Shell is one of the worst polluters in the world. What does that mean for Powershop, the green energy provider in which it just bought a 100 per cent stake? By Mike Seccombe.
What does Shell’s takeover of Powershop mean for green energy?
It’s been a bitter end to a beautiful relationship, marked by claims of abandonment, betrayal and recrimination. The bust-up between the progressive activist group GetUp! and the renewable power retailer Powershop has been as messy as any divorce.
Seven years ago, when love was new, both parties were eager to tell the world about their relationship, based on a shared commitment to fighting climate change.
In August 2014, when they “partnered”, GetUp! committed to directing its supporters to change their electricity supplier to Powershop. The power company, for its part, promised it would contribute money to GetUp!’s climate campaigning.
GetUp! hyped the so-called Better Power Campaign as its “massive next move” against the “dirty three” big power companies – AGL, Origin and Energy Australia – and the federal Coalition government’s attempts to weaken Australia’s renewable energy target. It put a button on its website by which supporters could go to Powershop.
In large numbers, they did. Somewhere between 15,000 and 20,000 – GetUp! was unable to provide precise numbers when contacted this week – made the switch. In return, the organisation received commissions from Powershop reportedly totalling $2 million.
It was a happy marriage, until this week, when the news broke that Powershop, or more correctly its parent company, New Zealand-based Meridian Energy, had found a new partner. On Monday it was announced that a consortium comprising the global oil and gas giant Shell and the infrastructure investor and manager Infrastructure Capital Group (ICG) would acquire 100 per cent of Meridian’s Australian assets, for a reported $729 million. Under the deal ICG will take control of the generation part of the company, its wind and hydro assets, while Shell will take over Powershop’s retail business and its 185,000 customers.
Very quickly after that announcement, things got ugly.
On Tuesday, GetUp! put out a media release making clear its feelings of betrayal.
“GetUp! mobilised tens of thousands of people to switch to Powershop, which was previously rated as one of Australia’s greenest energy companies,” it said.
“This move by Shell impacts the everyday people who switched to Powershop to distance themselves from big polluters.
“Shell is one of the worst climate polluters in the world. They are one of a small handful of corporations substantially responsible for heating our planet, leaving billions of people to pay the price.
“Under Shell’s ownership, Powershop has become the very corporation many customers were actively trying to move away from.”
GetUp! was far from the only civil society group angered by the Shell deal. Others had similar arrangements with Powershop, although on a smaller scale.
About 600 of Environment Victoria’s supporters, for example, were persuaded by it to switch energy suppliers. In return, says the organisation’s chief executive, Jonathan La Nauze, it received commissions of “about $50,000 in total over six years”.
“In the scheme of things, it was not a very large part of our revenue,” he says. “The primary motivation was to put a dent in the business model of the big polluters.”
Like GetUp!, his organisation put out a media release attacking Shell after the takeover was announced.
It said, in part: “They have spent decades funding climate denial groups and lobbying politicians to delay action, something which they continue to do. Right now, Shell is fighting against a Dutch court ruling which found their current activities threaten the ‘right to life’ and ordered them to pursue more ambitious cuts to their emissions.
“You can’t slap a bit of green paint on a multibillion-dollar pollution machine and expect us to ignore it. Shell’s actions and their values are fundamentally at odds with everything we stand for.”
Speaking on Wednesday, La Nauze said Environment Victoria now will encourage people to dump Powershop and switch to CoPower, a non-profit co-operative offering clean power, set up by 15 unions and environment groups.
“We have decided to email our 110,000 supporters and encourage them to shift,” he says. “The email is being drafted as we speak.”
GetUp! has yet to decide whether to make a similar recommendation to the million-plus people on its email list, but it appears inevitable. Others are likely to follow, too.
The sense of having been sold out is all the more intense because Powershop was for years the darling of environmental and other civil society organisations. Many advocated it to their members, although it is uncertain how many had commissions-for-referrals deals. The company did not respond to The Saturday Paper’s inquiry for numbers.
