Switzerland-based gas and power trader MET Group has adjusted its green power strategy with a new focus on developing projects from scratch after observing intense competition and high prices for ready-to-build projects in mature markets like Germany, head of renewables development Christian Huerlimann told Platts, part of S&P Global Commodity Insights.
Source: S&P Global
"We saw on the way of accelerating our portfolio development that we can create more value in early development and decided to develop from scratch until ready to build," Huerlimann said in an interview.
German and Italy are promising markets for the new investment strategy, while in Central and Eastern Europe, MET will work on its existing portfolio, "optimizing it, adding additional possibilities like co-locating, hybridizing connections or even repowering," such as its wind assets on Bulgaria's Black Sea coast.
MET's current renewables portfolio includes 414 MW of operating wind and solar assets as well as 112 MW still under construction.
"Standalone PV projects face a challenging situation at the moment, because of the lower revenue possibilities, and there is also strong competition in the tenders in Germany," Huerlimann said.
German solar capture prices averaged only Eur36/MWh in the second quarter, down 27% year over year, capturing 51% of the average wholesale power price, according to Platts assessments.
"We are maximizing our hybridization potential. We secured enough land, so it's mainly about co-located batteries now," the MET manager said, referring to a 60-MW solar project at Grossdueben, in the German state of Saxony, which is planned with a 240 MWh battery.
In terms of marketing, Huerlimann noted various routes to market, including EEG tenders as well as a hybrid PPA, combining PV and battery offtaking, and even a tolling agreement for the battery.
"At the moment we are looking to bring our first project online. Germany is one of the most mature markets in Europe for PPAs, but also in Italy, a growing interest for PPAs is seen," he added.
Battery portfolio
MET's Green Assets Division now also develops stand-alone battery projects and is currently marketing a portfolio of 200 MW of four-hour batteries at attractive locations with land leases and pre-aligned grid applications.
"Additional flexibility is needed in the market, this is where the competition goes and where the value is created," Huerlimann said, adding that MET typically looks at a structured and diversified portfolio.
"If you hedge 100% of the production over a very long time, you are completely de-risked, but also give up market opportunities."
In terms of project costs, "solar panels and component prices are already very low," he said.
"For batteries, there is a trend that shows that capex is going down. That's what we have been seeing in the last few months and the trend is also going further down quite substantially."
The trend was promising for project developers and investors with a "lot of money invested to make batteries better" and Huerlimann expecting "quite a push for batteries."
Analysts at Commodity Insights forecast a record 16 GW of large-scale, front-of-meter lithium-ion battery capacity to come online this year and next across Europe.
Battery spreads in Germany peaked at Eur375/MWh ($438/MWh) in May, the highest across European power markets, with the Q2 average for four hours at around Eur130/MWh, Platts assessments showed.
Platts Battery Spreads illustrate the arbitrage opportunities in the wholesale day-ahead electricity market, capturing the lowest hours for charging, while discharging when prices are at their highest.
Falling lithium prices also allow for longer battery duration on a similar cost. Platts last assessed battery-grade lithium carbonate CIF Europe at $8,200/mt on July 10.