Bucking the trend
Renewable developers have faced a tough few years since the heady Covid era days. First interest rates went up, then construction costs went up, then power prices went down and buyers of renewable assets became more selective. There is always one exception to the rule, however.
It has been notable the big infra style funds have been picking up renewable development companies over the past couple of years as the froth in the sector subsided and valuations came down from Olympian heights. Follow the wise words of TotalEnergies CEO Patrick Pouyanne who said in late 2020 and again in early 2021 that green company M&A valuations of up to 25x earnings were “just crazy.” This week he snapped up some ready-to-build Low Carbon solar assets.
Interesting to note, then, what has happened to the share price of Spanish developer Grenergy Renovables this year and particularly since its Capital Markets Day presentation last week on May 28. It is hitting the stars. This year the price has gone from €30 to €70 with a jump from €57 on May 27. Its 'crazy' 2021 peak was €41, so it is even well above that.
The excitement is about the value of battery storage in a global market where developing new green generation is not perceived as enough. That, combined with its track record in Chile, a market that other developers have found very challenging over the past few years.
Grenergy's impressive buildout, project financing and sales of the Oasis de Atacama platform has come at a time when the number of hours of zero pricing in the country during the day has been increasing – from 17% in 2022 to 28% in 2023 and 32% in 2024. Having battery storage combined with generation has been a big asset at night.
The duck curve phenomenon of low daytime prices and highs overnight has been seen for some time now, so it is interesting a company such as Grenergy has been seen as a beneficiary with a first mover advantage. Spice has been added, however, with the reduction in battery storage capex prices – this at a time when all other capex numbers across the energy and infra space are still shooting up.
Grenergy says BESS capex prices have come down from US$180/MWh at the time of its last Capital Markets Day in November 2023 to US$120/MWh a year later in September 2024 with prices trending down further now. This has allowed the company to increase its storage ambition for Atacama from 4GWh to 11GWh with relatively little increase in capex.
Just to hammer home the point, Grenergy's new and expanded 2025-27 €3.5bn programme will involve €2.1bn in battery storage and 'just' €1.2bn for new solar.
Europe is the next target for the company with its new Greenbox platform. Spark spreads are no longer relevant in the storage market, it is daylight spreads between day and night that can reach €75/MWh in Spain and more than €100/MWh in Germany. Over time, presumably, the duck curve should flatten out as a lot more storage capacity comes online and, perhaps, as power prices fall as gas prices drop. But that appears some way off as storage takes time to catch up with intermittent renewables.
Grenergy, of course, has not been the only developer to put forward ambitious storage plans. But it does have a track record. Plenty are now following suit driven by a perfect combination of the duck curve and reductions in capex.
Curtailment of renewables generation has been a factor in the market for some time now – from Australia to northern Brazil, Spain and now on to France. This week the French government and the owners of three offshore wind farms – Fecamp, Saint-Nazaire and Saint-Brieuc – signed agreements to stop the schemes selling power via fixed prices into the grid at times of negative prices. Battery storage might have helped.
For EIG-backed Fidra the game changer has been the fact the cost of lithium iron phosphate batteries is said to have halved in the past 18 months. The company bought the site for its 1.45GW/3.15GWh storage scheme at Thorpe Marsh in the UK in 2023 but at the time "we were struggling to make the economics work", Chris Elder, the Edinburgh-based company's CEO, told Reuters last month.
He said recent technological advances in LFP batteries mean that those being used at Thorpe Marsh will have a lifespan of 20 years, up from 10 to 15 years previously. The scheme would be Europe's largest single BESS scheme. A final investment decision has been due and the £550m project financing is still in progress.
Even Spain is getting in on the act with the government starting a storage auction. Time to flatten the curve.
