Enel Green Increases Bet on Renewable Power as Oil Slumps

(Bloomberg) — Italy’s biggest utility is preparing to
invest 27 percent more in renewable energy in the year ahead
even as a slump in oil prices makes it more difficult for solar
and wind power to compete with fossil fuels on price.

Enel Green Power SpA, the publicly traded renewables unit
of Enel SpA, plans to increase capital spending to 2.1 billion
euros ($2.4 billion) and hold it near that level through 2017,
up from 1.66 billion euros in 2014.

Chief Executive Officer Francesco Venturini, who briefed
investors on the plan Thursday, said renewable-power developers
are squeezing costs out of their projects, widening the appeal
of wind and solar farms beyond the energy-poor industrial
nations that subsidized the industry’s boom.

“In the last two years we’ve seen oil-producing countries
moving into renewables, which was an impossible thought until
two years ago,” Venturini said in an interview. “For them, it
makes more sense to produce energy with renewables” than to
consume their own oil and gas.

Brent crude futures are down about a third from their peak
of more than $115 a barrel last year, dragging down the cost of
natural gas and coal — the most widely used fossil fuels in
power generation. That undercut the economics of solar and wind,
which have relied on subsidies to expand.

Low Tariffs

Even so, some renewable-energy developments are progressing
at prices that appear competitive with traditional fuels,
especially in the most sunny places. Dubai’s government-owned
utility in January set out plans for a 200-megawatt solar plant
that will generate electricity at 5.85 cents a kilowatt-hour,
one of the lowest tariffs in the world. Venturini expects
projects like that to flourish even if oil prices stay low.

“There are countries that have systems now that enable
this industry to drive prices down at an even faster pace than
we’ve seen in the past couple of years,” he said. “It’s
telling me that price is no more an issue because we’re very,
very close to reaching grid parity in many countries.”

Enel Green Power plans to adapt its business model to
working in nations far from its stronghold in Italy.

The company currently operates almost 10 gigawatts of
clean-energy projects across Europe, North America, Latin
America and Africa.

Its spending of 8.8 billion euros through 2019 will almost
double its renewables capacity, adding 7.1 gigawatts. About half
of that, or 4.7 billion euros, will be in Chile, Mexico and
Brazil, where the company sees strong growth in electricity
demand and abundant resources, it said Thursday.

Emerging Markets

That will add to the 1.7 gigawatts of projects it already
operates in Latin America. Enel Green Power said it will also
start looking for opportunities in Asia.

For emerging markets that need electricity now, installing
a wind farm can be completed three to five years more quickly
than a gas-fired plant, Venturini said. Such projects also
create local jobs, since many places require developers to
source a portion of the components locally.

Enel Green Power will sell assets to help fund its plans.
The company has started looking for buyers for its clean-energy
assets in Portugal, he said.

While the company is currently focused on building utility-scale projects, smaller and more localized units are likely to
form a “big chunk” of the future, according to Venturini. It’s
looking at South Africa as a potential market for so-called
distributed generation. It already operates a project in Chile
that uses solar, a battery, and a diesel generator as backup, to
supply clean power to a remote village.

“It’s pretty incredible to see how once the power arrives,
it creates wealth,” Venturini said. “There was no bakery, and
suddenly there is because they can use the power to open one. My
impression is this is going to happen more and more often all
over the world.”

To contact the reporter on this story:
Louise Downing in London at
ldowning4@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Amanda Jordan

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