The Ability to Deliver Wind Success no Matter the ChallengesBy Cas Biekmann | Mon, 11/09/2020 - 10:35
Q: What is the general history of Envision and how important is Mexico to its global portfolio?
A: Envision was founded in 2007 by experienced entrepreneurs and investors in China. This happened in conjunction with China’s policy shift toward the use of renewable energies. From that point onward, China went from practically zero to over a 100GW of installed clean energy capacity each year, this includes nuclear energy. It involved around 20 to 30GW of wind energy, reaching nearly 210GW in total this year. Envision became the second-largest supplier in China and the fourth-largest manufacturer of wind turbines. After positioning itself in the Chinese market, the company expanded toward other markets, including Mexico in 2015.
Soon after, the company transformed itself into one of the world’s leading cleantech companies. We are not only designing, developing and operating wind farms but also have a very robust set of solutions. This includes AIoT-powered batteries with our subsidiary Envision AESC, which came from Nissan’s battery division. The company also provides other AIoT-based solutions through Envision Digital and has a professional racing team in the Formula E, Envision Virgin Racing.
Q: What is the company´s biggest success story in Mexico?
A: The 90MW Peninsula wind farm in Yucatan is a strong contender. It features 36 WTGs of the EN110_2.5MW platform. The Peninsula and the company’s other project, the Dzilam 70MW wind farm, generate 10 percent of Yucatan’s energy.
Envision is neither an IPP nor a developer. Our core business is to be a technology and services supplier. However, to do business in Mexico, we needed to take on a different role: that of the investor, taking on development risk and investing money to build projects. The goal is to generate a positive track record, which then can demonstrate to customers, partners and investors that we can deliver projects and secure financing on a non-recourse project finance basis. Therefore, we came to Mexico to invest, develop, finance and build. We were able to accomplish all of this at the Peninsula project.
The project was in a very early state when we launched our JV with Vive Energía. Together, we secured PPAs when participating in the long-term auctions. The project operates with attractive energy prices and is located in a very good area. This project was considered to be one of the top wind projects in Mexico, exemplified by the multiple investors trying to arrange partnerships with us. We brought in a strategic partner to construct the project, Avanzia, which is the Mexican subsidiary of the Spanish Grupo ACS. The company participated with equity as well, helping us to diversify our investment. Our goal is to operate the project and in a couple of years, we will close the successful cycle by finding an investor to take the project off our hands.
Q: How has the pandemic affected the company’s efforts to develop its projects?
A: The situation is complicated because we are facing a sanitary pandemic, an economic pandemic and a regulatory pandemic, all at once. 2020 will be remembered as a turning point, with a clear before and after. COVID-19 was a difficult challenge to overcome, specifically because Envision was in the middle of constructing two large-scale projects in Mexico and Argentina. Both countries were hit heavily, and this came with a number of challenges, restrictions and limitations. In Mexico, we continued our work under very strict sanitary measures to ensure the safety of all involved. This meant we had to deal with certain incremental costs but we finished just in time. In the case of Argentina, we were instructed to shut down construction for more than 3 months and require to implement more strict measures to reactivate constructions works. This windfarm ended up being commissioned six months later.
Q: How has further regulatory uncertainty in Mexico affected Envision’s pipeline of projects?
A: There is uncertainty in the market due to changes that have been made to contracts and agreements with CENACE and CFE. It has made us more cautious as we assess the implications of recent measures and present injunctions. We are trying to change our strategy and adapt to this new reality that features novel regulations. We are still bullish and positive about Mexico in the medium to long term because of its fundamentals. In Mexico, the demand for electricity is growing. In areas such as Yucatan, the demand percentage grows in double digits annually. There is simply not enough installed capacity to match the demand. Because of expected demand growth in the decades to come, there must be investment in new power generation. This needs to come from somewhere, which is reason for confidence. Renewables have been proven to be incredibly competitive all across the world, reaching the lowest LCOE without subsidies. We believe renewables will eventually be recognized by the government and other stakeholders, providing ample future opportunity.
Q: How does Envision invest in R&D to reduce even further the LCOE for renewable energy?
A: R&D has been part of Envision’s DNA since day one. We have a full commitment to innovation on a global scale, which includes attracting some of the world’s leading experts in certain areas and establishing innovation centers. As an innovation powerhouse, Envision leverages its global network of R&D and engineering centers across China, the US, Germany, Denmark, Singapore and Japan, leading global green technology development. We also invest in companies that further renewable energy generation beyond generation and distribution. The company is especially strong in technology related to AIoT.
We also joined the global RE100 initiative and became the first company in mainland China committed to 100 percent renewable electricity by 2025. Envision Group was ranked among the Top 10 in the 2019 World’s 50 Smartest Companies by the MIT Technology Review. We continue to promote wind and solar as the new staple for energy worldwide. Efforts to promote green hydrogen and battery storage are part of our strategies as well.
Q: How would you assess the potential for distributed generation in Mexico and its effect on smaller turbine platforms?
A: Mexico has potential for distributed energy. Regulatory changes have not posed a threat to this area. This potential can mostly be found in solar because in the country there are many apartment buildings that are rather small and suitable for photovoltaic panels. The type of wind turbines Envision offers are utility scale. The smallest we have is 10MW, which is already big for distributed energy projects and, therefore, more suited to industrial needs in isolated areas. This is an area Envision still needs to evaluate and find ways to make this economically viable. In terms of LCOE, wind is very competitive against solar but these numbers are reached through large-scale projects. The unitary costs to implement a turbine are still not at the level of competitiveness that solar can provide, meaning you would need to construct larger wind farms to become profitable. However, we do think distributed wind could be among the opportunities for the future.
Scale has become an issue and the wind industry has a strong appetite for offshore wind. Here, you are looking to use huge wind turbine generators. Envision has a solid 4.5MW platform for offshore but some companies are developing 10MW platforms. Governments like China are boosting this area further. Therefore, I see wind going more into this direction than toward smaller platforms.
Q: What are Envision’s objectives for the rest of 2020 and early next year?
A: For this year, we have already completed our most important tasks in constructing and commissioning of the Peninsula wind farm, as well as Vientos del Secano in Argentina to be commissioned in November.
For 2020, we still need to obtain a potential partnership with a third party, which has been on the table for some time now. We already have a strong Mexican partner in Vive Energía regarding project development and management of social and environmental factors. In addition, we are trying to partner on a portfolio basis with an equity partner. If they have a robust balance sheet, they can help us to do more and share risk and reward on a bigger scale.
Envision is a China-based smart-energy solutions provider offering smart wind turbines, smart energy management software and technology services. It has facilities worldwide.