Electricity house of the year: Engie

Energy Risk Awards 2020: Firm’s increased renewables and flexibility capacity alongside innovative online platforms results in raft of creative deals

Maxime Vermeire
Maxime Vermeire

Over the past 18 months, Engie has made huge strides in its evolution from a centralised power producer to a demand-driven utility, with the emphasis on being a ‘global green mid-streamer’.

Key to this shift has been the firm’s increased renewables capacity and the considerable growth of its demand-side response and other flexibility offerings.

“Decentralised flexibility is an important part of our strategy. It will play a key role in building up a long-term renewable power business in a sustainable way,” says Maxime Vermeire, head of power structuring and origination. “It has enabled us to work in new and innovative ways for our clients.”

For example, during the 2018–2019 winter, Belgium faced a high risk of blackouts, as only one of its seven nuclear plants – which supply 40% of the country’s power – was operating. Engie’s team jumped into action, extracting almost 1,300 megawatts (MW) of additional capacity from a variety of sources over the course of six weeks. Some 500MW of this was from demand-side response.

Over the past five years, Engie – through its commercial brand NextFlex – has built up a portfolio of flexibility comprising more than 400 industrial and commercial sites in Belgium, France and the Netherlands. These sites can change the way they consume electricity if requested to do so. Engie also operates small-scale grid batteries. These flexibilities are then aggregated by Engie, supplemented by its own flexible power asset production, and optimised on all available markets, including ancillary services, helping reduce grid instability.

Engie has also made strides in the growth of renewables, adding 3 gigawatts (GW) of renewable capacity last year and taking renewables to 28% of its overall generation capacity. Wind and solar production rose 49% in 2019. The firm also grew its hydro portfolio. In a key deal in December 2019, it purchased six hydro assets with generation capacity of 1.7GW for €2.2 billion from Energias de Portugal.

The deal required deep risk management expertise. Modelling the hydro assets’ value involved long-term tenors and factoring in variables such as precipitation and water collection from catchment areas over several decades.

This backbone of increased renewables and flex capacity underpinned several stand-out deals last year. For example, in June 2019, the firm signed a 15-year deal to supply Microsoft in North America with 11 terawatt hours (TWh) of renewable energy starting in January 2021. The wind and solar assets are still under construction.

The intermittency of renewable power makes volumetric risk especially hard to manage over an extended period. Engie tailored a transaction with an innovative 12-year volume-firming agreement (VFA) that will convert the intermittent renewable energy supply into a fixed 24/7 baseload block aligned with Microsoft’s energy needs. Engie believes this is to be longest tenor for a VFA in the US renewable market, possibly globally.

A second deal with a major technology firm followed in September 2019, with Engie agreeing to supply Google with 92MW of power from an offshore wind farm in the North Sea. This was Google’s first purchase of power from an offshore wind farm and its first large-scale renewable energy purchase in Belgium.

Decentralised flexibility is an important part of our strategy
Maxime Vermeire, Engie

“Engie structured a corporate power purchase agreement (PPA), seamlessly integrated into an on-site supply agreement, that allowed Google to source renewable power at a competitive price,” says Vermeire. Engie also took on some of the intermittency risk, he adds

In another deal, signed on December 19, 2019, Engie agreed to deliver traceable wind power to Lhoist, a Belgian industrial. This involved Engie supplying 8.4MW of power generated by offshore wind farms in the North Sea.

With the increase in renewables capacity comes an increase in exposure to weather, and managing this risk has been another area of focus for Engie. In some cases, it has added temperature and wind derivatives into PPAs.

The innovative nature of many of these deals relies on Engie’s technological expertise. The firm has developed several online platforms that give clients increased transparency across the electricity trading space. For example, Engie’s blockchain-based platform, The Energy Origin (TEO), was crucial to the Lhoist transaction, providing the client with real-time, secure confirmation on the green energy consumed at its industrial sites.

“Using TEO, Lhoist can select an asset, trace the electricity it produces and authenticate its green nature at the source, right as it is being generated,” says Vermeire. The platform also provides direct access to the guarantees of origin certificates associated with the power.

TEO can also show firms how much renewable energy as a percentage of total consumption has been used to manufacture specific products, allowing firms that buy these products to understand and improve their carbon footprint. 

Another digital platform is Engie’s Trading Innovative Power, which is designed to simplify and increase efficiency around buying and selling renewable power. Using Engie’s expertise in short-term markets, the platform helps large and small industrials, local authorities or prosumers reduce their consumption costs and helps renewable power producers to increase production revenues.

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