Enel’s Renewables Unit Taps Emerging Markets as Recession Bites

Enel Green Power SpA, the renewable energy unit of Italy’s biggest utility, is targeting Morocco, South Africa and Turkey as the recession hurts power demand in its home market.

“They all have something in common: a promising abundance of renewable-energy potential, a lot of wind, sunshine and in the case of Turkey, geothermal and hydropower,” Chief Executive Officer Francesco Starace said in a telephone interview from Rome. “On top of that, they have huge electricity demand.”

Enel Green has earmarked global spending of 6.1 billion euros ($8 billion) through 2016 to add 4.5 gigawatts of installed capacity. As demand wanes in Italy and Spain, its biggest markets, the Rome-based company is looking to emerging markets to help achieve that goal.

“We’re basically redirecting investment,” Starace said “We are moving growth to areas where there is demand.”

Enel Green plans to add 100 megawatts of wind energy in Morocco by 2016 and 140 megawatts of solar power in South Africa. It may seek joint-venture partners or even acquisitions, the CEO said.

The company is waiting to hear back on its bid to take part in a solar tender in South Africa and is also looking “very carefully” at a Moroccan plan to harness 2,000 megawatts of power from the sun’s rays, he said.

‘Logical Trend’

Enel Green is seeking new markets to offset slumping demand in Europe, where Germany, Spain and Italy cut subsidies to cap booming installations, helping depress prices for panels by 50 percent last year.

The subsidy cuts were a “logical trend” as equipment costs fell, the CEO said.

While less than 22 percent of its revenue is linked to incentives for clean energy, the company plans to improve revenue streams from existing plants, Starace said.

“In this type of environment, having a lot of capacity is really not so important,” he said. “Much more important is defending the revenues of the capacity we have.”

The imbalance between supply and demand for solar power may be resolved by grid parity, the point at which the cost of alternative energy becomes equal to or less than purchasing electricity from the grid, he said.

Grid Parity

“Italy, Southern California, Japan and Spain are quite close to that,” though nations such as Mexico, which must get 35 percent of its energy by 2024 from clean sources including hydro plants and nuclear reactors, may reach it faster than expected, according to Starace.

Enel Green plans to add about 460 megawatts of wind capacity in Brazil, 340 megawatts in Chile and 350 megawatts in Mexico by 2016.

The unit plans to build more so-called hybrid plants that combine different clean power technologies, Starace said. It’s already developing a geothermal and solar plant in Nevada. The combination of technology boosts electricity generation and maximizes use of the plant’s grid connection, according to the CEO.

The company intends to develop plants using geothermal and biomass in Italy in future years, Starace said.

“We have a goal, which like all goals might be a bit ambitious. In the medium-term renewable energy sources should be as dispatchable and reliable as fossil fuels,” he said.

The company is also set to complete the construction of a manufacturing plant for photovoltaic panels in Sicily by the end of 2012. This year’s output has already been sold, Starace said, “so the technology seems to be finding its way to the market, even in a very congested solar PV market.”

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