Shell’s Electric Mobility Strategy for North America: Focus on Fleets

Royal Dutch Shell, one of the world’s largest oil and gas companies, staked a claim on the North American electric mobility market when it bought one of the leading companies in the space early this year.

For charging network company Greenlots, which built itself up with less than $25 million* raised, the new corporate parent offers capital for rapid expansion. For Shell’s New Energies Division, the startup will lead an effort to penetrate the emerging market for electric mobility, creating a new revenue stream even as the old one centered on gasoline faces long-term headwinds.

“It will be about putting charge points on Shell gas stations, but it’s a lot bigger than that,” said Matthew Tipper, VP for new fuels at Shell, in a February interview. “There are going to be many routes to market in terms of providing EV infrastructure to consumers.”

Working with large enterprise customers, rather than individual consumers, will be the company's beachhead market.

Public chargers still a tough business case

In Europe, Shell owns many of its gas stations, and can move quickly if it wants to add electric chargers. In the U.S., the model is different: 14,000 independent owner-operators pay to sell fuels under the Shell brand, the company confirmed. Those franchises will have to decide for themselves how to proceed.

Still, Shell plans to launch electric fast-charging options at numerous Shell-branded U.S. retail outlets in the next five years, spokesperson Natalie Gunnell noted. 

"We aspire to provide EV drivers the same exceptional customer experience that they have now when filling up with traditional fuels," she said.

Individual public charging makes for a tough business, though, at least until the population of drivers grows enough to justify the capital investment. The systems cost the same to build whether they get used once a day or 20 times.

Early adopters also tend to have the option of charging at home, reducing demand for public charging.

"When we examine the profitability of public chargers, the majority of stations don't make money," said Ben Kellison, grid edge research director at Wood Mackenzie Power & Renewables. "DC fast chargers in particular need much higher utilization before they make money due to local demand charges."

Contracts with fleet owners can alleviate much of the utilization risk, offering a way to guarantee revenue as EV adoption and subsequent demand for public chargers grows, he added.

Shell agrees.

“The more scalable opportunity is with corporates, municipalities, utilities,” Tipper said. “You can convert whole cities to EV charging. Working with corporates, we can convert whole companies.”

More acquisitions likely

Such contracts could bundle with other capabilities Shell already has, like large-scale wind and solar development. With sufficient coordination among disparate business units, which can be easier said than done, the company could market a corporate fleet charging network powered by clean energy credits.

Shell's acquisition of home energy storage company sonnen, just weeks after Greenlots, throws batteries into the mix, which could manage the demand spikes that come from several vehicles charging at once. For customers with demand charges, charging load could lead to prohibitive bill increases.

Energy storage could also limit a charging station’s pull from the distribution grid in a way that avoids time-intensive grid upgrades.

Shell isn't sharing a firm timeline for when this robust vision of fleetwide charging will hit the U.S. market. Coordination is further along in Europe, where it acquired charging company NewMotion back in 2017.

With New Energies assigned to spend $1 billion to $2 billion in clean energy each year, further cross-pollination among startups is likely to emerge.

“You’re going to see Shell gradually filling in its matrix of opportunities through acquisition,” Tipper said. “I would expect to see this pattern continue so we can actually build synergies between these different models.”

Why Greenlots?

The Greenlots acquisition builds on the NewMotion deal in Europe. Shell indicated at the time it would introduce chargers at European gas stations.

NewMotion’s Euro-centric business model focused more on owning and operating charging stations, Tipper said. Greenlots offered an entrance into North America, with a different business model emphasis.

“What intrigued me about Greenlots is they’re essentially a software company that is developing a tool to provide turnkey networks to any commercial enterprise that wants to have its own private or semi-private charging network,” Tipper said. “Rather than an owner-operator, it’s a technology company.”

Talks began between the two nearly a year ago.

Shell, which has experimented with EV charging in California for several years, was impressed that Greenlots had earned the position of approved EV charging vendor with major utilities in that state.

“We know how difficult it is to establish that presence in the market,” Tipper said.

It didn’t hurt that Greenlots had built a scrappy operation of nearly 100 employees with only modest equity investment. That’s a marked difference from fellow charging company ChargePoint, which raised more than $500 million. 

“We were doing a lot with a little,” said Ashley Horvat, VP of private and public relationships, in an interview at DistribuTech earlier this year. “That kind of defines our team.”

The startup attributes that capital efficiency to its decision to focus more on controls software as opposed to owning and operating stations (which it still does when necessary). 

Greenlots secured charging platform contracts with utilities including Avista Utilities, Southern Company, Southern California Edison, BC Hydro, Pacific Gas & Electric, HECO and AEP Ohio. It also won a major deal with Electrify America to provide the operating platform for a $2 billion nationwide charging infrastructure push.

“We made a conscious decision to stay on the software side,” said Chief Revenue Officer Jeff Tolnar. “If you look at history, devices all drive toward commodity.”

Neither acquirer nor acquiree has disclosed the purchase price.

“This business, at its current scale and in its life cycle, was the right kind of ticket price for us,” Tipper said of Greenlots. “We felt that, strategically, we wanted to have full ownership and full control.”

For the time being, Greenlots will keep its name. Shell takes a “pragmatic” approach to corporate integration, Tipper said, and any rebranding would be the result of research and checking in with stakeholders.

*An earlier version of this story reported $15 million raised by Greenlots before the acquisition, but the company informed GTM that the most recent funding total is $25 million.