When GetUp! and Powershop announced their partnership in 2014, much was made of the fact that the power company was the only supplier to “unequivocally” oppose the Abbott government’s move to water down the renewable energy target. Over the succeeding years it lent moral and financial support to various environmental campaigns.
The company built its brand by appealing to consumers on the basis of conscience, not cost. This was strengthened by attacks from the political right, including a campaign of misinformation in The Australian newspaper about the source of its power.
But, says Dr Nikola Čašule, Greenpeace Australia’s head of research and investigations, you only have to go to Twitter or Facebook to see how that brand is degraded.
“There’s just literally thousands of customers who are soul-searching and saying, ‘Where do I go now, because I don’t want to support a Shell-owned company?’”
Čašule will shortly give them some suggestions. He is in the final stages of compiling a new Green Electricity Guide, assessing the offerings of every power supplier in Australia, which will be released in January.
Greenpeace has conducted similar exercises twice before, in 2014 and 2017. Last time, Powershop was rated No. 1. It won’t be this time.
“I can’t be certain what the final ranking will be until we finalise that research,” Čašule says. “But what I can say is that one of the criteria that we look at is whether the company or its parent company is engaged in fossil fuel extraction. Previously Powershop scored full points on that criterion because they weren’t owned by a company that did that. And now of course they are. So I would imagine that they will take a hit on that criterion alone.”
But is that fair? One might argue that those people so upset by Shell’s takeover should instead be happy to see a major fossil fuel company moving to clean up its act.
Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility, acknowledges a potential upside to the deal – while still noting big caveats.
“Shell has deep pockets, and so does its partner, Infrastructure Capital Group,” he says. “So they can afford to go and spend billions of dollars on new renewables and try and pinch customers from AGL and Origin and Energy Australia. And if that’s their plan, we should be supportive.”
There is no doubt Shell’s move into the renewable electricity market poses a new threat to those big “gen-tailers” who both generate and retail power. Not only is their power dirty because much of it is produced by burning fossil fuels – mostly coal – but it is increasingly uncompetitive on price. As more renewables have come into the electricity market over recent years, power prices have fallen. This week the Australian Energy Market Commission predicted they will keep falling and be $77-a-year cheaper for the average household in three years’ time.
The perceived vulnerability of the big legacy generators has encouraged a proliferation of new entrants into the market. In 2017, the Greenpeace guide rated about 40 retail suppliers. This time, it’s 86. Many are small and have no generating capacity of their own; they simply buy power off the grid and on-sell it. Given that about 20 per cent of the electricity being fed into the grid now comes from solar, wind and hydro, the electricity they sell also is about 20 per cent renewable.
The big gen-tailers have responded with significant moves into renewables and battery storage of their own, and also with efforts to diversify the services they offer customers, such as offering broadband.
The market, says Gocher, has become “a bit of a free-for-all”, of big moves and wild speculation, particularly now that some very big players, of which Shell is just one, are joining the game.
“For the past year, Shell and Telstra had been rumoured as potential buyers of AGL, or [the power retailing] parts of AGL,” he says. “AGL has four and a half million customers or something like that.
“And in the space of a week, you’ve had Telstra announcing that it’s not going to do that, but that it’s going to go and invest a couple of billion dollars in building new renewables, and then Shell buying a competitor, which is Powershop.”
Telstra aims to sign up more than half a million customers to carbon-neutral power within four years. Shell’s ambitions for Powershop are less clear, but the acquisition is part of a broader suite of new energy investments in Australia, other than its historical oil and gas interests.
The media release announcing the Powershop deal said Shell was “assembling the building blocks of a clean energy business that includes commercial and industrial retailer[s]”. This would include Shell Energy, formerly known as ERM Power, and carbon farming specialist Select Carbon. There would also be the construction of the 120-megawatt Gangarri solar energy development in Queensland; the acquisition of home battery energy storage systems provider Sonnen; and a 49 per cent stake in Australian solar developer ESCO Pacific.
