While the oil majors have been looking towards the electricity sector for their future growth, Shell’s acquisition of the UK independent retailer First Utility, now fully complete and rebranded as Shell Energy Retail, indicates the direction that these companies can take when they mean business.
Shell in particular has been aggressive in its approach, with acquisitions of suppliers and services in the United States and Europe that is laying the foundation to become a powerful player in the sector. Indeed, in a March 2019 interview with Bloomberg, Maarten Wetselaar, Director of Shells’ integrated gas and new energies unit, indicated that the company’s ambition is to become the world’s biggest power company within the next 15 years.
“We are building on the disruptive nature of First Utility to give customers something better,” says Colin Crooks, CEO of Shell Energy Retail Ltd. “We want to attract customers with fair pricing, strong customer service and innovative offers that set us apart from anything available today.
First Utility was launched in 2008 as a competitor to the ‘Big Six’ in the UK market and was a pioneer in offering smart meters to customers and engaging them with their energy consumption data through partnerships with companies such as Opower. The company, which has adopted a strong push towards digitalisation, currently has over 700,000 customers.
In a market where several albeit smaller companies have gone under, the customer offer and customer service are crucial for business success.
Shell’s UK energy offer
Indicative of the approach that retailers should be adopting into the energy transition, Shell brings a bundled package for customers with a key pillar being the supply of 100% certified renewable energy as standard on all tariffs.
Another pillar is the smart home and customers who choose a three-year fixed price contract are eligible for a Nest E smart thermostat and installation.
Via the Shell Go+ rewards programme, customers will be eligible for a 3% saving on fuel at Shell stations up to 60l per household per month.
Customers also are eligible for an almost 15% discount on a NewMotion home fast electric vehicle charge point capable of charging at speeds of 7.4kW on a single-phase connection, with the price including standard installation, six months of free access to smart services and the government grant.
Customers also can access a range of discounted broadband packages and later in the year – and through Shell’s acquisition of Sonnen – a sonnenBatterie home storage offering will be made available.
“Later this year, we’ll be announcing a string of exciting services that offer greater convenience to householders and help make homes more efficient,” Crooks promises.
Shells’ energy transition
What has been known about Shell’s future plans has been embodied in its Energy Transition report of April 2018, in which it indicates that electricity is intended to become “the fourth pillar of our business, alongside oil, gas and chemicals”.
The Bloomberg interview adds to this, with Wetselaar saying that electrification is the biggest trend in energy in the next 10 to 15 years as it is the easiest way to decarbonise energy usage and that it should provide investable returns.
“We expect the power market to grow faster than any of the other energy markets,” he says. “The business is becoming a lot more complex with intermittent demand and intermittent supply and we believe that by optimising around this we can make better returns than the industry has done so far.”
Those returns are estimated between 8-12% per year with generation at the lower end and customers at the higher end and Shell is currently investing between $1-2bn annually to demonstrate these before scaling up, Wetselaar says.
“We are buying the elements around the customer so we can get a holistic package into place but we also need to get more into power generation, primarily solar and wind but also gas-fired power,” he comments.