Interview to the CEO of Enerray, Mr. Andrea Venezia, about global energy transition
In an interview realized by Impact4All, the CEO of Enerray, Mr. Andrea Venezia, has given an explanation of why global energy transition is economically and technically feasible.
In simple terms, how has the Solar industry evolved – and has it changed significantly in recent years?
The landmark Paris Agreement adopted in December 2015 has sent a historical signal: over 190 countries in the world have recognized the need for urgent climate action.
By signing this agreement, the world community has committed to limit the global warming to well 2°C above pre-industrial levels. This is a very ambitious target. Therefore, the world community needs new and more aggressive climate protection strategies than in the past. According to the European Centre for Medium-Range Weather Forecasts (ECMWF) the global temperature increased to 1.3 °C above the pre-industrial level in 2016. To achieve the Paris Agreement targets, we need a two-fold strategy: to reduce greenhouse gas emissions down to zero and to remove surplus carbon dioxide from the atmosphere. A key aspect of this strategy should be a transition to an emission-free global economy, based on renewable energy.
The agreement calls for a global green-house gas (GHG) emissions to peak as soon as possible, recognizing that this will take longer for developing countries, and for rapid emission reductions thereafter. Furthermore, the United Nations has for the first time included energy in its new sustainable development goals, calling for a significant speed up in the deployment of renewable energy. As two-thirds of global GHG emissions stem from energy production and consumption, which puts the energy sector at the core of efforts to combat global climate change, the successful outcome of the historic Paris Agreement will depend on a rapid transition to the global energy system, led by the power sector.
Global renewable power capacity has doubled since 2007, from around 1000 GW to about 2017 GW by the end of 2016, nearly 140 GW, was equivalent to 55% of all generating capacity added globally, the highest proportion in any nearly until now. Renewable power capacity has been gradually increasing over the last few years, from 38% in 2010 to 49% in 2014. The proportion of global electricity coming from renewable sources has risen from around 25.3% in 2015 to 27.7% in 2016, and has prevented around 1.7 GtCO2eq of GHG emissions, which substantiates the decoupling of economic growth from fossil fuels.
From an environmental standpoint – what are the biggest obstacles to growing the solar industry?
As increasing shares of power capacity are added globally, renewable energy sources on a levelized cost of electricity basis (LCOE) become the least cost power generation source. The global average energy system LCOE is gradually declining, with solar PV emerging as the least expensive source of power generation.
A global energy transition to renewable electricity is no longer a problem of technical feasibility or economic viability, but of political will. The global community can significantly accelerate this transition by implementing favourable political measures and frameworks.
The first decisive prerequisite for a transition to a renewable energy is public support. The second prerequisite is a clear legislative framework promoting the fast and steady growth of renewable on the one hand and the phasing out all subsidies to fossil fuel and nuclear energy generation on the other hand.
To ensure a smooth, fast and cost-effective transition to renewable energy, governments need to adopt national legislative acts, which ensure the sufficient flow to private investment in renewable energy and storage technologies. The following political measures and instruments could be key:
– Instruments, enabling direct private investments in renewable energy and other zero-emission technologies.
– Phasing-out all state subsidies to fossil fuel and nuclear energy generation.
– Tax exemption for investments in renewable energy.
– Replacement of the emission trading system with carbon and radioactivity taxes.
– Promoting research and education in the sphere of renewable energy and zero-emission technologies.
What are the key reasons for the success of Enerray?
Enerray’s business has been growing for 11 years thanks to a strategy based on globalization by focusing on new areas. It has managed to expand despite the photovoltaic market in Italy being hit by sudden and drastic changes resulting in a marked case of “natural selection” with many companies folding as the State pulled the plug on economic incentives. The Enerray story is an unusual case in the Italian photovoltaic market scenario, which a few years ago faced a dual crisis: the global recession and the drastic cut in State incentives to promote green energy.
Enerray had to learn how to adapt to the changes in Italian laws concerning the regulation of photovoltaic sector, the incessant growth in bureaucracy and the increasingly difficult access to credit for customers due to the global economic crisis.
