Shell has become entangled in a disagreement with the World Bankover allegations that the Anglo-Dutch oil company is refusing to honorwarranties on solar photovoltaic (PV) systems sold to customers in thedeveloping world.
At issue are faulty PV panels, which Shell sold in Sri Lanka andelsewhere through its rural electrification business. According to theWorld Bank’s estimates, around 700 solar systems have failed. Shell hassince sold its rural electrification business and largely withdrawnfrom the solar energy equipment market.
Last year, Shell updated its corporate strategy, which moves awayfrom solar power and positions the company more firmly in the realm ofbiofuels and carbon capture and storage technologies — alternativesthat 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 withoutdue consideration to how after-sales service and warranty replacementswould be provided, thereby damaging the very local solar industries ithad earlier helped to create,” said Damian Miller, a former Shellmanager who now heads his own solar business, Orb Energy.
“In Sri Lanka, poor customers with average earnings of $1,500-$2,000a month have bought Shell’s solar systems. The system is equivalent to30% of their annual income,” he added. “They could only afford a systembecause they could get a loan from microfinance institutions or otherbanks. But now there are reports of thousands of Shell’s [branded]solar panels failing in the field and Shell seemingly is not replacingthem.”
For its part, Shell maintains that all liabilities were transferredto Environ Energy Global PTE Ltd. when that company bought Shell SolarLanka Ltd. in 2007. “In October 2007, Shell sold Shell Solar Lanka Ltdto Environ Energy Global PTE Ltd. Specifically in order to protectcustomer interests, the terms of the transaction explicitly covered themanagement of all past, present and future liabilities, includingwarranty issues,” said a Shell spokesman in the Hague.
Still, given the large number of faulty systems — which threaten tobankrupt local suppliers and other liable parties — the World Bankwants Shell to step in. Anil Cabraal, an energy specialist at the bank,wrote to Shell requesting that they take up the issue: “I would likeShell to honor these commitments. We are not talking about millions ofdollars here but hundreds of thousands.”
Regardless of whose side you take — the bank’s or Shell’s — theincident underscores the challenges that can arise when warranties andliabilities are transferred from company to company. When purchasingsolar energy equipment, be sure to (1) read the fine print, and (2)consider going with a brand panel that’s made by a well establishedcompany. The last thing you want is to end up stuck between two firmsbickering about where the liability lands.