In a press briefing held on Friday, the new CEO of Enel Green Power (EGP), Salvatore Bernabei, discussed the company's operating results for 2020 and unveiled the new developments the company is undertaking in its renewable energy business as well as in the areas of green hydrogen, hydropower and solar module manufacturing.
The renewable energy arm of Italian utility Enel installed 803 MW of PV and 2.28 GW of wind power worldwide last year and intends to keep growing at a faster pace as part of its strategy to reach a total renewable capacity of around 145 GW by 2030. “We are not targeting M&A and we want to grow organically,” Bernabei stated during the conference. “We can count on a huge pipeline and we want to take care of it.” Enel Green Power is looking to expand its cooperation with third parties to accelerate development and grow its ownership model by attracting other investors.
This growth should materialize in its traditional markets such as North America, Latin America and Europe, especially in Italy, Spain and Romania. “We are monitoring other European markets such as France and Germany and we are interested to see if, sooner or later, we will have opportunities to invest in these markets,” he told pv magazine. “However, we don't have a plan in the short-term, and perhaps in the next three years, we will do something, but we have not defined yet any clear development.”
Italian market
pv magazine asked EGP's new CEO about the possibility of building big solar plants in Italy as it did in other international markets, thus making a move that would make the utility's solar business compete with its own conventional energy business. “If we don't do photovoltaics in Italy, someone else will do it,” he affirmed. “The history is already written and coal will be phased out in Italy by 2025 and this transition must be done in a very well planned and ordered way and can not be sudden, but we don't have to be afraid about it.” Bernabei, however, didn't provide a timeframe for the realization of large-scale PV plants in his homeland.
Enel has committed to shutting down its coal power plants in all parts of Italy by 2025. “In some cases, the solutions are already being defined, and in other cases not,” Bernabei explained, adding that the company is working with system operators and the Italian government to reach the 2025 objective. “But this is feasible and there are different solutions on the table.” Important decisions will have to be taken this year if this schedule is to be maintained, he added. “We want to reach an agreement with all the stakeholders, as final decisions do not depend only on one of them.”
Auctions and PPAs
Bernabei also commented on the poor outcome of Italy's recent auctions for large-scale solar and wind, which were characterized by high prices and lower than expected allocated capacity, and highlighted the difference with Spain, where the most recent auction delivered 2 GW of allocated PV at very low prices. “The issue is not that the auction is less attractive in Italy than in Spain; the main issue for Italy is that there is a bigger difficulty in getting the projects authorized,” he stated. The auctions' rules, on the other hand, exclude projects on agricultural land, forcing developers to plan their facilities on unused surfaces in urban or industrial areas.
“We know each of every PV project in Italy, either ours or those of our competitors, and we know that the real challenge is securing approval.” The average time it takes to receive final approval for a solar energy project in Italy could be as long as five to six years.
The PPA segment is targeted as a possibility but mainly in the US market, where bilateral power purchase deals are a consolidated business model. “In Europe, we have some other tools, as we can also count on local auctions, other types of bilateral contracts and, for the residual merchant exposure, we can count on the integration of our retail portfolio,” Bernabei stated. “PPAs are an interesting tool if they create value with respect to other alternatives that we have.”
When asked by pv magazine about the sustainability of recent record-low bids in the solar auctions held in Portugal, Abu Dhabi or in the Spanish auction itself, Bernabei said the levelized cost of electricity is decreasing and noted that there is clearly an industrial reason why these results could be achieved. “Consider, however, that in some cases, there could also be newcomers that want to enter the market and are available to pay a premium for it,” he explained. “If you look forward, it is obvious that there is a limit in the sustainability of these prices, and as soon as the prices decrease in these auctions, you have to think carefully about what is happening.” He specified that in some cases this sustainability threshold has already been surpassed. “When it happens, we have to explore if there are some other strategic reasons for this to happen.”
PV module manufacturing
pv magazine also asked if Enel Green Power was planning to scale up the capacity of its heterojunction solar module factory in the southern Italian city of Catania, to a gigawatt size as other manufacturers are planning to do in France and Germany. Under the current market conditions and regulatory framework, a similar expansion would be difficult to carry out, Bernabei explained. “For strategic reasons, Europe works very well when it comes to battery manufacturing or in a very well structured way when it comes to hydrogen, for which an alliance and a clear strategy were created,” he emphasized. “These initiatives will make it easier to create a supply chain in Europe.”
The solar industry, however, is not included in the six chapters of the European Commission's strategic supply chain agenda, making major plans and investments difficult. “Companies that want to invest in solar manufacturing in Europe are unable to access the Important Project of Common European Interest (IPCEI) framework and the Commission should devote more attention to the PV industry and make it a strategic asset for the European industry, as we are investing a lot in Europe,” he added. “This would help Europe to become more independent from China and from Asia, as we have the required know-how,” he also stated, citing the recent efficiency records achieved by EGP. “But if you want to scale up module capacities in Europe, we need some kind of support,” he affirmed. “We have the efficiency, but what we need now is the scale.”
Enel is also investigating opportunities that could be offered by the recovery fund initiatives and working at the European level to gain political support and recognition of the European PV industry's strategic importance, Bernabei explained.
Green hydrogen
Coming to hydrogen, Bernabei said he didn't believe in CO2 capture technologies and that the production of blue hydrogen with gas and CO2 capture, as well as that of grey hydrogen produced with gas alone are not being contemplated in the company's future strategy. “CO2 capture technologies have been tried in the past and multilateral European funds were also devoted to this purpose, but the efficiency of the processes to capture and store CO2 has never reached 100%,” he said. Furthermore, the storing of the CO2 may have low social and environmental acceptance by the communities that live close to a storing site, which contributes to making these projects too complex, big and difficult to realize. As a result, Enel will only bet on green hydrogen for its future plans.
Bernabei also clarified that Enel doesn't intend to enter the upstream manufacturing business for the components needed for hydrogen production, although it will push for innovative solutions by cooperating with startups and other partners within the framework of its “open innovation” model. “We will test different types of electrolyzers and different business models around the world,” he said. “For example, electrolyzers can play a role in the ancillary market.”
During the media brief, the Italian executive also spoke about the company's strategy on wind, hydropower and storage, although the latter was only briefly mentioned. “Batteries could be a risk mitigator for renewables as they can reduce curtailment,” he said, speaking about the Romanian market. As for the hydropower business, Enel Green Power will invest mostly in repowering, as around 99% of future power generation capacity is expected to come from other renewables. “By investing in repowering we will have a more efficient capacity,” he stated. “And we will extend the useful life of these assets.”
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