In order to tackle these enormous changes, Enerray has focused its action on developing a simple and transparent commercial policy based on two targets:
1. Consolidation of its position in the Italian market
2. Starting the internationalization process
This is why the Board of Directors decided to focus on two directions:
The first was for Enerray to keep on doing what it did best: building turnkey photovoltaic systems and taking its Italian experience on rooftop (about 160 MWp), carport, greenhouse and ground all over the world, but without ever losing sight of the Italian market.
Secondly the board figured that the crisis would remove a lot of unstructured companies from the once so thriving Italian market. The sudden closure of these companies meant that many photovoltaic installations were left without any maintenance services, a key factor in maintaining a high level of PV system performance.
Consequently, Enerray started working a lot on the maintenance of existing systems, investing in an internal structure dedicated to O&M. Today, Enerray is leader in the Italian market, with a managed portfolio of over 580 MWp in Italy and over 800 MWp worldwide, acquiring new photovoltaic systems and with important prospects for growth.
Enerray is the direct result of an aware forward-looking approach of Maccaferri Industrial Group, a corporation active in the most advanced industrial sectors since 1879, with a turnover of over €1.2 billion, 4,747 employees and 58 factories worldwide, making it one of the most important economic players in Europe.
Eleven years ago, the Maccaferri Industrial Group grasped the growing importance of the energy sector and launched Seci Energia, an innovative subholding company which has the task to control all the Maccaferri Group green companies operating in the fields of solar energy with Enerray, biogas, biomass, hydroelectric and heat recovery.
Enerray’s underlying strategy is aimed at the photovoltaic sector but with a core idea: operating on the same basis as the Maccaferri Industrial Group’s philosophy, specializing in utility scale photovoltaic systems and in industrial roof-top installations.
The result is that in 2017 Enerray celebrated ten years of activity with excellent results: a € 130 million turnover despite the challenging global economic scenario.
Today Enerray is present with its photovoltaic installations in Europe, Middle East, Africa, South East Asia and Latin America for a total of about 800 MWp.
The result: Enerray boasts major photovoltaic installations in several countries, such as Brazil, where the Italian company built one of the largest photovoltaic system of Latin America (over 250 MW). Or Jordan, with 33 MWp of installed electric power, Turkey where Enerray is the market leader with 130 MWp of activated power, and Thailand, where the Italian company works on 75 MWp under maintenance programs besides having installed many MWp on rooftop. Enerray is present with installations in other countries, starting business operations from scratch in Cameroon (where it is developing a 30 MWp ground mounted pv plant), the United Arab Emirates, Mexico, Egypt (as developer, sponsor, EPC and O&M Contractor for 116 MWp in Benban), and many others.
The company is always strongly focused on innovation.
For example, Enerray has built 1 MWe CSP (Concentrated Solar Plant) installation with an ORC solution (Organic Rankine Cycle). in Ben Guerir, Morocco. This is in collaboration with IRESEN (Research institute for solar energy and new energies). The installation in Morocco will come into operation in the near future.
Enerray is also building an experimental 500 kWe installation, linked to the first one, with an innovative heat storage system (TES, Thermal Energy Storage).
Enerray’s team is able to identify new market outlets, experiencing interest even in countries which are remote both geographically and culturally. Enerray’s brand is expanding globally thanks to a specific strategy which has allowed the company to make its way into many international markets.
The key reasons for the success of Enerray are:
1.The financial soundness and the reliability we ensure as part of the Maccaferri Group, as well as the strong relationships with the principal banking institutions and development banks (as IFC and EBRD), make Enerray an ideal partner for those who wish to invest with confidence in this area.
2. Strong partnerships: Every component used during the construction of our plants is carefully selected on the world market, using our consolidated partnerships with the suppliers and aiming towards the best ratio between product quality, reliability of the company, and the costs to be sustained.
3.Risk and relevant markets diversification, in line with the Maccaferri Industrial Group’s policies, desiring to be pioneers in new, but also potentially risky markets.
4.Longlife assistance: High quality maintenance for the entire life of the pv plant.
