In preparations for the event, we’ve met with João Cunha, the COO & Deputy CEO at Smartenergy who shared his ideas on the barriers in achieving net zero target, the lessons learned from the history of the industry, unobvious aspects of renewable funding and his hopes for the future in the energy sector.
Smartenergy is a Swiss renewable energy private investment firm with a vertical integration concept on the energy market, investing into activities such as: Corporate & Project Development, Asset Management, Power Trading and Distribution. Smartenergy approaches the investment process from a transversal perspective by combining senior teams dealing with financial, technological, commercial, legal strategical and socio-political aspects, and by working closely with the industry stakeholders applying a multi country, multi technology and multi sector integrative approach.
How can you describe Smartenergy’s progress in the last year?
Smartenergy is a Swiss-based company turning 10 this year in October. We have been developing our TVT in the Renewable space, primarily focusing on solar PV and onshore wind. One and a half year ago, our company also decided to go to green hydrogen space, where we have become quite active and where we have been hand in hand with the other technologies developing also our portfolio in the countries that we are seeing getting more traction, mainly in line with our existing market which are Portugal, Spain, Germany and Italy. We are at the same time running our business plan for the next 5 years, which is based in three dimensions which will boost the growth of the company: one is the geographical – we are expanding also to new markets. The other one is the technology, where we are consolidating and expanding further the green hydrogen efforts but combining also with other projects that are so-called new technologies that we see also on the battery side – there is still a lot of potential still to be explored. And also, to combine the decarbonisation via electrification. We are also working on projects for the synthetic fuels for aviation, where we see also a clear path to help in this process of decarbonising the economies. Also, the third element is on the value chain. Smartenergy has been as well extending its business in the value chain, meaning that we are also moving or consolidating our TVT Asset Management/Ownership together with the Energy Trading, where we see also a key role in order to maximise the value that we generate from our assets.
What do you think is important to put in place to support European companies in achieving the 2050 net zero target?
In my view, it’s a combination of different perspectives that in the end, all combined could lead us to the ultimate goal. I see these in three main pillars, being: one – the electrification. I see renewables playing a vital role in providing that access to electrification. Energy efficiency, that could come also from technology and implementation of new measures from households and people use. But combining the adoption of new technologies or measures that could improve the efficiencies of buildings is also shaping behaviours, so as we become more and more aware of how important it is to tackle the climate changes that now is knocking on our doors as we have seen recently with a couple of events. Unfortunately, it appears to me that people are only able to align and to support, to tackle the fight against the climate change when their lives are heavily affected by this change and by those events. I think that the energy efficiency needs to always go hand in hand with the change of consumption behaviours from the populations. Moreover, the decarbonization of the economy cannot be done only by the electrification, because it only covers a part. It has to be combined also with other kind of technologies, such as the green hydrogen, where we need to support the sectors that are hard to abate in terms of emissions and that need to introduce new feedstock for their molecular processes, mainly related to the heating industrial processes. And we are seeing the green hydrogen also now coming into play in addressing this part of the economy that you can only adopt in this technology.
What do you see as the key barriers to the European businesses achieving net zero currently?
Currently, I think that a lot on the mindset of the corporate world and its management needs to be evolving in time. We need the triggers to change not only on the corporate investment side, but also on the good practices of the industries. We must somehow pull out a spirit of collaboration and we cannot allow the entrepreneur, the companies becoming afraid to be the first movers. They need to come up with the collective approach in order to gain enough scale that could be then translated into supporting the early adoption and to speed up the new technologies along their learning curves.
The technologies need also to move or to progress in parallel with the supply chain, so that the scale and the access in every point of the world at the right cost could be appealing enough to combine with the change in behaviour and mindset. The change needs to be well coordinated with the governments, with the entities that also need to have something to say with defining the policy. Stable regulatory frameworks are the golden rule because in every market we are, every sector that we see, the investors rely on the stability of the legal framework, the stability of the country, of its regulatory framework. I think it’s a combination of all these stakeholders and all these parties to be comfortable with an ecosystem that at the end needs to be reshaped in a way that the openness of the corporate world is there in order to be one of the enablers of the fight against the climate change and to translate into carbon neutrality by 2050.
