In an exclusive interview, Marc Groves-Raines, head of Allianz’ renewables division, speaks to Impact4All about the company’s long-term investment plans. With €3.5 billion of equity investment in green energy sources, Allianz Capital Partners are one of the world’s leading investors in sustainability and renewables.
Marc, what initially triggered Allianz Capital’s focus on sustainability?
At Allianz, we aim to create sustainable economic value by pursuing a long-term approach to corporate governance, social responsibility, and environmental stewardship.
As an insurer and investor, protecting the environment is part of our core business. We protect and care for our insurance customers vulnerable to climate risks. As an investor, we take a stance on the transition to a low-carbon economy and apply a systematic ESG [environmental, social and governance] approach in our investment and asset management. As a growth market with ecological impact, we have a clear ambition to invest in renewable energies.
Through ACP, Allianz has invested directly into operating wind and solar parks since 2005 and is currently the largest institutional investor in renewables in Europe.
The attraction of the renewables asset class was driven not only by its ESG attributes but also the relatively stable long term cash flows, which are uncorrelated to capital markets and help to match the Group’s long term insurance liabilities. Renewables, as part of the alternative asset investment strategy, form an essential component of a diversified portfolio given the increasing role of electricity as the energy commodity of the future.
Are there specific criteria that projects must fulfil to be legitimately considered a clean energy business and therefore suitable for investment?
In terms of renewable energy assets, Allianz has primarily focused on wind and solar investments in construction or operational projects.
Like other institutional investors, Allianz has a preference for projects that benefit from a long-term feed-in contract or, alternatively, from a power purchase contract with a reputable off-taker.
This has the advantage of minimising exposure to merchant electricity sales to the extent possible. Regulatory stability is also essential in order to inspire investor confidence.
What do you identify as some of the key strategies for the successful adoption of renewable energy sources?
The introduction of feed-in tariffs in Europe has seen a dramatic increase in the uptake of the wind and solar power, in particular in Germany. This has now been superseded by Contracts for Difference and PPA tenders with reasonable success.
Whilst the contractual framework for the sale of power is important, the administrative environment and levels of public acceptability are equally so.
Markets that have streamlined permitting processes, for example through a ‘one stop shop’, will prove to be more efficient in permitting projects than those that do not. Political and regulatory support are essential and require careful government attention.
What can you tell us about ACP’s first wind investment in the US?
Allianz has so far invested as a tax equity investor in the US wind energy market. ACP’s first investment was at the end of 2015 in the 300MW MiRose wind farms developed by EDF Renewable Energy, the North American subsidiary of French utility Electricite de France. The projects are located in Roosevelt County, New Mexico and utilise Vestas wind turbines. Performance to date has been in line with expectations.
From an environmental standpoint – what do you see as the biggest obstacles to growing the renewable industry?
In a European context, the key obstacles are generally environmental. This can include both impacts such as landscape, flora and fauna, as well as local acceptability, particular in areas which have already seen a high concentration of development.
Other factors at play include grid availability and its capacity to absorb large amounts of embedded and intermittent generation; the development of storage technology should help this. Many developments, particularly wind farms, are also restricted due to radar issues, both military and meteorological, and strategies should be developed in conjunction with all stakeholders to overcome such obstacles.
How do you think the renewable energy market will evolve over the next decade?
The future is hard to predict, particularly in a world experiencing rapid technological change and an evolving energy market design, characterised by increasing amounts of embedded generation and demand side management.
The pace of renewables deployment over the next 10 years will be dictated by the ability of developers to unlock administrative barriers and the continued availability of cheap finance, which has largely been structured around beneficial and secure energy sales structures.
As more markets embrace schemes that are becoming increasingly based on the merchant power market, investors and banks will need to adapt accordingly if projects are to attract the funding they will require; this is all the more important given the high capital requirements for renewables.
That said, on a 10-year horizon, I would expect to see continued global growth, increasingly supported by storage, with the consequence being that the more polluting of the traditional generation technologies are priced off the system.
Is there anyone in the renewables industry you would like to meet and what would you ask him or her?
On a professional level, I would like to meet Elon Musk and ask what is next for him, from a renewables perspective, after solar PV, batteries and EVs.