First italian O&M operator with more than 580 MWp managed in Italy and over 800 MWp managed in the world.
5.A balanced growth process. Enerray’s structure must be able to grow in a healthy and stepwise way.
6.A “win to win” logic when entering a new country, collaborate with other Italian and local realities working abroad, supporting synergies and collaborations.
7.Global experience, international customer portfolio & local knowledge: Our structure is conceived as global, organized in associate companies across 5 continents, which constantly study regional needs, cooperate with the local institutions and technicians, seek out and propose the most advanced solutions in the areas of our expertise.
How much has been important being backed by an industrial group with a diversified business for Enerray over the past years?
That was crucial for us, and not only from a financial point of view. The Group has opened the doors to markets in which it already operated. We have had the chance to rely immediately on local commercial networks and employees speaking the local languages. Being a part of a Group worldwide operating is a plus.
Spain has gone from a leader in the use of solar (Renewable energy doubled between 2006 and 2012 and subsidies reached €8.1 billion by 2012) to the point where the solar market has sunk and for the customer it has become so complicated with taxes and permits that people avoid it. Plus, self-consumption is even penalised with the so-called Sun Tax. What is Enerray’s position on countries that reject or make solar difficult?
Renewable energy can be cost-effective in economic terms also in countries that penalize solar energy.
For example in Italy, the country where Enerray was born and has gained its first experience as EPC and O&M contractor, the law has been in favour of photovoltaic sector with good Feed in Tariffs until the first half of 2014. Then, due to the achievement of the cost limits dedicated to financing renewable energy, the Government has not renewed this incentive form.
Moreover, the same Government issued decrees to reduce Feed in Tariffs retroactively and lowered the selling price of energy fed into the power grid.
This has challenged the construction of ground-mounted photovoltaic systems, but rooftop solar systems have remained cost-effective, especially for energy intensive companies, if designed in such a way as to guarantee a high self-consumption rate.
One the biggest advantages of a solar rooftop system is the possibility for the investor/building owner to consume directly the energy produced by the PV plant (self-consumption), allowing to reduce the energy taken from the grid and thus the cost of the electric bill that in Italy is very expensive, as in many other countries.
In addition, photovoltaic helps promoting a green image of the business, increasing customer’s positive perception.
The benefits coming from the photovoltaic investment are countless. For example, the client can count on a property appreciation of the store, it can offer more comforts to customers and workers (f.i. creating solar vergeboard for parking areas), qualifying itself as a green company with a strong attention to the environment.
The Middle East is having an important shift towards solar energy but why did it take such an affluent region so long to invest in a solar future?
Energy sector in Middle East has been dominated by fossil fuels in the past but nowadays the region is having an important shift towards solar energy due to lower costs of PV systems and, at the same time an increase in the price of oil.
Consequently, the use of renewable energy is gaining political attention worldwide, and many Middle Eastern countries are putting in place ambitious renewable energy programs, particularly due to the increase of electrification rate and energy demand in the region.
Enerray believes in this change with the purpose to develop new projects and implement the existing ones, and assert itself in new markets in the area of the Middle East. In fact, it works in a 50% joint venture with a Saudi company.
Nowadays Enerray is active in many countries of Mena Regions, such as Turkey
(through a 50% joint venture with the company Tekno) where Enerray is the market leader with 130 MWp of activated power, Jordan where two PV plants for a total power of 33 MWp have been connected, the United Arab Emirates with a dedicated branch office in Dubai that has won 1 MWp on rooftop in Fujairah, Egypt (as developer, sponsor, EPC and O&M Contractor for 115 MWp in Benban), Tunisia, Oman, Iran, Kazakhstan…
Are there any current trends or new developments in the industry?
The development of technology never stops and the need to face new challenges has led Enerray to develop other solar technologies such as:
– Concentrated Solar Power (CSP)
– Off Grid solutions
Regarding the Concentrated Solar Power Enerray is working with some important European and local research institutions (Enea, Iresen, Euronovia, Fraunhofer, Cic Energigune), to develop a 1,5 MWe plant in Morocco with an innovative Thermal Energy Storage System (TES). In this case there has been a synergy with another company of the Maccaferri Industrial Group, Exergy, that provided the turbine of the system. The plant has already been constructed and will be activated soon.
