• Legislate with careful wording, cleaner liquid fuels, re-purposing the existing infrastructure maybe a good alternative
• Let the market decide the take up of technologies through ease of use, price etc.
• Do not make the mistake of legislating for solutions specifically

Implications for Industry

Trade Associations can play their part……

• Trade associations have a unique perspective
• EU institutions prefer associations to company

dialogue

• Represent the industry through the transition
• Lobby Government
• Lobby Regulators
• Inform members
• Challenge members
• Trade association alliances:
• Different geography
• Like minded ‘transition’ partner associations
• Helping things happen:
• Sound science
• Level playing field
• Trials

Commercial organisations can play their part……

• Commercialising new technologies
• Off take Contracts
• DCC and others bridge new production to end

customers

• A range of different technologies:
• GTL, HVO
• Bio propane
• Carbon offsetting
• Telematics
• Lobbying ad trade association support

Key takeaways

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There is a wide range of forecasts and predictions on the Energy Transition We need to remain pragmatic while also vigilant of trends and changes Liquid fuels will to continue to play a significant role in the future We have a role to play in driving efficiency and clean fuel alternatives Track record of sustainable profit growth in declining market segments Our businesses are already taking steps on this journey

Next Steps

• Energy transition may feel a long way off, it may

come slowly but it is alive issue to address now

• Governments, trade associations and commercial

companies can all play their part

• Need for a level playing field for new technologies

to ‘play out’

• Not one single solution but many needed to

address such a huge issue, and it’s a global issue

• Fossil to renewable is what is needed which does

not mean non-molecule

• Technologies need to be monetised, opportunity

to re-purpose existing infrastructure

• Need to proceed through well thought out, and

well tested steps