Shell signals no new offshore wind projects

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Shell will not initiate any new offshore wind projects, the company said on Wednesday, as it steps back from renewable energy under chief executive Wael Sawan.

The UK-based oil major said it planned to keep its offshore wind farms in the Netherlands and would continue to develop its existing pipeline of wind farms in Europe, the US and the UK, but would not seek to lead any new projects.

“We will be focusing on maximising the value of our existing renewable generation platforms,” Shell said.

“While we will not lead new offshore wind developments, we remain interested in offtakes where commercial terms are acceptable and are cautiously open to equity positions, if there is a compelling investment case.”

Shell made the comments after updating its staff on a review of the business, which aims to cut costs, simplify the strategy and boost returns. The news was first reported by Reuters.

In October, Sawan told analysts that while Shell was “committed to the energy transition” it was “indeed pulling back in certain areas like renewable generation”.

He added: “We do not see ourselves as being advantaged in renewable generation to create material returns over others. And so you do see us stepping back from those areas where we have identified and we have learned, if I’m honest with you, that we do not have those advantages.”

BP has also recently stepped back from wind energy, putting its portfolio of onshore wind in the US up for sale. Shell declined to comment on whether it would seek to sell down parts of its pipeline or look for more outside investment.

It follows a difficult period for the offshore wind sector, which has struggled with rising costs and supply chain strains.

Industry leader Ørsted has cut its targets for growth by 2030 after walking away from two offshore wind projects in the US last year, while rival Equinor has also pulled back on early stage development in some markets.

Projects are particularly affected by rising interest rates as they have high upfront costs and long lead times.

Jérôme Guillet, managing director at renewable energy boutique Snow, said: “Many utilities are going into a more selective mode when it comes to offshore wind, investing in fewer projects. Investors don’t want Shell to allocate capital to the sector. It’s less profitable than oil and gas.

“In general, when it comes to offshore wind, many projects are reaching completion, but more early stage development is struggling.”

Asked if Shell would step back from other parts of its renewable energy business, the company said: “We believe that selective investments in renewable power generation and storage systems, combined with our deep power trading and B2B sales expertise, will enable us to create more value with less emissions.”

They added that Shell would also focus on using batteries and gas-fired power plants in selected markets to manage intermittency as more renewable power plants are added to grids. In 2022, Shell spent $2.7bn in cash capital expenditure on low-carbon energy solutions, down from $3.5bn the previous year.

The oil major has about 3.4GW of renewable energy capacity around the world, enough to power 16mn homes in the UK for a year. The company has 2GW of offshore wind either in operation or under construction, and a further 7.9GW of projects in the pipeline.

Shell is also splitting Shell Energy, which generates renewable power and sells it, into two units — generation and trading — in order to simplify the business.