Written evidence from Shell UK (ELV0055) 

House of Lords: Environment and Climate Change Committee: Inquiry into Electric Vehicles
Written response by Shell U.K. Ltd[1]

15th September 2023

Shell U.K. Limited (“Shell UK”) welcomes the opportunity to respond to this call for evidence in support of the Environment and Climate Change Committee’s inquiry on Electric Vehicles.

Shell Recharge is our electric vehicle (EV) charging network, offering EV drivers electricity from 100% renewable sources[2] with every charge. Shell Recharge provides drivers access to a public charging network of over 20,000 EV charge points across the UK. This includes over 500 Shell Recharge charge points at Shell forecourts, hubs and destinations, and over 7,000 EV charge points via Shell-owned ubitricity.[3]

Please find some key points we would like to raise for this inquiry:

Government Approaches

ICE ban: Shell UK supports the Government’s increased ambition in the deployment of electric vehicles (EVs) in the UK, and the announcement to phase out the sales of new petrol and diesel vehicles in the light duty segment by 2030.

However, setting a date is not enough. We need:

1. The enabling policy measures to ensure industry and businesses can prepare to deliver the required power and infrastructure to be stronger and more comprehensive and
2. Strong incentives to help consumers choose EVs.

Grant and incentive schemes: The Government’s Electric Vehicle Homecharge Scheme (EVHS), which provided funding of up to 75% towards the cost of installing electric vehicle smart chargepoints at domestic properties across the UK, was extremely successful in supporting demand for home chargepoints. In April 2022, it was replaced by the EV Chargepoint Scheme, which targets funding at a much smaller set of applicants. The withdrawal of the EVHS has had a dampening effect of 50% on sales of Shell Recharge Solutions home chargepoints over the two quarters following the withdrawal.

The EVHS demonstrates grant and incentive schemes can work. The Government should therefore consider introducing grant schemes that have broader eligibility criteria. This could include small and micro-businesses, such as mobile hairdressers or tradesmen who are unlikely to have access to dedicated business parking. The Government may also wish to consider innovative schemes to reduce the cost of public charging for specific groups – for example, by supporting the provision of subsidised charging cards.

VAT: Shell UK would support the VAT rate applied to on-street electric vehicle charging to be aligned with the VAT rate applied to domestic supplies of electricity to UK households. On-street chargers under 7.4kw should be considered an extension of residents’ home energy and the VAT rate should reflect this[4]. In most cases, these types of chargers are located in urban locations where off-street parking is less readily available, with local residents effectively using them as shared home chargers.

Based on our own analysis, such a levalisation in VAT rates could save drivers who rely on on-street chargers between £70 and £150+ per year. This would be a substantial saving for the 24.6% of UK households who lack off-street parking[5] and may otherwise be more hesitant to switch to EVs. Based on current on-street energy consumption, the reduction would cost the UK Government between £1.7 and £3.1 million per annum[6], rising to approximately £9.3 million in 2030 and £15.3 million in 2035[7].

Our understanding is that changing this policy specifically for on-street would not contradict Revenue and Customs Brief 7 (2021)[8], nor require an amendment to UK VAT law[9].

Driver Experience

Availability and reliability of public charge points: This is one of the main challenges drivers face, particularly for those without a private driveway, and it is increasingly acute as chargers are not increasing at the same pace as EV sales.

ChargeUK[10] members have collectively committed over £6bn in investment by 2030 and aim to double the size of the charging network through 2023[11].  By 2030, it is Shell UK’s aim for 90% of UK drivers to be within a 10-minute drive of a Shell charger. 

For this to be realised, Shell UK and other operators need policies that enable us to accelerate delivery of charge points. Currently, grid connections and planning permission are creating significant barriers to the deployment of infrastructure.

