Shell has become entangled in a disagreement with the World Bank over allegations that the Anglo-Dutch oil company is refusing to honor warranties on solar photovoltaic (PV) systems sold to customers in the developing world.
At issue are faulty PV panels, which Shell sold in Sri Lanka and elsewhere through its rural electrification business. According to the World Bank’s estimates, around 700 solar systems have failed. Shell has since sold its rural electrification business and largely withdrawn from the solar energy equipment market.
Last year, Shell updated its corporate strategy, which moves away from solar power and positions the company more firmly in the realm of biofuels and carbon capture and storage technologies — alternatives that are, according to Shell’s website, more in line with the oil company’s core competencies.
Some think Shell has an obligation to clean up the mess. As reported by the UK’s Observer,
“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.”
For its part, Shell maintains that all liabilities were transferred to Environ Energy Global PTE Ltd. when that company bought Shell Solar Lanka Ltd. in 2007. “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.
Still, given the large number of faulty systems — which threaten to bankrupt local suppliers and other liable parties — the World Bank wants Shell to step in. Anil Cabraal, an energy specialist at the bank, wrote to Shell requesting that they take up the issue: “I would like Shell to honor these commitments. We are not talking about millions of dollars here but hundreds of thousands.”
Regardless of whose side you take — the bank’s or Shell’s — the incident underscores the challenges that can arise when warranties and liabilities are transferred from company to company. When purchasing solar energy equipment, be sure to (1) read the fine print, and (2) consider going with a brand panel that’s made by a well established company. The last thing you want is to end up stuck between two firms bickering about where the liability lands.
I thought solar panels last 25 years. What happened?
By the way, you can still sue Shell to recover some of the “investments,” but how will you be able to sue the numerous solar and inverter companies that won’t survive the next three years? Anybody remember the former US PV leader, AstroPower?
It turns out solar PV is a much more risky proposition than what the manufacturers and installers are trying to convince us.