The British multinational oil and gas company Shell is selling its European onshore renewable energy operations, such as wind and solar farms, to the French group TotalEnergies. The deal involves a portfolio of 4 gigawatts, of which 500 megawatts are currently operational.

Under CEO Wael Sawan, Shell has taken a more critical look at renewable energy projects and intends to refocus on fossil fuels. The financial terms of the transaction were not disclosed.

12% of Shell’s energy projects

The deal, which the two companies hope to finalize by the end of the year, involves projects in the Netherlands, Italy, Spain, and the United Kingdom. That represents about 12% of Shell’s total energy projects, so it’s not their entire renewable energy division. Regulators still need to give the green light for the sale, however.

Shell continues to buy and sell solar and wind energy and supply green electricity to, for example, Dutch businesses, but under CEO Wael Sawan, a Lebanese Canadian business executive, the multinational has begun to take a more critical look at renewable energy projects. The company wants to refocus its efforts on producing fossil fuels.

Built with millions in Dutch subsidies

The point is, some of these parks, such as Energiepark Pottendijk in Emmen and Zonnepark Koegorspolder in Terneuzen, were built with billions in Dutch government subsidies – the Dutch projects have a combined peak capacity of over 254 megawatts.

It is therefore legitimate to ask whether it is appropriate to transfer this public investment to foreign parties as soon as the projects become profitable, even though the sale does not face any legal barriers. An interesting detail: A recent investigation by Follow the Money reveals that Shell pays virtually no corporate income tax in the Netherlands.

No return

For Shell, physical green energy generation does not yield sufficient returns compared to oil, gas, and energy trading. At last year’s Capital Markets Day, he stated it bluntly: one in five Shell dollars invested yielded no return – about 45 billion dollars – and that was especially true for green projects and chemical plants. Or, to put it in his own words: “I can’t invest in low-return projects just to ease my conscience.”

Shell’s scaling back of its green ambitions should therefore be viewed primarily against the backdrop of the U.S.-based energy majors. Shell is trying to close the profitability gap with its American competitors, ExxonMobil and Chevron, which have invested little in renewables and are therefore viewed by investors as “cleaner” and more predictable.

Shell announced late last year that it would sell its stakes in two wind farms off the Scottish coast. Earlier this month, the company also sold its 5-GW Sprng Energy, an Indian wind and solar energy producer.

To put Shell’s strategic shift into context: It has set a strict “green ceiling.” Electricity, biofuels, and CO2 storage combined may not account for more than 10% of total capital expenditure. Anything above that will be divested or will not be expanded further. At the same time, funding for oil and gas is being ramped up, particularly for LNG: Shell expects gas demand in Asia, Africa, and Latin America to peak only around 2040, and is heavily investing in growth outside Europe.

Green player TotalEnergies?

Does this suddenly make TotalEnergies, especially given the acquisition of these onshore wind and solar farms, a “green player” in the world of energy and oil companies? No, you can’t put it quite so simply.

And TotalEnergies has taken a pragmatic approach in the past. For example, in March, the company reached an agreement with U.S. authorities under which it agreed to abandon the construction of wind farms in exchange for a refund of nearly 1 billion dollars.

TotalEnergies also announced that the American investment firm KKR is acquiring a 50% stake in its European onshore solar and wind energy projects – representing 1,2 gigawatts. The deal with KKR represents an enterprise value of 1,8 billion euros. In other words, it spreads the risk.

The company may still have ambitious growth plans in renewable energy – with its recent acquisitions of VSB Group (a wind developer in Germany) and SN Power (hydropower in Africa), the company aims to reach more than 40 gigawatts of European renewable capacity, to generate more than 100 terawatt-hours of net electricity by 2030.

It remains, just like Shell, at its core an oil and gas company focused on profitability. But in general, it remains, along with the Italian company Eni, more of an exception that proves the rule in the energy transition.

Generating profits

According to Le Figaro, the French energy group is indeed generating profits from these assets. The target it has set – a return on invested capital (ROACE) of 12% for its electricity operations – has not yet been achieved, but at 9,7%, it is within reach.

In that sense, TotalEnergies’ policy somewhat counters the argument that returns on renewable energy versus fossil fuels (often 10-20% or 15-30%) are disappointing. While many oil companies are turning away from renewable energy, that is certainly not true of all investors.

What’s more, according to a report by GlobalData published last May, the share of renewable energy in global electricity generation is set to rise from 30% in 2020 to 40% in 2030.

General trend

In the meantime, we’re also seeing the same trend – a fundamental reset of energy transition ambitions – at other European majors, such as BP, Norway’s Equinox, and Spain’s Repsol.

Three factors keep recurring in this context: the disappointing returns on renewables compared to fossil fuels, investor pressure to close the valuation gap with U.S. competitors, and government policies that are slower or more uncertain than expected (subsidies, permits, CCS market development).

Add to that the Draghi report, which warned that European companies are losing the competitive battle with China and the U.S., and the switch at the European Parliament – which has shifted to the right since the 2024 European elections (with a stronger EPP group) – and you immediately have the ingredients for a noticeable shift in course, just as the scientific consensus is becoming ever more urgent about reducing – not increasing – fossil fuel use.

Although this sobering fact must also be mentioned right away: For most of the global oil industry, there is little to no renewable strategy to reverse. The International Energy Agency (IEA) estimates that oil and gas producers account for only about 1% of worldwide clean-energy investment.