Italian renewable energy developer and operator ERG intends to increase its wind and solar portfolio by at least 1.5GW over the next five years through the repowering of existing wind farms, greenfield development and co-development of new capacity and growth through mergers and acquisitions (M&A) transactions.
As part of a new business plan presented today, ERG said it was earmarking total investments of €2.1 billion for the five years to 2025, including €1.9 billion for renewables. For wind alone, it anticipates 1GW in new wind farms in the period and investments of €1.4 billion, while it expects to invest roughly €500 million for 500MW in new solar capacity.
The company currently has 3,115MW of capacity, with wind and solar accounting for 1,967MW and 141MW, respectively. ERG also has 527MW in hydroelectric plants and 480MW in CCGT (combined-cycle gas turbine plant) generation, although CEO Paolo Merli confirmed the company has selected preferred bidders for the potential sale of those assets and could grow faster in wind and solar if it these assets are sold.
“We may consider asset rotation as a way to further accelerate our growth in wind and solar and our transformation to a pure renewable player,” said Merli.
ERG already has some 400MW of planned capacity additions in the ready-to-build or construction phases, all wind projects and spread across the UK, Poland, France and Sweden, where ERG earlier this week announced it had entered the market with the acquisition of a 62MW ready-to-build wind farm from German developer BayWa.
The company aims to add a further 200MW from repowering Italian wind plants in the next five years. It currently has approximately 350MW in repowering projects in an advanced stage of development, which are earmarked to add a net 200MW to its overall capacity once the dismantling of existing turbines is considered.
Out of this 350MW, ERG already has 143MW in fully authorised repowering projects for three wind farms in Sicily, which were given final authorization in just the last few weeks and intend to participate in an auction for contracts-for-difference (CfDs) next month.
“Permitting is one of the biggest hurdles for development throughout Europe, and in particular in Italy,” said Merli, adding that the company was nonetheless hopeful after seeing “some signs of an acceleration” under the new government led by Mario Draghi.
The company also anticipates adding 300MW in greenfield wind and solar projects and growth of 600MW through M&A and the further development of its project pipeline. This includes recently signed co-development deals, such as that secured with Italian developer Renergetica for the annual joint development of 100MW in wind and solar projects a year in Spain.
The business plan also envisages that by 2025 some 80% of Ebitda will be “quasi-regulated” – either backed by CfDs secured through auctions or long-term power purchase agreements (PPA). That compares with 75% in 2020 and comes as a growing number of wind farms exit incentives.
Power purchase agreements
Indeed, alongside its new business plan, ERG announced that it had secured a PPA with Italian telecoms group Tim for the supply of 3.4TWh of electricity from 77MW in wind farms in Lacedonia Monteverde in the Campania region and Avigliano in the Basilicata region with turbines that are being refitted with more aerodynamic and efficient blades. Electricity provided to Tim, which will cover 20% of energy consumption through the deal, will be partially baseload and partly ‘pay as produced’.
ERG said all the 400MW projects in the ready-to-build or construction phase had either already secured CfDs or were expected to be underpinned by CfDs or PPAs.
Although ERG has not earmarked any capital expenditures in its business plan for storage and green hydrogen, Merli indicated that ERG is examining the possibility of using storage at two sites and could develop green hydrogen in partnership with other players. “Storage and hydrogen will gain ground in the energy transition, so we must remain vigilant to seize any opportunities that may arise.”