Why Shell pulling out of North Sea wind farm plans would be nightmare for Labour

Labour’s ambitious plans to take the UK’s energy system into the 21st century will require businesses to get on board – oil and gas giants will have to play their part too.

Sir Keir Starmer and Ed Miliband have been banging on about their plans for the publicly-owned GB Energy for more than a year. The blueprint could be radical, it could be bold – but it needs the private sector to get on board to be successful.

The industry generally likes what it has heard from Labour on cleaning up the energy system, despite fears over the oil and gas sector. Many, if not all, fossil fuel producers have switched at least part of their investments towards renewables and other clean fuels.

This shift is likely down to the writing on the wall rather than a particular want to tackle the climate crisis.

Reports have emerged this week that Shell, the global oil and gas giant with a base in the North East, is perhaps looking to sell on two of the floating wind leases it won from the ScotWind auction in 2022, totalling 5GW of clean power. If Shell does sell on the leases, someone else would surely develop the MarramWind and CampionWind sites? Surely no harm is done, right?

But it would send a signal from one of the planet’s biggest fossil fuels players that despite making more than £22 billion in profit last year, it is not worth investing in two key renewables sites. That is the last thing the UK government wants to see.

Private sector confidence is key to ramping up clean energy at the staggering rate that Labour is hoping for. The government has sent out all the right signals for investment in green energy and is backing it up with some funding.

But merely the speculation that Shell might think the investment is not worth the hassle could start placing doubts in the minds of other potential investors.

Last year, I visited The Hague in the Netherlands to see first-hand how businesses and innovators were managing the North Sea transition. Shell moved its headquarters from The Hague to London in January 2022 and a year on, Dutch business leaders were still quite sore about the decision and were adamant it marked a turning point in boosting green energy in the Dutch North Sea.

In the past, I have spoken to a tidal power project at the European Marine Energy Centre in Orkney, which had been left frustrated by the lack of confidence in their technology by the then-Tory UK government, feeling like it had no chance of being scaled up if the wrong signals were being sent out by politicians.

If Labour is serious about scaling up wind power and other renewables at some pace, it will need to calm any business jitters, particularly from oil and gas companies which may feel under threat from a government willing to end new North Sea licences. But they are on borrowed time without fully embracing what the future holds.

Read the latest issue of the OGV Energy magazine HERE