Global energy giant Shell plc apparently understands why some convenience-store operators are still weighing the cost of investing in electric-vehicle charging with the expected return.
It plans to put off until “tomorrow” its big plans to ramp up an EV charging network while streamlining its core fossil-fuels business, according to information from Wednesday’s Investor Day presentation in New York.
Just how fast an EV charging network should be built still isn’t clear, and Shell has pulled back from a goal announced in 2021.
Shell has 30,000 public charge points installed and expects to increase the number to 70,000 by 2025 and to 200,000 by 2030, according to slides of the Investor Day presentation. In 2021, Shell said it would increase its network of EV charging points to 500,000 globally by 2025, according to the Guardian.
In an uncertain environment, the London-based company plans to reduce overall capital spending to $22 billion to $25 billion for 2024 and 2025, while raising its dividend per share by about 15% starting in the second half of this year and buying back shares of the company’s stock, Shell plc CEO Wael Sawan said.
The company isn’t giving up on clean energy, but it’s also not dropping its current focus in oil and gas to please clean-energy activists.
The company plans to invest $10 billion to $15 billion from 2023 to 2025 in development of low-carbon energy solutions, such as biofuels, hydrogen, electric vehicle charging and Combined Charging System charging, Sawan said. In 2022, 40% of Shell’s total research and development (R&D) spend went to scaling low-carbon products and services, he said.
While environmentalists have pressured Shell to shift its focus to electricity and hydrogen more quickly, when it attempted to raise awareness of its clean energy options through advertising in the United Kingdom, the ads were criticized and banned for being misleading because the company’s focus continues to be in petroleum and gas production and sales.
The Advertising Standards Authority (ASA) banned Shell’s U.K. television, YouTube and poster campaign touting its EV-charging and renewable energy options, saying the campaign presented a distorted image of the company and its focus on gas, the Guardian reported.
Shell called the ASA’s decision short-sighted, pointing out, “No energy transition can be successful if people are not aware of the alternatives available to them,” according to a Guardian story. In the United States, Shell and other major oil companies have been sued by state and local governments concerned about climate change.
An Investor Day slide with the headline, “Tomorrow: Positioned for profitable growth in EV charging,” said the company plans to invest $500 million in EV charging capital expenditures in 2023 and 2025, and it noted its first EV-only station in the U.K. had a utilization rate of 44%, up from 35% in 2022.
Shell said the future looks bright for convenience retail supporting EV charging, noting EV customers make double the number of visits to convenience stores per month as gasoline customers and have an average basket twice the size of gasoline customers.
The company regards its global network of service stations as a major advantage as EV grows. By 2030, the company expects its EV business to deliver $1 billion to $15 billion in earnings before interest, taxes, depreciation and amortization (EBITDA). Shell expects EV charging to catch on in 2025 and hydrogen to find a market by 2030, according to the presentation.
Shell is the largest producer of low-carbon ethanol and also a major trader of biofuels, selling 14 times more low-carbon fuel than it produced in 2022, the company said.
While the free market apparently isn’t quite ready to fully embrace clean energy innovations in EV and hydrogen, Shell sees promise in government incentives like the Inflation Reduction Act. President Joe Biden has set a goal of a 50% reduction in greenhouse gas emissions and 500,000 EV chargers installed by the end of 2030 and offered federal incentives to help achieve it. Many U.S. companies also have been increasing their investments in clean energy.
“To close the gap between where we are today and the future, stronger policy and regulatory support is needed. A good example of this is the Inflation Reduction Act here in the U.S., which can make our investments more resilient and competitive,” the company said.
While Shell is waiting for the market to be ready for more EV charge points and hydrogen stations, it plans to streamline some operations, including at the retail level. “Despite inflationary pressures and a volatile external context, today we are lowering our cash capex range from $23 to $27 billion to $22 to $25 billion for both 2024 and 2025,” said Sinead Gorman, chief financial officer. The goal is $2 billion to $3 billion in “structural cost reductions” by the end of 2025 by exiting high-cost and lower-return businesses, she said. Shell’s exit from consumer utility Shell Energy Retail is expected to trim $300 million in annual operating expenses.
Shell acknowledged its marketing business has underperformed recently, but said the company is well positioned in marketing for the energy transition.
The company said it will “drive value over volume, disposing of sites,” such as exiting its Shell Pakistan Ltd. oil and gas business, subject to regulatory approvals.
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