When the world’s second biggest “Big Oil” company, Royal Dutch Shell, announced the purchase of German battery maker Sonnen last month, the talk from inside the company was that Shell is preparing for a significant and rapid shift to electric – perhaps within a decade.
Such forecasts, including by those like Stanford University futurist Tony Seba, are generally downplayed, by incumbents whose business models will be destroyed by the scale and speed of such a transition, by the nay-sayers still clinging to last century technologies, and by the regulators and policy makers who know they have already been left behind.
But Shell has all but confirmed that this scenario is exactly what they are planning for. By the early 2030s, it says, it expects to be the biggest power company in the world, as just about everything – including transport and heating – turns electric.
Shell’s acquisition of Sonnen is part of a $US2 billion a year spending budget on new technologies that it will use to “test its theory”.
Once that happens, the investment rate will be doubled and then ramped up even further as it shifts its focus from dominance of the transport fuels industry to dominance of the electric power industry – and leaps from one trillion dollar industry to another.
It is a phenomenal shift, and a repeated warning that the current transition will accelerate and be mighty disruptive, rather than controlled and linear.
Shell has also bought into home energy management and electric vehicle charging companies, along with a range of wind, including offshore wind technologies, solar, hydrogen and other storage investments.
And by scale, he means scale. By the early 2030s, Wetselaar says, Shell expects to be the biggest electric power company in the world, generating returns of between 8 per cent and 12 per cent, and hopefully at the highest end.
“Electrification is the biggest trend in energy … it is by far the easiest way to decarbonise energy usage,” he says. And customers are on board, particularly in Australia, the US and Europe, where he says consumers want batteries, solar panels and the ability to charge cars.
“There are companies and individuals who want to go green, who don’t need a law to force them to.”
And they will be careful who they seek such services from.
“We don’t think that customers 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 someone who buys it on the open market.”
Shell says the company has no interest in transmission, or in coal or nuclear, and will focus on wind, solar, hydrogen, battery and other forms of storage, and gas, which it obviously has lots of.
Shell says it is not just a matter of hardware – solar panels and wind turbines – but also software. And given the company’s experience in demand response (it is the biggest provider in Texas), and its other purchases, it expects to be able to make better returns than the industry has so far.
Giles Parkinson is founder and editor-in-chief of Renew Economy, and founder and editor of its EV-focused sister site The Driven. He is the co-host of the weekly Energy Insiders Podcast. Giles has been a journalist for more than 40 years and is a former deputy editor of the Australian Financial Review. You can find him on LinkedIn and on Twitter.