Ignacio Galán is the chairman and Chief Executive Officer of the global renewable energy giant, Iberdrola. He is a renewable energy enthusiast and over the last two decades, has led the company’s developments in renewable energy to build a massive portfolio. Many companies across the globe have been entering the renewable energy space, which Galan views as a positive sign in reducing global emissions. Being an engineer by profession, he also believes that there is a huge role for traditional engineers in the renewable energy space.
In a recent Reuters Event “Global Energy Transition 2021”, he discusses the state of the global renewable energy sector as well as Iberdrola’s plans for the next decade. The session was moderated by Veronica Brown and Isla Binnie from Reuters Editorial. REGlobal presents an edited excerpt of the interview……
What is the role of the power sector now and what are your priorities? How has the pandemic changed things?
About 20 years ago, we decided that we would have to close all our coal-powered plants. At the time, we saw most of our competitor companies as enemies, but this has changed as now there is a strong consensus that decarbonisation is the way forward for every company. Citizens too are demanding cleaner economies and there is strong political support for renewable energy, especially in Europe. Additionally, there is also a huge social pressure, like in the Paris agreement, which is a civil society pushing the politicians and countries alike to go green.
We have already learned how to live in big towns without any noise and smoke. Secondly, we have been able to harness remote communication capabilities. Thirdly, we have already discovered that the price of renewables is cheaper than any other source. Going forward, the biggest opportunities are in generating wealth, employment, and eventually a better society with renewable energy development. The International Energy Agency has already projected that the opportunity in clean energy is huge with a projected investment of $48 trillion in the sector by 2030. Hence, there is a need for a collective effort in transforming our economies to become sustainable, cleaner, and more efficient. For that, it is crucial to allying with all the players, even those who were ‘enemies’ in the past. It is also a great time for using our talent, financial resources, and technology capabilities to transform the world in a way that benefits everyone.
Since the covid-19 pandemic, Iberdrola has decided to help supply chains and created advance orders for almost Euro 80 billion in the period, allowing suppliers to keep the people working. We have even recruited around 6,000 new employees during this period.
Given the changes in the electricity market recently, how would you continue to grow your earnings in that time given that lower prices and margins?
Iberdrola is one of the first movers in the renewable energy world. We are already the world’s largest wind producer currently with an investment of over Euro 120 billion in the last 20 years. Further, more than 50 per cent of Iberdrola’s business is in grid development to transport electricity. We are planning to invest a further Euro 75 billion by 2025, Euro 150 billion by 2030, 50 per cent of which will be in grid networks.
During the pandemic, the company’s grids have been supplying power to hospitals and data centres to ensure essential services. The upcoming networks will largely be set up in the United States where we are serving a population of more than 10 million people and recently acquired the Utility Company of New Mexico, in Texas. The second destination is going to Britain where grid works are currently in the planning stage. These networks are crucial to achieving net-zero ambitions of the respective countries.
In terms of renewable energy project development, we are looking at Australia, Britain, France, Germany, the United States, Spain, and Portugal as potential areas of development. One area where the company will be active is offshore wind. As of today, we already have two large offshore wind farms in operations: The East Anglia Offshore Wind Park and the Saint Brieuc Offshore Wind Farm. This represents a total offshore wind portfolio of 4000-5000 MW, and we plan to take this to at least 12,000 MW by 2030. This would involve an investment of Euro 30-35 billion from now to 2030. Including onshore wind and solar, we plan to triple our portfolio of 35,000 MW and we plan for 100,000 by 2030, in line with our vision to reduce emissions on a large scale. We are proud to announce that the company’s emissions stand at only 28 grams of CO2 per hour, which is 10 times less than our peers in Europe. Further, we would like to be net-zero by 2030 while steadily increasing our net profit by about 6-7 per cent per annum. Last year our net profit was about 3.6 billion and we plan to take this to 5 billion in 2025.
All countries have similar challenges and opportunities in mobilising resources and generating jobs and wealth through renewable energy. Others are, however, going to countries with clear stable, predictable regulations. In some cases, politicians and regulators are in disagreement, but this has to change. In the case of the United States, Joe Biden re-entered the Paris agreement and further stated that by 2030, all its power generation will be zero-emission. For achieving this target, the president has also announced the extension of Investment Tax Credits and PV USA Test Conditions to make the investment prospects attractive. Other countries must follow this path to attract investments which goes a long way in renewable energy development. Additionally, predictability, stability, and the rule of law are crucial for long-term investment in lowering emissions.
There are lots of entrants in offshore wind? Who are Iberdrola’s competitors?
The number of players is very limited in the offshore wind space. Developing the resources and talent in offshore wind, takes time, unlike in Solar PV. Iberdrola’s first wind project was developed between 2007 and 2014 and its second project began development in 2010 and was only commissioned in 2019. Hence, it takes time to develop offshore wind.
Iberdrola has built a centre for excellence in offshore wind in London and we are building another one in Boston as well. The offshore wind wing of Iberdrola began 15 years ago and required prior planning. Oil companies are particularly interested but it will take time to plan the project. However, there is room for everybody, and Iberdrola welcomes the competition.
Does the RE sector have a sufficient talent pool?
It depends on the country. There are countries with good traditional electrical or electrical engineers. However, in countries like the United States, it is a little harder to find traditional engineers as the market is flooded with analysts and communications professionals. In the future, there is a need for such professionals who work in the design and maintenance of grids. University must prioritise traditional electricity knowledge and skill. The industry even needs biologists, geologists, environmentalists for robust growth,
How do you see the future of grids? What about distributed renewable energy?
Digitalisation and artificial intelligence are crucial to improving grid stability in the future. In grids driven by these technologies, 95 per cent of them have been restored in less than one hour in case of failures. Without these technologies, it might have even taken more than a week.
The next step towards the adoption of renewable energy in communities can be targeted at powering cooling and heating functions. There is also a need to build a strong reliable grid for charging electric vehicles, which has now been understood by most regulators across the globe.
Are there any obstacles in grid development across the globe?
The first need is to convince regulators that reinforcing grids are crucial to catalyse renewable energy development. Secondly, there is a need to digitalise and finally, there is a need to build resources for data analytics to integrate and facilitate customer needs. This needs talent and money at all levels.
In certain countries like the USA, most of the grids are susceptible to getting destroyed by natural calamities and hence efforts must be made to move these strictures underground. This is the case in other many countries as well which just highlights the need to redesign, repower, and digitalise the existing grid systems.
What role does hydrogen have in a low carbon economy?
Hydrogen is a form of electricity in the form of gas and so is very difficult to transport. There is hence a need to build specific infrastructure to transport the fuel. In countries like Saudi Arabia, plans are underway to export Hydrogen in the form of Ammonia in the vessel they use for natural gas. Japan and the United States are also looking at similar applications for Ammonia.
You can even break the molecule of ammonia into nitrogen which is not polluting. The largest European Hydrogen Plant is being built in Spain at a fertiliser factory. There are also plans in Spain and England to power buses through green hydrogen from solar plants. Many other countries must explore the potential of hydrogen and set up appropriate regulations and infrastructure.
Does Ibedrola’s vision identify with you as a person?
Yes, absolutely. If I have been able to mobilise this company and other ‘enemy’ companies to transform their operations, it is a great achievement. People are now believing what we believed in 20 years ago. We are now certain that the sector has a clear future and Iberdrola has delivered what it has promised not only in economic terms but also in terms of emissions and service to society.