Consumer benefits of using an EV: Smart charging involves the optimization of charging times and speeds for when electricity is cheapest and the supply of renewable energy is most abundant: drivers plug in their car as normal when returning home, but charging can be planned to start overnight at the cheapest time. Estimates suggest that drivers could save between £200 and £1000 per year by utilising smart charging, depending on their mileage[12]. This will also reduce the cost of electricity network reinforcements, which ultimately is borne by end-consumers in their energy bills[13].

Education of EV drivers:  We believe there is scope for improvement in the education of EV drivers. A number of Shell Recharge chargepoints are located on staffed sites - for example, at Shell Fulham (our EV hub) and other forecourts - which offer EV charging alongside conventional fuels. Feedback from site staff suggests it is common for them to find that drivers have not had a thorough handover on receipt of their vehicle and consequently do not know how to charge it. We urge the government to ensure car dealerships, service networks, repair and maintenance organizations, breakdown services, after market suppliers and the media support drivers switching to EV by making sure clear and consistent information on their new vehicles is readily available. 

Single charging standard: At this stage, we see no need for a single charging standard to be mandated in the UK. While many CPOs still provide CCS and CHAdeMO[14] connectors at their public charge points for convenience, CCS is already the de facto standard in the UK and Europe with CHAdeMO socket now found on only a small number of predominantly Asian-produced vehicles. Very few EVs are now being sold with a CHAdeMO socket. The overwhelming majority of EV drivers will own a vehicle with a CCS socket and will find a compatible CCS connector at almost every public charger in the country.

While several vehicle OEMs in the United States recently announced their intention to switch their vehicle sockets to the North American Charging Standard (NACS), it is important to acknowledge the differences between the UK, European and North American networks. In the US, CCS is much less dominant than in Europe and the majority of EVs on the road in the US were already equipped with NACS-compatible sockets. We would question the need – or indeed the benefits – of replicating such an approach in the UK with CCS already playing the same role.

Public Charge Point Regulations 2023: Shell UK strongly supports the objectives behind the Public Charge Point Regulations. We agree with the Government that it is essential that drivers know where to find chargers and enjoy a positive, reliable experience when they arrive. Only by providing a seamless experience across the network can we hope to win consumers’ confidence as they switch to EVs. We have worked closely with the Government to share our experiences of operating our growing network here in the UK and Shell’s experience in other markets.

Two areas of regulation need further attention:

• Reliability: The Government rightly wants to ensure that chargers are working when drivers arrive at a location. Like most major operators we are dedicating significant resources to improving the uptime of our units, using detailed data to systematically identify causes of reliability issues and working with partners to resolve them. This is a complex task, as we rely heavily on the local electricity networks, auto-OEMs (automotive original equipment manufacturers) and mobile networks to ensure a successful charging experience. We are disappointed that the Government has not incorporated comprehensive feedback provided by the charging sector and has instead opted to hold chargepoint operators legally and financially responsible for issues with the wider eco-system on which we rely.
• Payments: We share the Government’s desire to ensure that paying for a charging session is easy for everyone and are pleased that the Regulations acknowledge that contactless payments may not be financially feasible for lower-power chargers. However, Regulations should include a clear and adequate lead time for developing and rolling out payment terminals for those units which do not already include them.

We would welcome working more closely with the Government and its appointed regulator to establish clear guidance on how operators can comply with the Regulations.

Financial benefits of choosing an EV:

Smart charging enables drivers to take advantage of cheaper electricity prices at off-peak times. Estimates suggest that drivers can save between £200 and £1000 per year by charging in this way, depending on their mileage[15].

Many customers also find it beneficial to charge overnight so that they can take advantage of abundant renewables available at those times. Some choose to install domestic solar PV systems, which allow them to charge mainly or exclusively from their own solar-generated energy. Shell’s 2023 EV Driver Survey found that 46% of respondents had installed solar panels.

National and regional issues

Grid Connections: About 600 projects with a combined capacity of 176GW are in the queue awaiting connection to the grid in England and Wales against 64GW of connected capacity[16].  The grid was designed for a smaller number of fuel generators and is finding it challenging to shift to a more dispersed range of suppliers. 

