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23 November 2022

Enel to cash in €21bn, build 6GW solar factories, build out 21GW

Italy’s mega-utility Enel said this week that it will invest into the manufacture of 6 GW of bifacial heterojunction solar, in the US and in Europe, with the expectation that eventually these factories will double in size to 12 GW. The company announced all this at its capital markets day this week.

It will lead this off with a massive 3 GW upgrade to its Sicily factory which it calls the 3Sun Gigafactory in Catania, and then build a copy of it in the US. The Sicily upgrade from 200 MW to 3GW was first mentioned by Enel in July, and this week it told us of a similar factory in the US. In the process Enel will create 1,000 jobs and push into advanced HJT technology that will see 7% more energy harvested compared to the solar panels it uses today, approaching 30% efficiency, the company claims.

In June this year China’s Longi announced a new world record conversion efficiency in HJT of 26.5% – so the 30% level still seems to us a long way off – but CEO Francesco Starace at the Enel capital markets day was clear as he made the claim. Enel Green Power in September this year cited a panel it was using at 24.6% efficiency. It is almost certain than another thin film of something like Perovskite or CIGS will have to be added to the design to achieve those numbers.

This is part of the exceptional utility’s plan to add 21 GW of renewables to its mix over the coming three years, adding some 3.7 GW of battery, 10.9 GW of solar and around 5 GW of wind capacity. The company will leverage both the US Inflation Reduction Act and Europe’s REPowerEU funds to back this acceleration in renewables.

Starace said that to keep the effects of this manufacturing investment off the balance sheet it would do this through partnership deals – but did not announce the module partners. The Sicily factory was acquired from Japanese firm Sharp in 2011, with design input from STMicroelectronics, but Enel bought both of these companies out a while ago, so it is not clear who it will be working with on this new design or where it will get Polysilicon from.

Enel has said in the past that it will invest €600 million in the expansion of its 3Sun facility and that the European Commission will contribute €188 million of that from its Innovation Fund and National Recovery and Resiliency Plan.

The other big news from the Capital Markets day is that Enel plans to make €21 billion in asset sales by 2024, much of it happening in the next 12 months. It says it will cut its customer numbers to 50 million. Given that two years ago it was saying it had 70 million customers and was growing by a further 2 million a year, this is a huge contraction of its customer base, brought about by the Russian Ukraine war.

It plans to drop back to 6 main countries, 5 where it has grids in Spain, Italy, Brazil, Chile and Colombia, plus the US where it has 15 GW of renewables capacity.

Previously Enel was proud of stating it operates in 30 countries including Asia and Africa, it will now commit to building out its 5 main grids, and will use the high cost of gas and profits that coal and other assets are currently able to demand, to tempt bids for its gas and coal assets. It has consistently said it will be fully zero emissions by 2040, without resorting to carbon capture or carbon credits, so this must include selling its European gas assets.

This implies that Starace will take the company out of smaller European countries like Romania, Croatia, and Serbia, it will have already cut ties with Russia, but may also sell off businesses in France, Argentina, and Peru, to name but a few.  Its assets outside of the US, Latam and Europe will fall to around 8 GW of renewables only. The fact that this management team can respond so dynamically, so swiftly after the war and the rise in the focus on energy security, is a testament to how flexible the business has become.

The key driver here seems to be to retain and invest in the company’s grids – spending some 40% of a touted €21 billion in capex on completing digitization of its grids so that it can keep pace with the 5X increase in annual demands for renewables connections (up to 480,000 requests) on those grids. The rest will go into its pipeline of renewables.

Throughout all this transition Enel has amazed its customers by cutting energy prices, impressed its shareholders by increasing dividends and retained its staff by constant retraining – and it promises more of the same, but Starace did say that an increased focus on delivering energy security in each major market could not be avoided in light of the war.

But he said that the company still planned to take its EV charging points from 500,000 to 1.4 million; its storage at homes behind the meter from 99 MW to 352 MW, and its Demand Response capability from 8.4 GW to 12.4 GW – all by 2025.