Europe needs to do more to boost supply chain self-sufficiency in renewable energy, the head of French utility Engie has warned, as huge US subsidies help it steal a march in creating an independent green tech industry.
Catherine MacGregor, the gas distributor’s chief executive, said it was branching heavily into renewables in Europe as well as the US, where President Joe Biden’s $369bn package of tax breaks and incentives was “spurring quite a bit of interest” from the group to pursue hydrogen and battery storage projects.
“We were already developing and operating very large renewable projects in the US but we are seeing an acceleration,” McGregor told the Financial Times, adding that a “big chunk” of Engie’s 10 gigawatt battery capacity target by 2030 would be in the US.
The US scheme should inspire Europe on several fronts, MacGregor said, including the fact it rewarded not only companies that produce goods domestically but also those that “buy local”.
“Europe has to think about protecting or making sure its industry flourishes,” MacGregor said, adding that she would welcome incentives to help more regional suppliers emerge. “From a business standpoint, that is also a way to mitigate my risk — to have local, healthy suppliers.”
Europe is heavily reliant on other markets to supply its renewable energy sector. In the solar industry, for example, the bulk of panel manufacturing is concentrated in China.
The EU is still working on its policy responses to the Inflation Reduction Act (IRA) and has unveiled proposals that would loosen state aid rules and eliminate red tape to encourage the development of green technologies in the region.
But a “Buy European Act”, an idea initially backed by France, does not appear to have momentum among all EU member states. The European Commission will unveil more specific proposals in mid-March.
Under MacGregor, who took over as chief executive in early 2021, Engie this week unveiled a new investment push geared towards renewables as well as “green molecules” — the development of cleaner forms of gas such as biofuels.
It is boosting spending on new projects to €22bn-€25bn between 2023 and 2025, up from €15bn-€16bn over its 2021-2023 plan, funded in part by a big disposals programme completed since 2021 as the group restructured and sold off some services businesses such as Equans.
The group, born out of the 2008 merger of Gaz de France and Suez, plans to more than double its renewables capacity to 80GW by 2030. A quarter of its pipeline is geared towards Europe and almost a third in the US, with the rest spread across regions such as Latin America, Asia and Africa.
Even without a fully fledged IRA response in Europe and as the EU gears up for discussions this year over how to reform electricity markets, MacGregor said the region still held attractions.
“The sheer amount of renewables that need to be developed in Europe is massive,” MacGregor said. “You need to be very, very local, you need to go and talk to local authorities and citizens . . . for us it’s a competitive advantage.”
However, both Europe and the US would also need to invest at scale in areas such as grid infrastructure to help support their push towards electrification, MacGregor said, echoing warnings from other big power groups such as Eon.
Engie has replaced its gas bought from Russia’s Gazprom, which before last year’s invasion of Ukraine accounted for 17 per cent of its supplies, with other sources including Norway.
Europe was “exiting the winter in a good position” on the gas front, MacGregor said, with encouraging storage levels thanks to clement weather conditions and solidarity in the region.
She cautioned that Europe was still exposed to possible strains on its power systems in the months ahead, however, including due to a drought that could affect hydro power production.
Engie reported record net profits of €5.2bn for 2022 when stripping out exceptional items, fuelled by soaring gas prices. Its net income was €200mn including impairments, including those linked to the shelved Nord Stream 2 gas pipeline to Russia, which it was a lender to, and provisions on its Belgian nuclear operations.