Timelines for grid connections vary widely across the country and often depend on the type of works required.  There have been cases where Shell UK has waited 2 years for a grid connection. Shell UK has also been forced to exclude a number of sites on the basis of prohibitively high connection costs.  We believe there are a number of steps the Government, along with the regulator and Distribution Network Operators (DNOs) could take to ease the grid connection process. This is outlined below:

Distribution Network Operators: DNOs play a critical role and we are working closely with them to share our plans and seek their feedback.

Currently applications are prioritised purely on the basis of submission date. To reduce the number of speculative applications, we would like the DNO’s application processes to be updated to prioritise applications with:

• Approved planning permission
• Finance in place

The DNOs, along with the regulator, should explore an expedited application process for projects that help to support the UK Government’s net-zero ambitions.

Local Authorities: Local authorities should be provided with additional resources to develop Local Electric Vehicle Infrastructure (LEVI) funding strategies and operate tender processes informed by best practices.  This should include centralized IT platforms for tender processes rather than each local authority using their own bespoke system to manage tenders. It should also include demand forecasting/assessment tools.

International perspectives

EU: Renewable Energy Directive III (RED III): Obliges member states to introduce a credit mechanism to allow operators of public recharging points to generate and sell credits for the renewable electricity (RES-E) charged by BEVs (battery electric vehicles) to fuel suppliers, and enables member states to introduce a similar mechanism for private charging locations.[17] Many EU countries, notably the Netherlands, had already established schemes like this prior to the passage of RED III and evidence suggests that these have had a significant impact on the cost of charging to the end customer. In a similar vein, the UK does have a Renewable Transport Fuels Obligation (RTFO), but unlike these European counterparts, this does not allow chargepoint operators or customers to generate credits from charging their EV. The UK Government should consider an equivalent incentive scheme either by expanding the existing RTFO or setting up a separate credit-based mechanism to bring down the cost of EV charging both for public and private charging. Investment in private charging locations, most notably e-depots for commercial fleets, can be stimulated substantially through such credit mechanisms.

EU: Batteries: In July 2023 the EU adopted a new regulation on batteries and waste batteries[18]. This regulation seeks to regulate the entire life cycle of batteries from production to use and recycling. The UK Government should consider adopting similar standards where they help to develop a competitive battery production market which effectively combines availability and sustainability of materials.

Forward-Looking Statements

This response contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections, and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, “milestones”, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this response, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, judicial, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this response are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Shell plc’s Form 20-F for the year ended December 31, 2022 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward-looking statements contained in this response and should be considered by the reader. Each forward-looking statement speaks only as of the date of this response, 14 September 2023. Neither Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied, or inferred from the forward-looking statements contained in this response.

Shell’s net carbon intensity

Also, in this response we may refer to Shell’s “Net Carbon Intensity”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions. The use of the term Shell’s “Net Carbon Intensity” is for convenience only and not intended to suggest these emissions are those of Shell plc or its subsidiaries.

Shell’s net-Zero Emissions Target

Shell’s operating plan, outlook and budgets are forecasted for a ten-year period and are updated every year. They reflect the current economic environment and what we can reasonably expect to see over the next ten years. Accordingly, they reflect our Scope 1, Scope 2 and Net Carbon Intensity (NCI) targets over the next ten years. However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCI target, as these targets are currently outside our planning period. In the future, as society moves towards net-zero emissions, we expect Shell’s operating plans to reflect this movement. However, if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.

Forward Looking Non-GAAP measures

This response may contain certain forward-looking non-GAAP measures such as [cash capital expenditure] and [divestments]. We are unable to provide a reconciliation of these forward-looking non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile those Non-GAAP measures to the most comparable GAAP financial measures is dependent on future events some of which are outside the control of Shell, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.

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We may have used certain terms, such as resources, in this response that the United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.