Constant adaptation is mandatory in a changing world

Nuno Silva and Susete Patrício believe that the transformation required by energy transition is just the starting point for a global strategy in which sustainability is one of the key pillars. Galp intends to lead through innovation and by example

The combination of the burden of the conflict in Europe and the negative impacts of the global pandemic has forced us to expedite our goals with regard to carbon neutrality. Particularly in Europe, where energy dependence on external markets – such as Russia, in the case of natural gas – has reminded the Member States of the importance of investing in renewable energies. “Companies like ours have to adapt if they wish to survive in the long term. However, Galp doesn't want to merely survive, we want to prosper from this transition process and pursue opportunities”, declared Susete Patrício, Galp's Head of Renewables Project Development at the Energyear international congress held in Lisbon.

However, in order to take advantage of the opportunities provided by the market, meeting some of the challenges inherent to transition beforehand will be essential. One of these challenges involves the gradual replacement of the production of oil and its derivatives with the production of clean energies such as hydrogen. The Sines refinery is an example of this – the Portuguese multinational is converting this complex “into a green plant with renewable hydrogen, advanced biofuels, synthetic and reduced carbon fuels and sustainable aviation fuels”. Indeed, with respect to the latter, it is worth remembering the recent public presentation of the partnership entered into between Galp, TAP and ANA - Aeroportos de Portugal for the supply of green fuels.

Susete Patrício discussed Galp’s goals and the challenges of energy transition while attending Energyear

The ongoing transformation at the Sines plant is merely the tip of the iceberg in terms of the strategy adopted by the energy producer, which had already committed to achieving carbon neutrality by 2050 – the same date set by the Portuguese State. “We are allocating around half of our investment to renewable and low-carbon energy projects”, confirmed Susete Patrício at the meeting of energy experts. This commitment will consolidate, and eventually advance, the status of the second biggest producer of solar electrical energy in the Iberian Peninsula. Moreover, in recent weeks Galp completed the acquisition of all the shares of Titan 2000 S.A., a joint venture that has brought together the Portuguese company and the ACS Group in the production of photovoltaic solar energy. This will be another step towards the goal of reaching 4 GW by 2025 and 12 GW by the end of the decade. “It´s exciting to be at the forefront of all these changes”, added the official during the panel dedicated to the analysis of energy transition in Portugal.

The Secretary of State for the Environment and Energy, João Galamba, was present at the opening of Energyear and recalled the national commitment to green energy. “We have particularly favourable conditions for the development of the installation of renewable energy, more specifically hydro, wind and solar”, he said, while underlining the aim of achieving some goals ahead of schedule. “Our original goal was to achieve at least 9.3 GW by 2030pursuant to the National Energy and Climate Plan (PNEC by its acronym in Portuguese)”, but we now intend to speed things up and do it sooner, he guaranteed.

The cost of PPA is rising

The meeting of energy specialists also set aside some time to discuss PPA – Power Purchase Agreements (long-term agreements between producers of renewable energy and buyers that establish a fixed sale price) and some of the trends registered in this market. The panel was made up of Nuno Silva, Head of Market Intelligence, Structuring & Analytics at Galp, who recalled the increase in the cost of raw materials to partly justify the increase in the average price defined in PPAs. According to a recent study, the price rose by around 25% to approximately € 50 per MWhbetween mid-2021 and mid-2022. “The price of lithium has increased 6.6 times, copper 1.7 times and the price of aluminum six times. The cost of a [renewable energy production] project has risen significantly”, he points out. .

Nuno Silva highlighted the growth of solar capacity in Portugal and Spain

Despite acknowledging that “solar capacity in Portugal has increased considerably” in recent months, Nuno Silva says that the increase in Spain was seven times higher. Growth in the wind energy sector in the neighbouring country was actually ten times greater than that registered in Portugal. The setbacks the conflict in Ukraine has brought to the energy market have given sellers of PPAs the upper hand. “What sellers want is to enter into short-term PPAs to 'lock-in' the high market prices and maximise their profits”, he explains. The promise made by João Galamba and the Ministry of the Environment and Climate Action to simplify licensing processes through the creation of a guide to help investors and to reduce bureaucracy could have a positive impact on increasing installed capacity in Portugal, rendering the energy market more dynamic and, eventually, reducing or stabilising the prices in question.