The move, taken with rival BP's decision last week to invest in the world's dirtiest oil production in Canada's tar sands, indicates that Big Oil might be giving up its flirtation with renewables and going back to its roots.
Shell and BP are among the biggest producers of greenhouse gases in the world, but both have been keen to paint themselves green through a series of clean fuel initiatives.
BP, under its former chief executive, John Browne, promised to go "beyond petroleum" while Shell has spent millions advertising its serious interest in the future of the environment.
But at a time when interest in solar power is greater than ever, with the world's first "solar city" being built at Phoenix, Arizona, a small announcement from Environ Energy Global of Singapore revealed that it had bought Shell's photovoltaic operations in India and Sri Lanka, with more than 260 staff and 28 offices, for an undisclosed sum.
The sell-off, to be followed by similar ones in the Philippines and Indonesia, comes after another major disposal executed in a low-key way last year, when Shell hived off its solar module production business. The division, with 600 staff and manufacturing plants in the US, Canada and Germany, went to Munich-based SolarWorld. Shell has however formed a manufacturing link, with Saint-Gobain, and promised to build one plant in Germany.
The Anglo-Dutch oil group confirmed yesterday that it had pulled out of its rural business in India and Sri Lanka, saying it was not making enough money.
"It was not bringing in any profit for us there so we transferred it to another operator. The buyer will be able to take it to the next level," said a spokeswoman at Shell headquarters in London.
The oil group said it was continuing to move its renewables interests into a mainstream business and hoped to find one new power source that would "achieve materiality" for it. Shell continues to invest in a number of wind farm schemes, such as the London Array offshore scheme, which has government approval. Shell has also been concentrating its efforts on biofuels, but declined to say whether it had given up on solar power even though many smaller rivals continue to believe the technology has a bright future.
Environmental groups have always accused Shell of using clean energy initiatives as "greenwash" to deflect criticism from its core carbon operations, especially tar sands. The latest pull-out has annoyed rival business leaders at London-based Solar Century and local Indian operation, Orb Energy, who fear the impact of a high-profile company selling off solar business. Jeremy Leggett, chief executive of Solarcentury and a leading voice in renewable energy circles, said Shell was undermining the credibility of the business world in its fight against global warming.
"Shell and Solar Century were among the 150 companies that recently signed up to the hard-hitting Bali Declaration. It is vital that companies act consistently with the rhetoric in such declarations, and as I have told Shell senior management on several occasions, an all-out assault on the Canadian tar sands and extracting oil from coal is completely inconsistent with climate protection.
"This latest evidence of half-heartedness or worse in Shell's renewables activities leaves me even more disappointed. Unless fossil-fuel energy companies evolve their core activities meaningfully, we are in deep trouble," he said.
Damian Miller, former director of Shell Solar's rural operations and now chief executive of Orb Energy, said Shell was missing an opportunity by pulling out at a time when renewables markets were starting to mature in the developing world. He alleged some customers were complaining of being abandoned by Shell and worried about the servicing of equipment they could expect from Environ. "We see former Shell customers who are highly disappointed not to be receiving proper service for the solar systems they have invested in. These customers have often invested 20-30% of their annual income in a system to ensure they have some minimum amount of lighting and access to radio, TV, or a fan," said Miller.
He added that the oil majors, including Shell, had invested time and energy in promoting their plans for renewable energy in the press and on TV, but were not able to lead the transformation the world needs towards renewable energy and energy efficient solutions.
Shell declined to comment on these criticisms or talk about where its priorities lay. But the chief executive, Jeroen van der Veer, did make a number of comments last summer which could have paved the way for a change in policy. Alternative energy sources such as renewables will not fill the gap, he argued, forecasting that even with technological breakthroughs they could give supply only 30% of global energy by the middle of the century. "Contrary to public perceptions, renewable energy is not the silver bullet that will soon solve all our problems," he said.
Meanwhile, BP has been accused by Greenpeace Canada of lining itself up to help commit "the biggest environmental crime in history". This follows its decision to swap assets with Husky Oil, giving it an entrance ticket to the Alberta tar sands, which are said to be five times more energy-intensive to extract compared to traditional oil.
John Browne, the group's former chief executive, had said BP would not follow Shell into tar sands as he established an alternative energy division and pledged to take the group "beyond petroleum." The new boss, Tony Hayward, has pointed the corporate supertanker in a new direction although his public relations minders insist BP remains committed to exploring the potential of renewables.
"Tony Hayward has been part of the management team at BP for many years and has endorsed the low-carbon strategy that involved BP creating its alternative energy business late in 2005. We are spending $8bn (£4bn) over ten years and are pressing ahead with 450 megawatts of wind production capacity in the US," said a spokesman. "The tar sands deal in Canada does not represent a change in direction, it was just a very good opportunity which represents a broadening of the portfolio."
Greenpeace climate campaigner Joss Garman said: "If Shell is to survive the climate change age... it needs to become not just an oil company but an energy company. One wonders if Shell's executives have noticed what's happening in Bali or if we'll see slick adverts on TV boasting about their retreat from renewables. Probably not."
© 2007 The Guardian