Shell has never directly supplied the UK’s consumers with electricity. While the company does not own any power plants in the country, it does have a large energy trading operation in London and has agreements to buy renewable electricity from various wind and solar farms.
Shell plans to take over the power supply to all 600 sites that it owns in the UK, comprising about 550 petrol stations as well as its offices, terminals and oil and gas platforms.
Shell’s plans in Europe
According to Jonathan McCloy, General Manager North West Europe at Shell Energy Europe, the decision to offer power supply directly to end users in Great Britain’s industrial and commercial sector reinforces their strategy to boost their position in Europe’s electricity market. He explained: “In addition to supplying Shell’s assets in Great Britain, we intend to supply power to other large industrial complexes from early next year.”
The company is present in 14 European power markets and offtakes renewable power from wind farms and solar parks in Britain and mainland Europe.
Shell Energy has been active in power trading and wholesale markets in Great Britain for several years and says it plans to continue to provide wholesale gas and power to existing independent energy retail counterparties.
Shell is already a provider of energy trading services to small and medium-sized household energy suppliers, including First Utility and Ovo Energy. The company is also expanding its role in power generation through its “New Energies” division which was launched in 2016. In December the company was awarded a tender to build 700MW of wind turbines off the Netherlands coast and offshore wind development in the UK’s waters could be on the cards.
Challenging the big utilities
Shell’s move comes after Shell’s launch as an industrial power supplier in Germany, Italy and Turkey this year.
Its entrance into the UK’s industrial and commercial power supply market presents a huge challenge to long-standing UK utilities. Npower, part of Germany’s Innogy, and EDF, the French state-controlled utility, are the two biggest players, each supplying close to 20% towards the total consumed. UK-listed companies SSE and Drax, through its subsidiary Haven Power, are among the next rank of significant established players, along with Eon, of Germany, and Total, of France.
Although the licence Shell has sought from Ofgem, the energy regulator, will enable it to “supply electricity to any non-domestic premises” in Britain, it said that its plans were focused on big energy users.
Robert Buckley, an analyst at consultancy firm Cornwall, said that Shell’s entrance in the supply market “would certainly make people sit up and take notice”; although he warned that it would be “going into a very competitive space”.