Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
Shell’s apparent desire to exit the energy retail market highlights real concerns that the healthy balance of risk and reward in the sector has been “off for some time”, an industry expert has told Utility Week.
Shell revealed on Thursday (26 January) that it was launching a strategic review of its home energy retail businesses in the UK, the Netherlands and Germany.
The company’s wholesale and B2B energy supply businesses are out of scope for the review, as are its home energy supply businesses in the USA and Australia.
Asked for her thoughts on Shell’s announcement, Amy Marshall of PA Consulting said: “From a contextual point of view I think it’s fallout from the fact that the healthy balance of risk and reward in energy supply has been off for some time, which has contributed to supplier failures and companies like Shell reconsidering their position.”
She added: “There’s a genuine question about whether energy retail, as it stands, is uninvestible and therefore the companies that are surviving at the moment are those that have got parent companies with very, very deep pockets, balance sheets and a strategic rationale and/or, like Octopus, they have been through lots of fundraising rounds to give them more financial security and stability.
“So I think it’s a question about whether it’s uninvestible and a question about the balance of risk and reward.”
Shell Energy Retail, which supplies 1.4 million domestic energy customers in the UK, has made significant losses in recent years, with its latest accounts showing it lost a total of almost £220 million across 2020 and 2021.
Although the future of the company has not yet been decided, there are questions as to which retailer would take on Shell Energy Retail’s customers if it does decide to exit.
British Gas owner Centrica would seem the obvious choice considering it is the market’s largest player.
Marshall said Centrica has “shown that they’ve got appetite to do something quite big and bold” having been linked with a bid for Bulb before the supplier was acquired by Octopus.
Please login or Register to leave a comment.