ENGIE sees clean energy transition continuing after coronavirus impacts subside

ENGIE is committed to the energy transition to cleaner power generation resources, and while the coronavirus pandemic will present challenges to US clean energy development in 2020, the company sees the US renewable energy industry as well positioned for recovery.

France-based ENGIE has targeted having renewable energy resources account for 58% of its energy mix by 2030, up from 28% in 2019, Gwenaelle Avice-Huet, CEO of ENGIE North America, said during a recent S&P Global Platts webinar. The North American division is based in Houston.

"We are not only talking about the energy transition, we want to be a leader and to play an active role and that means we are ready to take very bold decisions in terms of business opportunities," Avice-Huet said.

Over the past three years ENGIE divested "massively" from thermal power generation assets, exploration and production of oil and gas and LNG, she said. The company divested $16 billion from those sectors and invested it in renewable energy and energy efficiency.

As part of that effort, ENGIE sold 1.3 GW of clean energy to corporations in 2019 through power purchase agreements, with 1 GW sold in the US. These clients want to consume clean energy and that momentum is "critical," Avice-Huet said.

CORONAVIRUS IMPACTS

The coronavirus pandemic has introduced much uncertainty into power markets in the US and other countries, particularly uncertainty around demand, power prices and fossil fuel prices.

In countries where stay-at-home orders have been issued, power demand has decreased, by as much as 15% in Europe, Avice-Huet said.

"My conviction is this reduction in power demand is just temporary ... we will have a rebound at some point" and older power generation assets will need to be replaced with more sustainable solutions, she said.

Power prices are another uncertainty, with prices down on average in the US by 5% to 10%. So while now may not be the right time to make large investments, the coronavirus situation is not a "mega-trend," Avice-Huet said.

ENGIE's chief science and technology officer, Michael Webber, shared similar thoughts in a blog post Wednesday.

"We like the reduced air pollution from the quarantine, so we will seek ways to keep those environmental benefits," Webber said. This could help maintain energy transition momentum when economies begin opening up again, he added

And there is no reason power prices should crash over the long term so this trend will probably disappear after the coronavirus crisis, Avice-Huet said.

Additionally, many large power consumers have already committed to reducing greenhouse gas emissions and in some cases doing so through 100% renewable energy goals. As a result, currently reduced fossil fuel prices should not be a long-term headwind for the energy transition, she said.

"Yes there are some uncertainties but over the longer term, climate change and the energy transition will remain priorities," she said.

For example, oil and gas prices hit low levels in 2016, but wind and solar power generation capacity continued to grow. The renewable energy industry is also more mature than five years ago and is attracting larger investments as wind and solar power costs decrease, Avice-Huet said.

The webinar audience was also relatively optimistic regarding coronavirus impacts on clean energy development or project delays, with 50.4% expecting a moderate impact based on responses to a polling question. The impact could be severe according to 42.9% of respondents and only 6.7% thought the impact would be critical.

Asked by an audience member about the role of hydrogen for power generation as part of the energy transition, Avice-Huet said that while she is passionate about the sector, green hydrogen remains expensive for now.

However, those costs can come down as renewable energy and hydrogen production technologies scale up.

"Our vision is that there is a need for green hydrogen especially in the industrial sector," Avice-Huet said, because industrial users like ammonia manufacturers may be incentivized to reduce GHG emissions. Many of these companies have internalized a carbon price into their investment decisions.

Renewable energy competitiveness is key because large-scale renewable energy generation is needed to produce green hydrogen from water through electrolysis, Avice-Huet said.

"That's why we need to think big about hydrogen and not work only on small-scale demonstration projects, but work on the large-scale projects," she said.