Shell sells stake in London Array

02.03.08 Shell announced today that it would be withdrawing from the London Array windfarm, located off the coast of Kent, UK, as it wanted to invest instead in more lucrative oil-based projects. This is the latest in a series of decisions against renewables, made for a variety of reasons. Commentators agree that this move is driven by recent oil price rises and the consequent attractiveness of oil-based investments. We feel this is an important story because it illustrates the complexity of the relationship between external factors and companies' strategic decisions. A simple long-term analysis might interpret the rising oil price as confirmation that Shell had been on the right track with its strategy of diversifying into renewables in order to reduce its dependence on a dwindling energy source. But strategy sometimes needs to weight long-term threats against short-term opportunities, in this case the opportunity to squeeze more value out of the company's past investment and consequent strong position in upstream oil. It's not only renewables that are wobbling. A report from Policy Exchange (April 2008) has found found that the number of proposed Carbon Capture and Storage (CCS) projects in the UK had halved in the previous year. The authors put this down to 'timidity and political incoherence' on the UK government's part. Maybe, but does this loss of momentum also signal a hesitancy about costly clean-up of conventional power generation plant when the price of fuel looks set only to rise further? Again, a rising oil price may be driving behaviour that looks counter-intuitive if your big-picture view is over-simplified. Read more at the Guardian's website which covers Shell's decision and reaction the next day. See All News