Royal Dutch Shell, one of the world’s biggest oil and gas groups, is aiming to become the largest electricity company by the 2030s, as it prepares for a fundamental shift in global energy supplies towards lower-carbon sources. Maarten Wetselaar, Shell’s director of gas and new energies, told the Financial Times that the group could develop a power business, including supplying customers, trading and providing equipment, that was the same size as its oil or gas operations. Speaking at the CERAWeek conference in Houston, Mr Wetselaar said that if Shell achieved its goal for cutting its greenhouse gas emissions by 2035, “the amount of power – of clean power – we will need to be selling … will make us by far the biggest power company in the world”. Achieving its ambition would depend on being able to secure an acceptable return on capital of 8-12 per cent, he said, but added: “With our brand, our global presence … and the adjacency to our gas business – we can get our hands on the cheapest gas anywhere – we should be able to win.”
‘Many [competitors] are at a disadvantage, because they have this enormous legacy position, with coal plants and nuclear plants, but also a very centralised philosophy Maarten Wetselaar, Shell director of gas and new energies He added that Shell’s expected competitors, the established power suppliers, were “useless”, because they were shackled to outdated business models. “Many of them are at a disadvantage, because they have this enormous legacy position, with coal plants and nuclear plants, but also a very centralized philosophy,” he said.
“We see the future customer group being much more decentralized, where people do have a battery in their basement, people do have solar panels on their roof, and they want us to help them optimize.” By 2020, Shell plans to be investing $1bn-$2bn a year in new energy technologies including electricity. This is still a fraction of the group’s annual capital expenditure of about $25bn, but Mr Wetselaar said the early spending was for “proving this hypothesis” that Shell could succeed in electricity. “We will do that for a number of years,” he said. “And then we will scale it up, because otherwise, we will never get there.” Shell’s plan is a response to an expected shift in the world’s energy system to much greater use of electricity, up from about 20 percent today to about 50 percent or more.