A solar farm in Spain. Working conditions in panel manufacturing are now under increased scrutiny.
➤ Europe's pivot away from Russian gas will require a rethink of administrative and grid-related constraints for renewables.
➤ Forced labor and transparency initiatives in the solar supply chain are front of mind.
➤ Long-term power purchase agreements still key for project finance despite the current appeal of merchant exposure.
With a global installed capacity of 5.4 GW, Lightsource BP Renewable Energy Investments Ltd. is one of Europe's largest solar developers. The company, 50% owned by oil major BP PLC, is active in 17 countries and plans to build more than 20 GW of solar projects globally. While solar is underpinned by strong policy commitments, the sector is also having to deal with surging equipment prices and forced labor allegations in the supply chain, as well as facing a frenzied recruitment drive.
S&P Global Commodity Insights spoke with Kareen Boutonnat, Lightsource BP's CEO for Europe and international, on the sidelines of the Solar Finance and Investment Europe conference in London on March 8. The following is an edited transcript of the conversation.
S&P Global Commodity Insights: European policymakers are pivoting away from Russian gas in light of the invasion of Ukraine. Is this an opportunity for renewables and what is needed to accelerate deployment?
Kareen Boutonnat: In light of the Russian invasion of Ukraine, what has surfaced is that Europe wants more independence on energy, and solar is very well positioned because of the speed at which you can deploy solar, unlike offshore wind or even onshore wind. But I have to say what we are seeing across [our European markets] is massive delays on the development side. It's mainly because of the amount of administration we have to deal with. The other big showstopper is the grid, and policies need to be developed to reduce the amount of curtailment.
What about supply chains — are they another showstopper?
Clearly nobody expected some of the headwinds that we have faced — the polysilicon prices, the steel prices, the logistics and what happened in the Suez Canal last year. I hope that, given the investment that is going into the supply chain, there will be some drop in [capital expenditure]. We believe that things will improve. Having said that, there is still a big issue around traceability in the supply chain and forced labor. Frankly, Lightsource BP have zero tolerance for forced labor and we're pushing with a number of our peers in the industry to try to understand what is happening in the supply chain and to have full visibility and transparency.
Kareen Boutonnat, CEO of Europe and international at Lightsource BP.
The U.S. has effectively banned the import of solar panels from the Chinese region of Xinjiang over reports of forced labor, which China denies. How has this changed the international solar supply picture?
Modules that are coming into the U.S. have to be manufactured outside of China effectively, and that has really massively increased the price and created effectively some distressed projects because people have [power purchase agreements] to deliver on without having the modules. In Europe, we have a slightly different issue: There is definitely an intention to try to control the supply chain and have visibility all the way upstream but effectively we are not restrictive in the same way.
Are you still taking panels from Xinjiang?
We are taking panels from suppliers that have traceability in place and that can demonstrate to us that there is no forced labor. We are making this a mandate in all our contracts.
As power prices and equipment costs rise, are you becoming more interested in merchant exposure?
We have a goal of 25 GW by 2025. For us to achieve that goal, we are after volume. For large projects, you still need project financing. We're seeing a number of people moving to merchant but they are probably smaller projects. We like to have some long-dated revenue streams coming from either corporates or utilities with large power purchase agreements. We are seeing a huge demand for [power purchase agreements] at the moment, and that is something that is necessary for the volume that we want to do.
Renewables targets will need to be delivered by people. How are you experiencing the market for talent, and how important are diverse teams?
Today, we are 730 people, and the plan is that by the end of 2022 we will be at 1,100. [This] is a big challenge, but I think it is a good time for people to move into renewables. We're in the middle of this energy transition which is highly attractive. Solar is about the people. Having the right people in the right place is critical. There's a huge amount of people that came come from other industries; solar is not rocket science.
It's definitely very important to have a diverse team. But it's not always easy to act on it. It depends on which part of the world you are hiring in, and it's not just women, it's diversity in the broader sense.
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