“Shell has taken the decision to exit the power value chain in China, including power generation, trading and marketing, from the end of last year.”

On April 29, Shell (China) spokesman made the above statement to Interface news.

A few days ago, Jiangsu Power Trading Center announced that the trading center accepted Shell Energy (China) Co., Ltd. voluntary cancellation of market registration application; Guangdong Power Trading Center also issued a document saying that it accepted its application for voluntary withdrawal from the market.

9907-023 Shell Energy (China) Co., LTD., established in 2014, was one of the first foreign companies registered to participate in China’s electricity trading market, and will participate in electricity trading in Jiangsu and Guangdong provinces in China around 2020.

Shell’s exit from China’s electricity market is related to the company’s slowing pace of energy transition, and also to the fierce competition in China’s electricity sales market and the difficulty of making profits.

A spokesperson for Shell (China) told Jiemian News that Shell’s decision to withdraw from the Chinese power market is consistent with the information released on the “Capital Market Day” last year. Shell will invest in power selectively, focusing on extracting value from its power portfolio.

In January 2023, Wael Sawan succeeded Ben van Beurden as Shell’s new CEO. Sarwan was previously head of Shell’s integrated gas, renewable energy and energy solutions. Since taking over, Weiswan has redefined Shell’s energy transition path.

Last year, Shell highlighted the three principles of “Performance, discipline and simplification” on Capital Markets Day. Under the guidelines, Shell focused more on what it was good at. This is the first time since 2021 Shell put forward the “enabling progress” business strategy that Shell has released a signal to the outside world that the pace of energy transition has slowed down.

In March, Shell released its first energy transition strategy update since the launch of its “Enabling Progress” business strategy in 2021. As part of the strategy update, Shell lowered its carbon emissions targets and adjusted its power business development strategy.

In its new Energy Transition strategy, Shell said it would focus on specific markets and segments based on a shift in value over volume growth in the power sector. This includes selling more electricity to commercial customers and less to retail customers.

Shell has defined its power operations in Australia, Europe, India and the United States, excluding China. It will establish a power business, including renewable energy, in those countries.

The acceleration of Shell’s power business began in 2019. Shell said at the time that Shell’s annual oil production had peaked in 2019 and its total oil production was expected to decline by 1-2% per year until 2030. To this end, the company proposed a new goal – to transform into the world’s largest power company.

9907-023 In October 2019, Vasella, executive director of Shell’s gas integration and new energy business, said in an interview with Interface News and other media that the transition to electrification is closely related to global energy development trends.

In 2021, Shell put forward the “Enabling Progress” business strategy, setting a target of reducing absolute emissions by 50% by 2030 with 2016 as the base year; Renewable electricity is the focus of the transition.

However, with the outbreak of the Russia-Ukraine conflict and the after-effects of too rapid energy transition, in 2022, the price of traditional fossil energy such as oil and natural gas has risen, and energy security has become a priority.

Last year, international oil companies began to set radical energy transition targets, cut traditional oil and gas business investment plans, gradually returned to rational, re-strengthening upstream business, with the goal of establishing a safe, clean and affordable global energy system, orderly development of traditional oil and gas business and new energy business.

In 2023, Shell says its low-carbon strategy will still acknowledge the role oil has to play. At the same time, Shell does not intend to become one of the world’s largest power producers.

In addition to its own development strategy adjustment, Shell’s electricity sales business in China is not smooth, but also one of the reasons for its withdrawal from the market.

In 2015, China opened a new round of electricity reform, and the release of electricity sales has become one of the highlights. Previously, power users mainly bought electricity from power grid enterprises, but after the sale of electricity side, users can directly buy electricity through the sale of electricity enterprises. In other words, after the electricity reform, electricity selling enterprises can become “middlemen” by buying electricity from power plants (power generation enterprises) and then selling it to power users.

The sale of electricity is considered by the market to be a “cake” worth one trillion yuan, and various capitals have entered. At the beginning of the reform of the electricity sales side in 2016, there were less than 300 electricity sales companies publicized by the power trading center, but there were more than 3,000 industrial and commercial registrations. By 2018, the total number exceeded 10,000.

Jiangsu and Guangdong provinces became the pilot reform of the electricity sales side in 2017. In 2018 and 2019, Jiangsu became the country’s largest electricity trading market for two consecutive years.