Why Has Royal Dutch Shell Plc Acquired A Little-Known German Company

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Why Has Royal Dutch Shell Plc Acquired A Little-Known German Company

 Why Has Royal Dutch Shell Plc Acquired A Little-Known German Company

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Summary

  • Royal Dutch Shell Plc to acquire German virtual power plant operator Next Kraftwerke.
  • The valuation of the deal has not been disclosed yet.
  • The acquisition marks Shell’s policy shift of venturing into cleaner energy forms

Royal Dutch Shell Plc (LON: RDSA) has announced that it would buy Germany-based virtual power plant operator Next Kraftwerke for an undisclosed amount. The deal is being viewed as another step towards Shell venturing into the smart grid sector. Next Kraftwerke helps in selling electricity by bringing together all clean-energy capacities from across Europe.

Also read: Why is Shell increasing push towards net zero emissions?

Shell would be acquiring a 100 per cent stake in the company subject to regulatory approvals. The deal will enable Shell to have access to the 10,000 off-grid units that Next Kraftwerke’s helps to connect and manage. These units include solar, hydropower, and bioenergy facilities and are spread across eight countries.

Oil and gas companies across Europe are trying to expand into the renewable space. Shell too, has been keen to cut down emissions, and this deal is a step towards increasing its footprint in low-carbon technologies. It has earlier acquired First Utility, virtual power plant company Limejump and a German energy storage firm Sonnen.

There is an interesting difference in the approach of European oil behemoths visible towards the renewable sector. While France’s Total SE and BP Plc (LON:BP) have spent a fortune in the renewables sector acquiring several companies in the sector, Shell has confined itself to smaller deals only with a focus on acquiring supply contracts over big solar or wind farms. Shell’s policy of concentrating on organic growth has drawn flak from experts and observers, who have criticised it for creating fossil fuel infrastructure, which is significantly more than investments in clean energy space.

Also read: Top Executives at Royal Dutch Shell (LON: RDSA) Quit Over Green Transition Concern

David Wells, vice-president at Shell Energy Europe, said that the deal is in keeping with the company’s policy to venture into the renewables space. He also said that the transition to cleaner energy forms has made the power market more fragmented. The acquisition of Next Kraftwerke would give an impetus to the company’s policy to add smaller assets from the renewables space.

Next Kraftwerke CEO Hendrik Sämisch said that the deal was symbolic of the movement away from fossil fuels to more sustainable energy solutions. He said that this transition could be successfully shaped only if the big players from the traditional energy sectors lead it.

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