Oil major buys Hudson Energy, which supplies 200,000 households with power from renewable PPAs.
Oil major Shell acquired another customer-facing electricity and gas provider in the U.K., potentially bolstering its green credentials and renewables procurement expertise in the country.
The deal for Hudson Energy, which trades as Green Star Energy, will add 200,000 new customers for Shell Energy. Hudson’s supply is drawn entirely from renewable generation, while Shell Energy depends heavily on offsets for its renewable offerings.
In 2017 Shell acquired energy and broadband supplier First Utility and its 825,000 customers, amid an ongoing push into the clean power business. The following year it rebranded the service to Shell Energy and began sourcing 100 percent of its electricity from renewables via existing power-purchase agreements (PPAs) and offset certificates.
Shell Energy also offers customers access to smart home technology and EV charging infrastructure.
“As part of our ambition to build a significant U.K. retail energy business, this deal will take the number of Shell Energy Retail’s U.K. residential customers to just under 1 million and adds to Shell’s presence in the B2B market,” said Colin Crooks, CEO of Shell Energy Retail.
Hudson comes with a portfolio of 2,000 commercial clients.
Shell’s electricity supply in the U.K. uses Renewable Energy Guarantees of Origin (REGOs) to offset its non-renewable power. That means the company can generate power from any source and then purchase the equivalent number of certificates to offset any non-renewable power in its fuel mix.
The problem is that REGOs are very cheap and offer suppliers a low-cost route to offering “green tariffs.” Unsurprisingly, rivals with 100 percent renewable fuel mixes drawn directly from generators rather than offsets have been the first to cry foul.
The supplier Good Energy dedicated a blog post to the issue, pointing out that in its final fuel mix disclosure before folding into Shell, First Utility had only sourced 3.7 percent of its power directly from renewables. That figure jumped to 10.5 percent for the following disclosure period, which ended in March 2019. That means Shell is sourcing REGOs for up to 89.5 percent of its supply in order to make the 100 percent renewable claim.
“To support our 100 percent renewable electricity promise, we use a mix of PPAs with renewable generators in the U.K. and REGO certificates to ensure all our customers’ electricity is matched to the equivalent amount of renewable generation,” a Shell Energy spokesperson told GTM. Last month Shell Energy signed a PPA with Falck Renewables (PDF) for a 67.5-megawatt wind farm in Scotland. The company is also leveraging Shell Energy Europe’s trading team.
Green Star Energy sources all its power from hydro, wind and other renewable generators, bringing both signed contracts and expertise into Shell’s business.
“Post-completion, both companies will work together to maximize the synergies and opportunities on offer,” the Shell Energy spokesperson added.
Shell has a substantial renewable project development businesses, but these are predominantly active in the U.S. and Asia.
U.K. utility regulator Ofgem would appear to agree with concerns over REGOs.
“We also note that suppliers can buy REGOs cheaply, so it is easy and cheap for suppliers to ‘green’ some tariffs. As such, our starting point is that simply having renewables in the portfolio is not enough to demonstrate that a tariff is providing support for renewables,” Ofgem stated in a 2018 report.
The consumer group Which? found that suppliers can spend as little as £1.55 per household on REGOs in order to make the 100 percent renewable claim. It ranks Shell as “mid-green.”
Regen, a British nonprofit that works with the sector to move toward a zero-carbon power network, warns of the dangers of REGO trading. If customers can be presented with a “green tariff” without the more involved route of sourcing PPAs or even co-developing new generation, then demand for new renewables development is stifled.