On the other side, the Off Grid technology is very important for Enerray to bring solar energy in those countries where the power grid cannot arrive.
Enerray operates in the global off grid market through the company Plug the Sun, a firm capable to offer customizable solutions and innovative and unique products for rural electrification and urban living.
The company is young but very active and is working on different projects, from Latin America to South East Asia, for the installation of thousands solar home systems.
Indeed the award contracts are:
– Design, manufacturing and installation of customized SHS in the Amazon Rainforest, solving problems caused by the high humidity of the site;
– Supply, installation and maintenance of 8,500 Off Grid SHS that are going to be installed across 8 regions in Argentina covering an area of approximately 2,8 Million of km2. Plug the Sun has been successfully awarded the important Off-Grid tender issued by the Argentinian Energy Minister (Permer) and financed by the World Bank Group.
– Supply, installation and maintenance of about 5,000 Off Grid SHS in the Philippines, equipped with Lithium storage technology and remote monitoring software.
Plug the Sun has been successfully awarded the international “Pay as you go” tender in the Philippines financed by the World Bank Group.
Are there any challenges being presented at the moment? Finally, what is the worst thing about your industry?
For a solar Epc, margins are very compressed, independently from the complexities of every single market. With the current level of market competition, nearly the 100% of key component price drop goes for the benefit of clients; of course more projects can be realized worldwide with a lower CAPEX so we would say that we do have a positive indirect effect.
Utility-scale projects will probably become bigger and bigger and contracts will be more segmented. This implies high turnover but also high risks, since that an Epc has to work with very low margins, facing many unexpected problems during the construction. As for the distributed generation segment, we would say that margins are not particularly high, but risks are also limited.
“Fierce” competition is lowering the prices more and more, so it can happen that companies not so well-structured win tenders thanks to the lower price but paying a price in terms of quality in the construction.
By being involved in development or sometimes acting as co-investors we get involved in projects at their early stage and this gives as significant boost to our EPC actives, as well as a competitive advantage to the projects developed.
We operate as a pure developer only in Italy where we do development through a sub-holding companies. Enerray itself started as a 100% pure EPC contractor, but now we are moving to a mixed model, where we also do development directly within Enerray.
What are the positives for the industry now and for the immediate future? I know you can’t predict the future but what do you think the Solar market look 10 years from now?
The development of the power sector is characterised by a dynamically growing electricity demand driven by developing and emerging countries and an increasing share of renewable electricity in the overall supply mix. The results show a growing RE trend that will compensate for the phasing out of nuclear power production as well as for the continually reducing number of fossil fuel based power plants.
According to the study Global Energy System based on 100% Renewable Energies -Power Sector by LUT (Energy Watch Group) published in november 2017, the installed capacity of renewables will reach about 14,000 GW in 2030 and more than 28,000 GW by 2050.
A significant amount of wind and solar PV, roughly around 4000 GW, could be installed from 2020 to 2025 and 4300 GW could be installed from 2025 to 2030. Solar PV will drivethe major share of installed capacities between 2035 and 2050.
By 2050 fossil fuel and nuclear energy are phased-out, as their generation costs will become increasingly uncompetitive.
Due to rapidly falling costs, solar PV and battery storage increasingly will drive most of the electricity system. The solar PV share will increase from 37% in 2030 to 69% in 2050. Solar PV emerges as the least cost energy source through the transition in almost all regions of the world. In 2050, solar PV will reache 69%, wind energy 18%, hydropower 8% and bioenergy 2% of the total electricity mix globally.
Development of renewable energy has emerged as a true multi-beneficial phenomenon, which enables climate change mitigation, drives economic growth, creates local value based on technology development, production, installation and maintenance, helps to increase energy access in a timely manner, and to reduce resource conflicts in water-stressed regions of the world.
A global transition towards a 100% renewable electricity system will create over 36 million direct jobs in the power sector by 2050 – an increase from 19 million jobs added in 2015.
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