Why Royal Dutch Shell Has Moved Into The B2B Power Supply Market In Britain
According to Nick Butler, former vice president for strategy at British Petroleum, there are three reasons for Shell to enter the electricity supply market in Britain. First, declining prices for natural gas can help Shell, which has snapped up several big natural gas assets in recent years, sign long-term contracts with massive industrial and commercial customers, such as the National Health Service. Butler writes that Shell offers long-term security, as opposed to conventional providers of electricity, because it has an extensive range of assets that can be offered at a discount to prevailing prices. Second, world opinion is moving away from carbon fuels. "It (Shell) can match its global supplies of gas to growing Asian markets while developing a renewables-based electricity supply chain in Europe. The new company can buy supplies from other parts of the group or from outside," he writes. Third, this business could end up as a steady business for the company. The retail electricity supply market is prone to changes in policy and constant scrutiny. The Industrial and Commercial supply market, on the other hand, is stable and does not suffer from constant policy tweaks. But things may not be as simple as they seem. Existing suppliers have found the going tough in recent times as they have been forced to pay pony up additional taxes for "social and environmental costs", an amount that small suppliers do not have to pay.
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