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Shell accused of abandoning solar power buyers in the developing world

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Row over responsibility for sold-off systems has left Sri Lankan communities unable to replace faulty equipment

Terry Macalister
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.


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One Comment

  1. shellglobal demands says:

    Check this Royal Dutch Shell is having serious issues in Sri Lanka with its joint partners.

    This was traced by The Global Complain System of Royal Dutch Shell
    You may get additional information by going to at any time.

    Here is the Report

    Attention: Chairman, Royal Dutch Shell


    2nd October 2010

    Mr. Walter Sanchez
    Chairman & Country Managing Director
    Shell Gas Lanka limited
    498, R.A.De Mel Mawatha

    Dear Sir,

    This letter is to convey our disappointment in securing our interest in the divestment process
    of Shell Gas Lanka Limited and the Shell Terminals Lanka Limited.

    We are sad to note that the several commitments made to our association by various
    important officials of Shell, throughout the representations we made in the process of
    divestment, were just made to pass the time in order to achieve the objectives of Shell LPG

    We are convinced that Shell LPG, having the desire of divesting it’s business in Sri Lanka,
    deceived us by making us to expand and improve our distributor Yards, Vehicles, Facilities,
    Safety and Human Resource with a massive infrastructure cost just before the divestment
    was aimed mainly to augment the value of your business in Sri Lanka in order to get the
    best deal at the divestment in the pretext of “V2” or Volume double concept.

    This further indicates the hidden agenda of Shell Gas Lanka Limited as the announcement
    was made just as the new distributor investments were completed.

    Most of our member distributors had the capacity to meet the present turnover (which is not
    increased as per the shell promise of V2) with the facilities that was available prior to this
    demand of expansion by Shell. There was tremendous pressure to all the distributors with
    deadlines to complete and in the process, some distributors were asked to step down as
    they could not meet the huge investment that was required to meet the shell demand of
    “comply or get out”.

    We request you to compensate the distributors for this investment prior to the transfer of the
    business as otherwise the membership have decided to expose the entire deceptive tactics
    and operation of Shell Gas Lanka Limited with it’s stake holders to the World Media followed
    with suitable legal action.

    This has been written by the the Management Committee
    of L P Gas Distributors Association according to system records