Royal Dutch Shell is to launch as an electricity supplier in Britain, challenging some of Europe’s biggest utilities.
The oil major has applied for a licence to supply power to businesses across Britain and plans to start signing up industrial customers now to provide them with electricity early next year.
Shell also will establish a significant business at a stroke by taking over 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.
The move forms part of a strategic push into the electricity sector by the Anglo-Dutch company as it adapts to rising global demand for clean energy.
Ben van Beurden, chief executive, said last month that “further electrification of the economy” would be crucial if the world was to hit its climate targets and could hasten the point at which global oil demand would peak. Shell needed to adapt by getting “involved in the electrical chain, in the renewable business and more in petrochemicals”, he said.
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The entrance of the world’s second-largest oil and gas company into the UK’s industrial and commercial power supply market presents a huge challenge to established utilities. Npower, part of Germany’s Innogy, and EDF, the French state-controlled utility, are the two biggest players, each supplying close to a fifth of volumes, according to Cornwall, the consultancy.
The 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, would allow it to “supply electricity to any non-domestic premises” in Britain, it said that its plans were focused on big energy users.
The move comes after Shell’s launch as an industrial power supplier in Germany, Italy and Turkey this year. Jonathan McCloy, general manager for northwest Europe at Shell, said: “The decision to offer power supply directly to end users in Great Britain’s industrial and commercial sector reinforces our strategy to boost our position in Europe’s electricity market.”
Shell has not supplied electricity directly to customers in the UK before and does not own any power plants in the country. However, it does have a large energy trading operation in London and has agreements to buy renewable electricity from various wind and solar farms.
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Robert Buckley, an analyst at 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”.
Shell has already built a significant presence behind the scenes as a provider of energy trading services to small and medium-sized household energy suppliers, including First Utility and Ovo Energy. Mr van Beurden is also significantly expanding Shell’s role in power generation through its “New Energies” division, established last year. In December it won a tender to build 700 megawatts of turbines off the Netherlands and could return to developing offshore wind in British waters.