Repsol Exec Hypes US Renewables Potential

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Spanish major Repsol sees the US as the most attractive market in the world for renewables, underscored by its purchase of a 40% stake in project developer Hecate Energy last month, an executive tells Energy Intelligence (OD May13'21). Repsol believes the acquisition of Hecate will enable the company to hit its targets to ramp up low-carbon power generation through 2025 and even 2030, according to Joao Costeira, director of renewables for Repsol's electricity and gas unit. "The US has, for us, the most interesting, most promising renewables in the market in the world, by far," Costeira told Energy Intelligence. "I would say it's the cornerstone of our strategy going forward." Repsol kicked off renewable projects in its home country of Spain and picked up solar assets in Chile last year (OD Jul.23'20). But it has now extended that reach into the US, a market that will give it significant running room. The move represents a major step for the Spanish major, which was the first large oil company to commit to becoming fully carbon-neutral by 2050 (IOD Dec.3'19). Repsol currently operates 1.1 gigawatts of renewable power capacity and aims to have 7.5 GW of renewable capacity installed by 2025 and 15 GW by 2030. US Advantage Costeira cited the US' strong regulatory and legal system as its key benefits, as well as relatively low costs and a strong solar and wind resource. The company's pre-existing presence in the US, where it has long been active in upstream areas including the US Gulf of Mexico and the Eagle Ford Shale, was also identified as a positive. The opportunity for scale and for growth in the US is another major factor, he said, as well as the ability to add new capacity instead of just replacing it. "You don't come to the US to make a few hundred megawatts. You come to the US to do gigawatts," he said. The potential with Hecate is huge. The project developer boasts of 40 GW of renewable and storage projects under development, of which 16.8 GW are solar projects at advanced stages and 4.3 GW of which are in energy storage. "Hecate had one of the biggest independent pipelines of projects in the US," said Costeira. Early Entry Repsol's deal was closely followed by a similar move by UK supermajor BP, which acquired a 9 GW pipeline of projects from developer 7X Energy (OD Jun.1'21). Such acquisitions shed light on the longer-term shape and structure of the firms' renewables investment options. "We always have this very clear objective of finding projects we can enter at a relatively early stage and participate in the derisking of the project," Costeira said. Repsol's goal is to operate the projects in their final stage, while Hecate is structured to develop and site projects rather than operate them. The Spanish major believes it can deliver a double-digit internal rate of return from the acquired projects. Financing is especially important in the renewables space and can have serious bearing on the viability and profitability of projects, Costeira said. As such, the company is exploring a range of financing options. "We are considering anything from project finance, green bonds, equity bridge loans, you name it," said Costeira. "That's probably one of the areas where you have also seen more innovation." Energy Transition While Repsol hasn't ruled out other renewables deals in the future, the potential of the Hecate project pipeline is seen as enough to largely meet the company's needs in the medium term. "To 2025 it's about delivery, delivery and delivery," said Costeira. The company's renewables push is part of its strategy to put its money where its mouth is regarding the energy transition, he added. "We cannot just simply replace every vehicle in the planet. We cannot stop flying," he said. He sees the energy transition as a gradual process rather than a revolution, and that approach is mirrored by the step-by-step blueprint of Repsol's business plan. "The climate challenge is there, and is not going away," said Costeira. Kathrine Schmidt, Houston

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