What is Wärtsilä’s solar energy strategy, and why did the company take the decision to move into solar and storage?
Javier Cavada: Wärtsilä has an energy strategy rather than a specific renewables vision. The strategy is heavily weighted towards renewables to reflect the transformation that is happening in energy markets globally. We see that solar is the most competitive source of power going forward from an affordability and sustainability perspective. Technology and cost competitiveness have been developing in such a way that it will continue to become more attractive and dominant. We also see that renewables are becoming the base load.
But this means the base load is becoming intermittent and less reliable, requiring additional sources to provide sustainable power. This puts inflexible power plants like coal and nuclear not only on the decline trajectory, but also means they are no longer a good investment. Flexibility is what is required, as is energy storage, but also gas produced in the cleanest way to generate power and balance the grid. Our vision is to act as an essential energy integrator – putting the assets together through software, full turnkey offerings, and our global services capability.
The large-scale solar sector is becoming quite top heavy with big utilities and large power corporations. How does Wärtsilä seek to differentiate itself from the competition?
We are not aiming to be the solar company: We are becoming an energy integrator armed with all the possibilities to combine all suitable forms of energy. Our unique value proposition is to become a leading hybrid integrator, which means providing solar + storage, solar + gas, or gas + storage for example – all possible combinations, supported by total turnkey capability. Wärtsilä has power plants and energy solutions running in 177 countries. Via this network we deliver services, train and develop local people, and offer engineering, procurement, construction and software integration.
Can you provide more details of Wärtsilä’s engine-solar hybrid plants – how do they work?
Wärtsilä can provide the solar component and the gas smart power generation to solve the intermittence of solar. Our engine technology is able to ramp up to 100% output in less than one minute, and now combined with storage this gap narrows to milliseconds, switching from solar generation to battery support. We synchronize the supply to maximize the use of solar, storage, and gas to minimize operating costs and reduce emissions to the ultimate minimum. This synchronization is managed by a software platform GEMS5, developed by Greensmith, the company we acquired last summer.
A 95 MW solar farm in Nigeria’s Katsina State will be Wärtsilä’s first grid-connected large-scale facility. Why did you identify Africa for such a landmark?
This plant is 100% PV, and we are integrating it into the grid with our software solution to make it fully synchronized in a way that there will be no curtailment of the PV. Curtailment is an acute problem in many places, with PV only being used when the sun is at its highest point – this is an inefficient use of solar. We want to utilize any innovation designed to maximize solar energy, and to avoid blackouts and the difficulties sometimes inherent with renewable power. This is our first grid-connected utility power plant. Other orders that we have in Jordan, Burkina Faso, and elsewhere in Africa are for decentralized grids, often for use in an industrial area or a small city. But Nigeria is different: It will plug into the national grid, and is our largest solar plant so far.
From our installed base of 65 GW, nearly 7 GW of generating capacity is in Africa. Wärtsilä employs over 1,000 local people in Africa when servicing and operating our plants. With Nigeria being Africa’s biggest economy, we have plenty of activity there. The amount of utility-scale solar projects in Africa is growing big time, and we see opportunities in not only Nigeria but also Senegal, Ivory Coast, Morocco, Mozambique – many nations.
What are the specific opportunities and challenges when operating in Africa, and how can a firm with the scale and scope of Wärtsilä meet these?
The big opportunity is the hybridization with existing grids. This is what we are adding. We are not looking for 5 MW plants – we could hybridize at that size, but the size we operate best at is at volume. The plant in Nigeria will be the second-largest on the continent once finished, and the largest in the country. Average PV plant size is growing very rapidly: 40-50 MW is becoming standard in many countries. African conditions could not be better: There is excellent irradiation, and most countries have access to other fuel that is easily available locally and can form part of the base load.
So is Wärtsilä’s future moving solely towards solar?
We want to be the company pushing renewables to be the predominant source of energy. This is the only way forward in our view. The share of renewables is booming, and will continue to do so. The ratio of renewables in Wärtsilä’s portfolio will match that growth. Adding wind and solar brings reliability and intermittence challenges to the grid that can be solved through flexibility: called Smart Power Generation. Having wind and solar together is not so easy because the sunny places don’t tend to have much wind, and vice versa. Renewables have intermittency in their DNA, so you need to add some support to ensure a constant grid supply because the cost of blackout is too high.
In storage, the acquisition of Greensmith was quite a statement of intent. Since that deal, how has Wärtsilä synergized Greensmith’s system integration expertise with your own?
We are really enjoying this integration – it is synergizing and energizing us. Between 2015 and 2016, Greensmith was making one third of utility-scale lithium-ion battery storage in the U.S. That means Tesla, ABB, and Siemens combined produced less in the sector than Greensmith over that time. They were dominant, but they had the financial limitations of being a small company. They had a smaller geographical reach and a smaller capability for EPC and service. By combining the two companies it has been an explosion of potential, of possibilities, of new projects, and we are in the middle of that change.
We are installing nine battery projects in the U.S., and we now have our first storage projects in Singapore, the U.K., and Australia. Everywhere we see a need for energy storage: It is not the main dish, but by combining flexible renewables with storage it is a way of making the grid and system better. This all means that today Wärtsilä is the biggest energy storage integrator globally.
With Tesla and sonnen growing and a large company like Wärtsilä moving into the space, does size now matter more in the storage industry?
Storage is still a small market in terms of deployment, despite growing approximately threefold every year. The huge battery that Tesla announced recently in South Australia is still providing power for a couple of hours to a few thousand people – in a region of 1.6 million people, this is a relatively small impact despite being the largest battery in the world.
The market is still small and there will be lots of consolidation as it grows, but we see a great opportunity to be the energy integrator that can bring renewables and flexibility together. The fact that renewables will become the future energy base load is non-negotiable: this means that storage’s role is only going to become more important. This is why you need advanced software solutions to manage this flexibility.
Wärtsilä has expressed interest in developing storage projects in India to support the booming solar sector. What, specifically, is Wärtsilä hoping to achieve there?
We have been in India for 40 years. We have a factory there, so the Make in India program is crucial for Wärtsilä. For the Indian industry the 100 GW solar goal by 2020 is vital because India does not have gas and there is no big appetite to import it. So there is going to be a need to add more storage as the solar base grows. This means more behind-the-meter applications to tackle chronic curtailment and intermittency challenges: Storage located near to demand is what will be required, likewise decentralized energy storage across transmission lines.
We are working on several projects in the state grid to improve the quality and reliability of the power source to avoid blackouts.
India is one of the most active solar markets today. Quality and reliability of the power is therefore vital, and is why we are not looking to build solar power plants in India – there is enough of that going in already. Our approach will be to support this solar growth with storage, software, and integration.
In general, what are the most pressing topics facing the storage sector?
The main point we make to utilities, governments, industry, and the public is to understand that the energy market is changing – slowly – and that does not mean we can simply shut down inflexible assets right away. They need to be phased out as part of the transformation. California is at the forefront of renewable uptake. The state can do so because there is backup cover at any moment in case there is no wind or sun. But if that reliable base load is not built in, then we would set our energy system back one century. Those who manufacture batteries have often created too much hype that storage is going to solve everything. The direction of travel globally is the same, but the speed and level of infrastructure differ wildly.