CLASS OF 2016
WORLD-GENERATION FEBRUARY/MARCH 2016
20
Tristan Grimbert, CEO of EDF
Renewable Energy, the North American
Renewable arm of Electricité de France,
participated in a panel discussion covering
market trends at the annual REFF Wall
Street conference hosted by Euromoney
and ACORE.
WHAT IS DIFFERENT ABOUTTHE RENEW-
ABLE MARKETTODAYTHANTWO YEARS
AGO?
Tristan Grimbert:
First, there is a lot
more money looking to move into renew-
able energy. It is not only yield cos. There
is an imbalance between the amount of
money and the number of projects available
for investment.
Second, our business is becoming
more and more technical. Being able to
deliver on the business plan requires more
and more technical knowledge and resourc-
es. I am thinking in particular about turbine
performance, congestion risk and basis
risk. As there is more penetration of renew-
ables, the ability to understand and act on
business risk and market conditions is
becoming critical.
The third thing that is different is we
have reached a turning point in the last
year in the US where we can talk again
about carbon pricing and about moving
away from subsidies to something that
would recognize the cost of carbon. My
hope is that, within the next five years, we
will move away from renewable portfolio
standards and all the subsidies to a truly
market-based mechanism for carbon pric-
ing. That is my hope.
WHAT ARE YOUR GREATEST CHALLENGES
TODAY?
Tristan Grimbert
: Defining a viable
business model in the distributed space is a
challenge with the lack of differentiation
and the repetitiveness and credit issues. A
lot of people are moving into that sector. It
is very difficult to figure out how to make
money. That is one area with which we are
struggling.
Another challenge is finding the right
balance for spending on the development
pipeline in relation to the size of the market
when the tax incentives are always on the
verge of expiring. Five years ago, there
were too many projects under development.
I think the wind pipeline was something
like 351 gigawatts for an annual market of
six to eight gigawatts, so it was 50 years of
projects. Today, the number has been
reduced significantly.
Lastly, it is a challenge to forecast the
price and cost curves accurately. We must
take a view on the future price for electrici-
ty and the future cost of solar and wind
equipment and the future cost of capital.
We have been talking about yield cos and
their impact on the cost of capital the last
couple of years, but at some point the cost
of capital will start going back up. You do
not want to be caught in a trap where you
have offered an aggressive electricity price
to win a power purchase agreement and
then the cost of capital goes back up. On
the equipment side, we expect the costs to
keep falling , but the question is to what
extent.
SOMETHING LIKE 38% OF US ELECTRICITY
SUPPLY IS FROM COAL. CONSULTANTS
EXPECT ATHIRD OF THATTO BE RETIRED
BETWEEN 2017 AND 2020, BUTTHERE IS A
DEBATE ABOUT WHETHERTHAT CREATES A
LOT OF OPPORTUNITYTO REPLACE THAT
CAPACITY. DO YOUTHINKTHIS IS A GREAT
OPPORTUNITY?
Tristan Grimbert
: The coal retire-
ments will allow us to keep a market in the
range of five to 10 gigawatts of new wind
capacity additions a year, and that is critical.
You do not need a lot of storage to allow
much more penetration of wind and solar.
The coal retirements driven by the Clean
Power Plan will allow the utility-scale wind
and solar markets to continue adding capac-
ity over the next 15 years at the current
level. It was suggested earlier that the
growth rate is accelerating. I do not think
we have an acceleration of the growth rate,
but I think we will have stable growth.
LET’S PROBE ON STORAGE. MANY PEOPLE
SAYTHE WIDESPREAD ADOPTION OF BAT-
TERIES WILL LEADTO A FUNDAMENTAL
CHANGE INTHIS MARKET. DO YOU AGREE?
Tristan Grimbert:
We are building a
20-megawatt battery storage project right
now in PJM, and we have more in develop-
ment. PJM does not need a lot of storage in
order to be able to manage the intermittent
generation on the grid, so that market
reached saturation quickly. The potential
storage market is about a tenth of the wind
capacity: rough calculation, back of the
envelope, you need an order of magnitude
less capacity in storage than you need in
intermittency.
Keep in mind that storage is
a transmission asset. The more reliable and
the more structured the grid, the less you
need storage.
So, yes, storage is a market
for us, and we are in it, but it is a fraction of
the solar or wind potential market in terms
of capital deployment.
Storage is a diverse universe. We can
talk about a battery bought by a residential
customer all the way to a pumped storage
hydroelectric project or thermal storage
facility for a city that is huge in scale. I
think it will be all of the above. You need to
manage the grid in a way that you can pro-
vide some load-shifting equipment or load-
following equipment.
The question about battery storage is
the timing. The timing depends on the tran-
sition to distributed generation. Battery
storage at the residential or commercial
TRISTAN GRIMBERT
President and CEO
EDF Renewable Energy
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