How do your clients and stakeholders judge the net zero target? Are there similar levels of optimism among renewable generators?
Being so involved in the renewable space, the awareness of the climate changes and how important it is to drive our economies in a way that we have a sustainable world is already in our DNA. By working in the renewables for so long and especially now in the case of Smartenergy, we are already somehow doing our part at our scale, but that is our contribution. All the stakeholders and all the partners that are with us, are also sharing this view and for us it’s also very important and confirms that the decision of being and investing in this area is becoming more and more important. It’s of course very reassuring to see that renewables are seen as one of the main sectors of the economy that could also help the world to overcome these difficult times that we are now crossing under the pandemic. It’s quite encouraging seeing that the renewable sources of energy, together with other sectors in the economy, could drive, support and leverage this recovery for all the economies in the world and be in the center of the stage for undertaking this mission. To answer the question more directly, I think it’s quite important for us to see that the technologies that we have been investing, the technologies that we also believe could play a central role going forward such as the green hydrogen are addressing more specific challenges. We see that some industries like steel production, long haul trucking, aviation or shipping, definitely need to come up with a solution that for now might not be there in terms of pricing. It’s still raising some concerns for all the sectors of the activity that further down the line will have to implement and change their energy consumption behaviours. Somehow, we’ll put some more effort and stress in their own value chain, but collectively, together with other players that are also attempting to pave the way to the technology as it was 20 or 30 years ago for wind and solar energy. Due to the commitment of the industry of the sector, together with the governments by setting up and defining the legal framework and public incentives in order to help deploy the technology, support the development of the value chain, research and development, we see a lot of motivation. We see, together with our partners, that we are in a sector clearly looking to the future and we will be supporting the youngest generations to aspire for a better world in a sustainable way.
Businesses struggle with the costs of the pandemic and may be concerned about financial requirements to achieve net zero. What is the best way to act on renewable funding?
I think that renewable funding needs to be there until the moment when the technology achieves a certain level of maturity as we have seen with wind and solar energy. If we look at the levelised cost of electricity from solar, it’s cheap and it’s able to compete with other kinds of technologies. But if we go back 20 years, everybody would laugh if we said that it could become one of the cheapest energy sources. We needed to go down the path of tariffs, public incentives and public subsidies that the governments better or worse have defined.
That was fundamental to enable the industry, the players of the sector, manufacturers, investors, banks to become more comfortable with the technology and to translate it now into a mature market that could be compared with real estate where by delivering very predictable and reliable cash flows from all renewable generation assets. My personal view is that the less we rely on subsidized public incentives, the better, but we need to acknowledge that to be in the point where solar and wind energy is now, that gap needs to be filled. I believe that the governments need to look back at other technologies and understand the lessons learned and be very efficient and critical in allocation of the funds. That means being quite strict and demanding at the time when all sponsors and investors are invited to participate to make sure that funding is channelled to the right opportunities that are as efficient as possible.
What is your biggest hope for the industry in the next five years?
My biggest hope for the industry in the next 5 years is to make sure that the governments and entities understand how important it is to bring stability and predictability so that the investors, sponsors and developers, all the players that are already in the renewable space are willing not only to extend and go even further on their level of activity, but also to be open to diversify from the technology point of view also their activities. They need to see on the side of the state members, countries, public authorities the same level of commitment which usually translates into stability, reliable licensing procedures so that all the expectations, assumptions and parameters that have been defined by the investors already in an environment with a lot of uncertainty and moving pieces and barriers that will only be overcome in time. At the same time, the investments are already happening and we would like to see the same commitment that can provide a stable playground for the investment to be growing and nurturing entrepreneurship courage that always needs to be in the centre of the stage if we want to achieve these ambitious goals. Combining different sectors of the economy, shaping behaviours of the populations in the manner that we are efficient with the resources that are always scarce, and need to be invested in a fair, transparent way.
And finally, what are you most looking forward to at the upcoming Summit?
As always, we are looking forward to a very open discussion that can bring together all the players involved in the energy transition and the fight against climate change. We are open and eager to learn from the best in class. We try to contribute with our humble view, thoughts and experience, but at the end of the day, it’s the combination of all ideas that will provide the best results.