High prices deter Shell power investments in Europe

High prices make large-scale acquisitions of power generation projects in Europe unattractive, compared to other regions of the world, says Jeroen van der Veer, managing director of Royal Dutch Petroleum Co. and group managing director, Royal Dutch/Shell Group. Through InterGen, a Shell joint venture, the company has invested in power projects in the US, the UK, Egypt, Australia, and recently acquired an operation in Greece.


High prices make large-scale acquisitions of power generation projects in Europe unattractive, compared to other regions of the world, says Jeroen van der Veer, managing director of Royal Dutch Petroleum Co. and group managing director, Royal Dutch/Shell Group.

Speaking Wednesday at the 8th Handelsblatt Annual Energy Conference in Berlin, van de Veer said Shell is "moving rapidly to realize its aspirations in power generation. We call it atoms to electrons." He said through InterGen, a Shell joint venture company, the company has invested in power projects in the US, the UK, Egypt, Australia, and recently acquired an operation in Greece.

"The reason for this is that we are already part of this value chain and we see it as a logical next step�extending the chain," he said. "We haven�t made large-scale acquisitions in the generating industry on the continent so far for a very practical reason�the prices are very high. Current, per customer acquisition costs are extremely difficult to justify. It is very difficult to see how companies can make money at present prices."

However, van der Veer emphasized power generation is an attractive field for Shell. He said too often companies leap into areas they know little about.

"You think the brand would work well in an area�so let�s give it a try," van der Veer says. "We have learned that is essential to have many more points of contact in order to guarantee success. We like areas where we can apply our technology or our commercial experience, and our brand and our reach and our reputation."

In addition to power generation, van der said Shell is working hard to make renewables, including photovoltaics, wind, and biomass�"a real business. Results are slow in coming, but we remain optimistic."

He said fuel cell technology is moving forward very fast at the moment, noting energy value chains can change dramatically. If carbon pricing is introduced in coming years, van der Veer said, noncarbon fuels will likely be able to carve a niche for themselves.

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