Pragmatism Forces Slowdown of Green Projects As Subsidies Decline, Market Flags

Shell is halting its construction on one of Europe's largest biofuel manufacturing facilities, citing a weak market and renewed focus on stock returns.

The Rotterdam biofuel facility will be put on pause for a while, with a reduction in contractors on site, and a slowdown of activity, hopefully cutting costs as Shell's margins get thinner. Renewables and energy solutions director Huibert Vigeveno said that "temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project." 

Shell has taken flak from the green crowd for its lack of enthusiasm for a range of eco-friendly fuels, a side effect of its weakening corporate position. Then again, Shell isn't alone: BP paused construction on its own biofuel facilities earlier this year. Those in the industry blame a weakening European biofuels market, where margins have slimmed for renewable diesel and SAF. A pretty significant drop in US renewable fuel credits did some damage to the market, too, leaving Shell, BP, and the like to try and bolster their bottom line with good ol' tried and true petroleum products.

The firm's CEO, Wael Sawan, has been under increased pressure to bring home the bacon since taking the throne in the early days of 2023. That's put him at odds with some of Shell's previous eco-friendly talk, since renewable and green projects aren't all too successful in and of themselves. Sawan has put the firm on course to double down on more traditional forms of energy sales, easing off on its renewable power and electricity sales in turn. Shell canceled hydrogen projects stateside, sold off retail power units in Europe, and sold off a 60% interest in a 182-megawatt wind farm in Texas. 

That choice wall along similar lines to a divestment of a 180-megawatt solar development project in Ohio. Shell has defended the choice as a pragmatic decision to keep the global economy moving, noting the requirement for diesel, gas, and liquified natural gas in the face of economic turbulence. Shell will grow its LNG business another 30% by 2030, likely making the best of a changing market now that (at least on paper) Russia's LNG is off the table for the collective occident.

While the news isn't all too heartening for fans of the coming biofuel revolution, it's notable that Shell has only promised a slowdown on its facility, and not an outright cancellation. Once completed, the Rotterdam biofuel facility is expected to produce more than 820,000 metric tons of sustainable fuel.

FMI: www.shell.com