Shell has launched a strategic review of its household energy retail businesses in the UK, the Netherlands and Germany, raising the prospect of the company leaving the sector in the wake of what it described as “tough market conditions”.
Domestic energy suppliers in Europe have struggled in the past year to deal with soaring wholesale energy prices and efforts from governments to protect customers from rising costs. In Britain more than 30 suppliers have gone bust since the start of 2021.
Shell last year had to inject £1.2bn in cash and loans into its lossmaking British subsidiary Shell Energy Retail to enable the unit to meet its liabilities until the end of December 2023.
The group, Europe’s biggest integrated energy company, said no decisions had been taken on the retail businesses, adding that the review would take “a number of months” to complete.
“We remain committed to our integrated business model that produces, buys, trades, transports and sells energy around the world,” it said.
A decision to withdraw from home energy supply in Europe would be a blow for the UK where Shell, given its upstream portfolio of gas and generating assets, is viewed as a reliable supplier in a struggling sector.
“That is how bad it has become that even an oil major can’t put up with the losses,” said one senior director at a rival company in response to Shell’s announcement on Thursday.
Shell was among a few larger energy suppliers that rescued customers from failed companies in the past 18 months.
Shell Energy Retail is the eighth-biggest supplier of electricity in Britain and the seventh-biggest supplier of gas, serving 1.4mn households.
Shell acquired the business, then called First Utility, in 2018 as part of its campaign to become the world’s largest electricity company by the 2030s. It also has about 500,000 broadband customers after acquiring the Post Office’s broadband and home phone business in 2021 for £65mn.
Shell’s other European household energy businesses are smaller, serving 110,00 customers in Germany and 15,000 in the Netherlands.
UK energy executives have long feared that continued turmoil in the retail energy market would lead to further supplier collapses, or to better-capitalised companies deciding to sell out.
Ofgem, Britain’s energy regulator, told business secretary Grant Shapps in a letter on Thursday that household energy debt — the collective sum households cannot afford to pay — had risen to £2.5bn, which it said was the “highest increase in energy debt we have seen in over a decade”.
Although Shell said the review was in line with the strategy developed by former chief executive Ben van Beurden, the decision to reconsider the retail business represents one of the group’s first commercial moves since Wael Sawan took the helm at the energy major at the start of January.
Sawan, a Shell lifer, previously ran the company’s integrated gas and renewables division, and before that headed Shell’s upstream oil and gas business.
Shell said its wholesale energy and business-to-business divisions, and its home energy supply businesses in the US and Australia, were not part of the review.