Renewables and Energy Solutions

Renewables and Energy Solutions (R&ES) includes renewable power generation, the marketing and trading and optimisation of power and pipeline gas, as well as carbon credits and digitally enabled customer solutions. R&ES also includes hydrogen production and marketing, development of commercial carbon capture and storage (CCS) hubs, investment in nature-based projects that avoid or reduce carbon emissions (NBS), and Shell Ventures, which invests in companies working to accelerate the energy and mobility transformation. We are building a business to profitably deliver clean energy for our customers, using a strong portfolio of energy solutions to help them decarbonise.

Business conditions

For the business conditions relevant to Renewables and Energy Solutions, see "Market overview".

External power sales

In 2023, our external power sales increased compared with 2022 as a result of organic customer growth across the portfolio and portfolio additions.

Sales of pipeline gas to end-use customers

In 2023, the decrease in our sales of pipeline gas to end-use customers was mainly driven by commercial decisions to reduce our supply to certain counterparties.

Earnings 2023-2022 [A]

Segment earnings reflected lower margins (decrease of $684 million), mainly from trading and optimisation. This was because of lower gas and power price volatility in 2023, unfavourable tax movements (decrease of $218 million) and higher operating expenses, resulting from business growth (increase of $186 million).

Segment earnings also included favourable movements of $2,756 million, due to the fair value accounting of commodity derivatives, partly offset by net impairment charges and reversals of $669 million. These favourable movements and charges are part of identified items and compare with 2022 which included unfavourable movements of $2,443 million due to the fair value accounting of commodity derivatives, and impairment charges of $361 million.

In 2023, Adjusted Earnings from Energy Marketing and Trading and Optimisation accounted for 216% of Renewables and Energy Solutions Adjusted Earnings. This was partially offset by Renewable Power Generation, Hydrogen, CCS, NBS and Shell Ventures that accounted for a negative 116%.

Prior year earnings summary [A]

Our earnings summary for the financial year ended December 31, 2022, compared with the financial year ended December 31, 2021, can be found in the Annual Report and Accounts (page 74) and Form 20-F (page 78) for the year ended December 31, 2022, as filed with the Registrar of Companies for England and Wales and the US Securities and Exchange Commission, respectively.

Cash flow from operating activities

Cash flow from operating activities was primarily driven by working capital inflows of $3,723 million and Adjusted EBITDA. This was partly offset by net cash outflows, related to derivatives of $1,988 million and tax payments of $762 million.

Cash capital expenditure

Within cash capital expenditure, $2.3 billion was in low-carbon energy solutions. This includes Renewable Power Generation, Environmental Solutions, Hydrogen and CCS. In 2022, cash capital expenditure included $2.9 billion in low-carbon energy solutions. Higher cash capital expenditure in 2022 was mainly a result of the acquisition of the renewable energy platform Sprng Energy group.

Our cash capital expenditure is expected to be in the range of $4-5 billion in 2024.

Portfolio and business development

Key portfolio and business developments:

• In March 2023, we entered into a joint venture with Eku Energy (Shell interest 45%) to deliver a utility-scale battery energy storage system in Australia.
• In June 2023, Hollandse Kust Noord, our offshore wind park in the Netherlands (Shell interest 79.9%), delivered its first megawatt hours of electricity.
• In November 2023, we sold our home energy businesses in the UK and Germany to Octopus Energy Group.

[A] All earnings amounts are shown post-tax, unless stated otherwise. 2022-2021 reported pre-tax segment figures.
* Non-GAAP measure (see Non-GAAP measures reconciliations).