Barcelona — Italy's largest power company Enel said it expects to beat its own renewable addition targets by 2020, as it pivots its generating model away from coal and grows its renewable footprint both in Europe and worldwide.
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CEO Francesco Starace told analysts on a conference call Tuesday evening that 90% of the company's 7.8 GW target of new additions for 2020 is secured, and the company is certain it will "go beyond that target."
Enel said that it currently has 3 GW of projects in execution, of which, 2.4 GW is wind. It has 1.8 GW under construction, of which 1.4 GW is wind; and 1.2 GW is ready to build, of which 1.1 GW is wind. Of the total, around one third is in Europe and North Africa.
The company said it added 3.4 GW in the last 12 months -- a record for one year -- and expects to bring online 800 MW in H2, without saying which projects.
Starace said he expects the current favorable climate -- where one can make money in a competitive environment -- to last for five more years, with utilities able to preserve margins and see no changes to their returns despite cost reductions and increased competition.
Enel had been "careful not to win all the time," Starace said, noting that while Enel won 5 GW from various competitive processes during 2017, it also missed out on 9.5 GW tendered.
The company's renewable energy production in Italy exceeded that of fossil-fired plants in the first half of the year, accounting for 52% of the total, while in Spain, renewables chipped away at thermal's significant lead, accounting for 21% of Enel's output.
Across the whole group, including other European markets, North Africa and South, North and Central America, total Enel H1 generation of 121 TWh was split 41.4% to renewables and 58.6% to fossil/nuclear.
The company' switch out of coal, in particular, and into renewables looks likely to be further facilitated by changes in government in its two principal European markets, Italy and Spain, which have both undergone a change of government in recent months.
Indeed, under the current climate, Starace said that the company could quite feasibly reach 2025 with "all but one plant will be out of business in Italy and a similar outcome in Spain."
Enel has successfully shutdown 23 plants in Italy in recent years for 13 GW, and has divided its Spanish plants into three groups: plants that it foresees to have 10 years of operational life left; plants with no future within three to four years; and others that fit neither category.
For the first category, the company is happy to invest in in terms of security and emissions compliance, while the second category will be "retired immediately" and the third will have their decision rolled over for a year, he said.
The future of the company's Spanish nuclear plants is in less of a rush to be decided, even despite what Starace called a "drastic change of policy."
The decision on continued operation in Spain "will take some time and there is no need to finish the debate tomorrow," he said, noting that the first reactor hits the 40-year technical benchmark in 2021 and any closure notification would still take "about one year from now" to be published, and would have little likelihood of being final and permanent as witnessed with the slow drawn out closure of the Santa Maria de Garona nuke, which only officially closed in 2016 after receiving its closure order in 2009.
In either case, Starace said he was "not anxious," and expects the "reality of decarbonization to kick in" and the place of nuclear in the ordered transition.
As such "having [Spain's] nuclear capacity with10 years more life makes sense," he noted.
With respect to Italy, Starace said he has been encouraged by the nominations for the authority and thus believes the country will remain "stable and logical" in terms of regulation with little set to change.
However, in the power market there is one looming piece of legislation that will need to be addressed soon, which is the end of the regulated tariff regime and the full switch to free market rates -- a situation that is under pressure from the EU because it is "bordering on infringement."
The delay of the deadline to June 2019 from June 2018 is a slight positive for Enel, Italy's largest power group which was able to continue growing its customer base in the last 12 months.
The company increased its volume sold in Italy by 20% in the first half to 33.6 TWh, although its margin slipped from Eur22/MWh in the first half of 2017 to Eur20/MWh in H1 2018 as it increased the number of larger clients in its supply portfolio.
Indeed, the company's business to business (B2B) volume rose 14% year on year in H1 to 26.5 TWh, outpacing 8% growth in business to customer (B2C) sales volume to 7.1 TWH, as the company boosted overall free market power customer numbers from 7.5 million at the end of H1 2017 to 8.2 million at the end of H1 2018.
In terms of forward sales, Enel reported that it has hedged 90% of its expected 2018 Italian output of 55 TWh at a wholesale price of Eur46/MWh, and 50% of 61 TWh of 2019 output at a price of Eur53/MWh.
In Spain, it has sold 100% of its expected 75 TWh 2018 generation at a retail price of Eur63/MWh, as well as 65% of the 75 TWh generation expected for 2019 at Eur71/MWh, it said.
-- Gianluca Baratti, firstname.lastname@example.org
-- Edited by Geetha Narayanasamy, email@example.com