Shell leverages power business to deal with energy transition

Oil major Shell is expanding its footprint in the power businesses as a way to engender future growth in the face of growing climate concerns, an approach that has seen it buy successful power businesses around the world.

The latest acquisition is the purchase of Powershop Australia, an online energy retailer with over 185,000 customers. This comes barely four months after it acquired a renewable energy retail supplier Inspire Energy Capita based in California and Pennsylvania.

In Nigeria, just weeks ago, Shell officially launched its new outfit, Shell Energy Nigeria which aims to deliver competitive and reliable energy for power generation and industrial users and to develop gas distribution to serve people in new regions.

The impact of climate change is forcing a reckoning with fossil fuel, a development that could disrupt the business strategies of oil companies. To deal with this reality, oil companies are diversifying into related energy businesses.

Power business seems to be Shell’s biggest gambit to meet its net-zero goals. Achieving Shell’s net-zero emissions target could mean that Shell doubles the amount of electricity it currently sells and provides enough renewable electricity to power 50 million households by 2030.

Other oil companies are embarking on power business but Shell’s plan appears the most ambitious. In 2019, the company said it was investing between $1 billion and $2 billion yearly in energy technologies including electricity out of its $25bn yearly capital expenditure budget.

Shell is capitalising on the weaknesses of legacy power plants sourcing generation from coal, nuclear and some thermal plants bogged by debts and inefficiency and thinks it can deliver better value using its vast retail experience and network around the world.

The company said the acquisition of Powershop is in line with Shell’s Powering Progress strategy and ambition to create an integrated power business.

Powershop will form Shell’s residential power platform in Australia, extending Shell’s existing position as Australia’s largest dedicated retailer of electricity to commercial and industrial customers.

Under the arrangement with ICG, Shell Energy will also acquire wind power purchase agreements (PPAs) and has agreed on offtake arrangements with ICG associated with MEA’s hydro and wind assets.

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“Our aim is to become a leading provider of clean power-as-a-service and this acquisition broadens our customer portfolio in Australia to include households,” said Shell’s Executive Vice President of Renewables and Energy Solutions Elisabeth Brinton.

Brinton said Shell’s presence across the entirety of the changing energy system means “we are well-placed to manage complexity for customers so that we deliver simple, cleaner energy solutions.”

Shell Australia chairman Tony Nunan said: “This acquisition is another example of how we are continuing to grow our footprint in Australia to meet customers’ evolving needs through the energy transition. Powershop today offers innovative energy packages, and customers will benefit in the future from access to Shell’s broader suite of energy solutions linked to e-mobility and battery storage.”

The transaction will take place through the 100 percent acquisition of Meridian Energy Australia Group, the parent company of Powershop, by a consortium of Shell and Infrastructure Capital Group (ICG), an Australian infrastructure investor and manager. Under the terms of the deal, Shell will acquire Powershop and ICG will acquire MEA’s portfolio of renewable generation assets and development projects.

The acquisition is subject to regulatory approvals. It is expected to be completed in the first half of 2022.

In Nigeria, Shell Energy Shell Energy Nigeria’s gas solutions are designed to partner with other sources of energy – including renewables – to provide competitively priced and flexible energy, while helping the country to transition to a lower-carbon energy system.

The new business will draw on the capabilities and experience of Shell from a portfolio of natural gas, power and environmental products. It offers a comprehensive selection of energy solutions available from a single supplier and made possible by one of the industry’s largest trading operations, the company said in a release.

Country chair of Shell Company in Nigeria, Osagie Okunbor, said Shell Energy Nigeria brings to Nigeria Shell’s decades of marketing and trading experience, a wealth of market knowledge and its ability to integrate energy solutions to support economic development in Nigeria.