Shell’s expansion in this country is part of a broader goal, announced in 2019, to become the world’s largest electricity supplier by the mid-2030s. It’s an ambition born of necessity: the business Shell has been involved in for more than 100 years, oil and gas, can have no future if the world is to avoid catastrophic climate change.
The International Energy Agency said in May that if global temperature rises were to be limited to 1.5 degrees Celsius, as set out in the Paris Agreement, there must be no new investments in oil, gas and coal, from this year.
That is clearly not happening. Nonetheless, The IEA’s latest World Energy Outlook report, released just before the Glasgow climate summit, forecast that, on the basis of pledges already made by governments, demand for oil and gas would peak in 2025. That was before most of the world’s governments – not including Australia’s – increased their emissions reduction ambitions.
The IEA noted that “rapid growth in electric vehicle sales and continued improvements in fuel efficiency” would drive down demand for oil.
Hence Shell’s play – and that of other big corporates such as Telstra – for big slices of the household electricity market.
Obviously, electric vehicles do not require petrol. But to a large extent, they do not even require service stations. In an electrified future, it is expected about 80 per cent of electric vehicle charging will occur in people’s own homes.
“So,” says Shu Ling Liauw, lead analyst with Global Climate Insights and author of two recent detailed analyses of Shell’s business structure and future plans, “the question for Shell is: How do you get into the home? How do you establish that direct customer relationship?”
It’s an existential question for the company and others like it. The biggest part of the answer to climate change will be the electrification of everything from cars to household appliances with renewably generated power.
This is going to happen. It’s just a question of whether it will happen fast enough to spare the world climate catastrophe.
That goes some way to explain why Shell’s takeover of Powershop was greeted with such cynicism and anger.
Unlike Telstra, for example, which is already carbon neutral, Shell remains a massive polluter. It claims a goal of achieving net zero greenhouse emissions by 2050, but many environmentalists and scientists are sceptical about the way it plans to do this. A significant part of the plan involves offsetting 120 million tonnes of carbon emissions by planting trees, reforesting and otherwise naturally sequestering carbon.
According to Nikola Čašule, Shell would have to plant an improbably large number of trees to offset industrial emissions.
“Famously,” he says, “three or four years ago Shell said that they would eventually plan to offset all of their carbon emissions around the world. That would take something like 40 per cent of all of the arable land on Earth to be planted with trees.”
Further to the point, the company is not moving anywhere near fast enough in its plans, says Liauw.
“The group’s medium-term investment target involves $US3 billion per annum of investment into new energy, out of $US23 billion per annum. It’s still a pretty small proportion.”
And its absolute greenhouse emissions are forecast to continue to increase, until at least 2030, she says.
“In forecasting Shell’s emission Global Climate Insights assumed a 2 per cent reduction in oil production between now and 2030. The reduced emissions from decreasing oil production will not offset their aspirations for market share growth in gas.”
Under that higher-range target, Shell would still see a net increase in emissions. While emissions from oil would fall about 207 megatonnes of CO2 equivalent, those from gas would increase by 276 megatonnes, Liauw says, an overall increase of 69 megatonnes.
In the context of Shell’s global emissions, Liauw says, the acquisition of Powershop is “not going to be material to Shell. It’s a very, very small part of their energy portfolio.”
It will mean little so long as Shell views its new ventures into renewables as something undertaken as well as its fossil fuel business, rather than being done instead of it.
“What would change things,” says Greenpeace Australia Pacific chief executive David Ritter, “would be if Shell came out with plans and strategies consistent with essentially decommissioning itself as a fossil fuel company, in line with what’s needed to give us the best chance of hitting the Paris climate goals. We don’t see any sign of that.”
What we see instead is the takeover of a green power provider and the very real chance that many of the people using it will leave because of the other pollution their money is now involved in supporting.
This piece was modified on December 1, 2021, to make clear that the Australian Energy Market Commission prediction was for prices per year rather than per week.
This article was first published in the print edition of The Saturday Paper on November 27, 2021 as "Shell game".
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