David Carroll: “Our entire suite of offerings are here at scale in the US”

Speaking of business, ENGIE has really grown in North America from carbon-based fuel technologies to heavily renewables. Some of this growth has been through acquisitions, and while that is not always a smooth process, it has allowed us to keep an entrepreneurial spirit. Our people think like an ‘entrepreneur’ asking: How do we grow the business? How do we get creative to stay competitive? Not very many large businesses have that.

We now have 4.6 GW of renewable generation, 2.9 GW capacity within energy solutions and 12 GW of wind and solar managed, as well as 7.5 GW of hydro managed, within GEMS. We work with a total of 1,740 municipalities, hospitals, schools, districts and universities, including Georgetown, Iowa, Ohio State and Howard University. We also have large commercial customers like Microsoft and Procter & Gamble and serve large U.S. utilities, and government agencies. Within the region we are expanding our base every day to increase our scope and breadth of customers. We are spread across many different industries, and there is a certain security in that. If one industry has a downturn, the effect is lessened.

At the Market Update, the Group positioned the USA as a priority geography with strong ambitions. How does the country contribute to the Group's strategy?

D.C.: North America is one of the few regions in the world that is active with every single Global Business Unit. With 350 million people, several unique energy markets and 400,000 TW hours of generation, there’s a huge potential for renewables, C&I, distributed generation, energy services and sustainable battery storage. We are already seeing growth within the Flex Gen & Retail GBU with a robust hydrogen market on the Gulf Coast of the U.S. that is continuously growing. However, one of the big constraints within the U.S. is transmission. The good news is that independent developers are just starting to build transmission, whereas previously it was only the utilities. The bottom line is that if you look across our entire suite of offerings, they’re all present here at scale.

You recently had a lot of great press about the inauguration of a wind and a solar project in Texas. How do you explain these huge renewable successes and what role does the IRA play here?

D.C.: A month ago, we held ribbon cuttings in North Texas for the 300 MW Limestone Wind project and the 250 MW solar Sun Valley installation, which also has a 100 MW one-hour battery associated with it that will achieve COD in 2023. This success has been years in the making in terms of greenfield effort, M&A work and our commitment to grow our renewable capacities. In 2019 we were under one gigawatt in owned operation and now, just four years later, we’re at 4 ½ GW.  By the end of 2023 we plan to be at more than 6 GW.

Our success is driven by our people being out in the field, working with landowners, working with utilities to get the interconnections, and working with our customers in order to find offtake agreements. We also rely on tax equity, with the US Inflation Reduction Act providing additional incentives for the deployment of renewables. For the first time we have close to a decade of runway, which we haven’t ever had in this industry. Although the IRA brings huge incentives inside North America, with that comes a lot of competition.

The main issues we address here are constraints in transmission, which I mentioned previously, and NIMBYism. For example, sometimes it takes four to five years just to understand if you can be interconnected to a grid. The renewables market is strong yet we have a lot of challenges to work through in order meet our very aggressive goal. Fortunately, we have a great team that is hyper-focused on addressing the risks and scenarios.

How are big operators viewing PPAs in the local acceleration of renewable energy?

D.C.: Many of the big multinational corporations have publicly stated their renewable energy goals, and many states and utilities have established carbon targets as well. It should be noted that shareholders have driven investor-owned utilities to have publicly stated targets.

The region has been very complex in terms of PPAs, as these agreements have evolved greatly over the last 20 years. The large customers all want them, but the balance is to manage the risk profile for ENGIE North America with the customer needs (given the intermittent generation of renewables). Previously, the risks were not as well understood, and there were a lot of small companies that would develop and then flip, and that set a certain tone where many aspects favored the customer. Now the market is more mainstream and the more sophisticated developers are better able to manage the risks in the complex markets we operate in. It all has to be thoughtfully managed.

You have big ambitions for the Group's new business (3 GW of battery storage capacity projects and 1 GW of green H2 in 2030): how will you achieve them?

D.C.: We began greenfielding our own battery storage in renewables several years ago and are now seeing those first projects come online. We should have a little more than 700 MW of new battery storage online by the end 2023, while coordinating with GEMS on the operational aspects. This is a great demonstration of One ENGIE in that we are building and operating it, while GEMS will be the market face for those batteries. Additionally, with Flex Gen and Energy Solutions, we have worked on a couple of acquisitions that also brought in additional battery pipeline in order to fill our near-term goals. The Monarch project involved the acquisition of a pipeline from Belltown Power, which is a small developer out of North Texas. Because of this, Flex Gen & Retail, Renewables and Energy Solutions are working on projects in Texas and other states that will help us achieve those targets.

One of the biggest constraints we currently have is access to batteries. The pricing of batteries has gone up due to supply chain issues with COVID and the escalating trade issues between China and the United States. Since the vast majority of our batteries come from China, we have been looking to diversify our source and scope of supply. Presently there is a large demand for batteries primarily in California and Texas, spreading to the East Coast as we work on a higher level of renewables penetration.

Flex Gen & Retail, Renewables and Networks are working together on green H2, but it’s a nascent industry, so there are no operational projects at this point in the region. However, the groundwork to hit that 1 GW of green H2 by 2030 has already started. We are already having conversations with our customers and greenfielding sites, which include pipeline access, transmission access and the development of renewables so that we can be prepared to deliver on that target.

ENGIE global has been very supportive of the necessity of this early development to support that goal of 1 GW green H2 as this industry grows.”