Shell accused of leaving renewable project 'high and dry'

A row over the Government's ambitious renewable energy targets erupted yesterday after Royal Dutch Shell pulled out of the London Array, the world's largest proposed offshore wind farm. Environmental groups and politicians criticised Shell for its decision to put its one-third stake in the £2bn project, which is projected to generate 1gw of emission-free energy – enough to power a quarter of London households – up for sale.

The announcement was made days after Shell revealed it had earned $7.7bn profit in the first quarter of 2008. In its annual $27bn investment programme, renewable energy is barely visible. The Environment Secretary Hilary Benn called the decision "very disappointing. A lot of people would want to understand why this was the case... in a week in which the company announced record profits".

The Friends of the Earth campaigner Nick Rau accused Shell of leaving a renewables project "high and dry" while investing in fossil production. "We're very disappointed that Shell... is pulling out of the London Array. It should be investing in renewable energy, not sucking fossil fuels out of the ground," he said.

Critics also accused the Government it of doing little to ensure it reaches the target of increasing wind generation capacity to 33gw by 2020 – an 80-fold increase over the next 12 years. Mr Rau said: "If the Government is serious about renewables targets, one measure might be to address turbine shortages by encouraging manufacturing capacity in the UK."

Since Shell and its partners E.on and DONG Energy set up the joint venture five years ago, the costs of building offshore wind farms has jumped by roughly 50 per cent. Having received planning approval, the partners were set to take the final investment decision by the end of September. Shell has already begun sounding out other companies, including Centrica, to see if they are interested in its stake. A spokesman for the British Wind Energy Association said Shell's move was a "hard-headed business decision. This is simply not as lucrative as oil and gas". Dr Paul Golby, head of E.on UK, claimed the project's economics were now "marginal at best".

The energy industry called for the Government to extend the Renewables Obligation (RO), an incentive scheme that partially subsidises power from renewable sources. Most of the onus for meeting EU targets to cut emissions by 20 per cent by 2020 falls on the energy industry, which generates 5 per cent of the country's power from renewable resources. By 2020, this will have to grow to 40 per cent. Under the RO scheme, energy suppliers are only required to source 15 per cent of generation from renewables by 2015. The industry argues the Government must increase the threshold to 40 per cent, under which companies can receive subsidies to pay for more costly projects.

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