Row over responsibility for sold-off systems has left Sri Lankan communities unable to replace faulty equipment
The Observer, Sunday 3 January 2010
Shell is at the centre of a row over warranties for solar power systems sold to the developing world. Photograph: Leon Neal/AFP/Getty Images
Shell has become embroiled in a major row with the World Bank and green energy companies after allegations that it is unfairly refusing to honour warranties on solar power systems sold to the developing world.
A widespread breakdown of its equipment in Sri Lanka and elsewhere has left the oil firm accused of abandoning a responsibility to impoverished communities while damaging the prospects of the wider renewable power sector in a world desperate to reduce carbon emissions following the Copenhagen climate change summit.
The rural electrification business under which the Shell systems were sold has now itself been passed on as have most other parts of the group’s solar business but critics say that Shell, which made profits of $31bn in 2008, has a continuing role in ensuring former customers are not left vulnerable.
“Shell exited solar on a global basis, seemingly without due consideration to how after-sales service and warranty replacements would be provided, thereby damaging the very local solar industries it had earlier helped to create,” said Damian Miller, a former Shell manager who now heads his own solar business, Orb Energy.
“In Sri Lanka, poor customers with average earnings of $1,500-$2,000 a month have bought Shell’s solar systems. The system is equivalent to 30% of their annual income,” he added. “They could only afford a system because they could get a loan from microfinance institutions or other banks. But now there are reports of thousands of Shell’s [branded] solar panels failing in the field and Shell seemingly is not replacing them.”
The World Bank, which provides financing packages to the developing world, said it too was very worried about a situation in which about 700 solar systems appear to have failed and local suppliers risked going out of business.
Anil Cabraal, an energy specialist at the bank’s Washington headquarters, has written to Shell asking for action. “I would like Shell to honour these commitments. We are not talking about millions of dollars here but hundreds of thousands,” he told the Observer.
The company argues that it is being unfairly targeted and is doing all it can to sort out the problem. It points out that its Shell Solar Sri Lanka business has been transferred to a third-party purchaser, Environ Energy, along with all liabilities. The Anglo-Dutch oil group says the bulk of its former solar module manufacturing operation has also been switched to a new owner, Solar World.
“In October 2007, Shell sold Shell Solar Lanka Ltd to Environ Energy Global PTE Ltd. Specifically in order to protect customer interests, the terms of the transaction explicitly covered the management of all past, present and future liabilities, including warranty issues,” said a Shell spokesman in the Hague.
“Environ Energy Global understands that resolution of this issue rests with Environ, but [its] own management team in Sri Lanka continues to approach Shell. We have asked Environ Energy Global to clarify responsibilities with [its] own management team in Sri Lanka.”
The situation has been complicated by the fact that Environ claims Solar World will not replace any modules unless it has the appropriate warranty documents. Environ claims those papers were destroyed by Shell prior to the handover to Solar World, although Shell told the Observer this was not true.