Shell is planning to become the “world’s largest power company” by the early 2030s, according to the director of its New Energies division.
In an interview with Bloomberg Television, Maarten Wetselaar said the oil supermajor is aiming to generate double-digit returns for its investors by providing a “total package” of energy products and services.
“We believe we can be the largest electricity power company in the world in the early 2030s, because this part of the energy system is going to be the thing that grows fastest,” said Wetselaar.
“Electrification is the biggest trend in energy in the coming 10 to 15 years because it’s by far the easiest way to decarbonise energy usage.
“So, we think the power market will grow a lot – faster than any of the other energy markets – and it’s easy to grow in growing markets”.
When asked how the company intended to bring shareholders on board given the lower returns historically seen in the electricity sector when compared to oil and gas, he responded: “We are not interested in the power business because we like what we saw in the last 20 years. We are interested because we think we like what we see in the next 20 years”.
Wetselaar said the increasing complexity of energy systems will create opportunities for Shell to achieve “better returns than the industry has done so far.” He said it is targeting an annual return on investment of 8 to 12 per cent.
Shell has pledged to increase spending on its New Energies division to between $1 billion and $2 billion per year by 2020. Wetselaar said this investment will allow the company to test the feasibility of its plans: “Once we feel comfortable that 8 to 12 per cent range is realistic then we’ll scale up”.
He said the “customer end” of the supply chain, where demand is growing for solar panels, batteries and electric vehicle charging, is expected to be the most profitable: “We’re buying those elements around the customer to make sure we can get a holistic package in place.”
“But,” he added, “we don’t think people will want to buy that clean energy from people who don’t generate it. They will want to see the real source of it rather than just someone who just buys it on the open market”.
Wetselaar said Shell will therefore invest heavily in grid-scale renewables such as wind, solar and hydro, and perhaps also gas generation to provide backup power. He said the oil giant’s preference for high-risk, high-reward businesses meant it would probably steer clear of regulated networks.
With a market capitalisation of more than €220 billion (£190 billion), Shell is the world’s second largest oil company by value behind Exxon Mobil. The company bought the mid-sized supplier First Utility in 2018 and last month agreed to acquire the energy technology firm Limejump.