Wento develops and sells renewable energy. The company was established in late 2011, after almost a year of market research and analysis done by Enterprise Investors and after assembling a team of experienced Polish professionals from the RES industry.
You allocated a generous amount of time to researching the market in Poland before creating Wento. What convinced you that energy made for a good investment at that point in time?
The Polish market is distinctive when it comes to energy, because it is very carbon intensive: 87% of our electricity comes from either hard coal or lignite. There are obvious consequences to this, well visible now that the CO2 allowances have reached realistic levels. This confirmed our assumption that Poland will have a higher than average price compared to the rest of the EU.
The second part of our analysis focused on demand and supply. GDP growth in Poland is always supported by growth in electricity demand - on average, over the last eight years, the demand increased by roughly 1,5% per annum. This growing demand is difficult to satisfy with the current generation base, which has two essential flaws: it is very old and has technological limitations (especially when it comes to emission standards) to the point that some of the generating units will have to be retired.
Combined with the fact that consumption patterns have also changed in the past years…
Indeed, consumption patterns shifted a few years ago from winter peaks to summer peaks. We have a growing need for air conditioning and cooling processes, and as the temperature goes up so does consumption of electricity. This is putting stress on the generation fleet and the problem became very visible in 2015, when the sudden heat wave forced the electricity system operator in Poland to call for shut down on several users of electricity. It was almost a black out situation.
While we were not sure when, we knew this situation could happen. Investing in renewables was the logical answer, because there are structural reasons for these technologies to become the backbone of the system. Thermal technologies are changing their role from base loads to a balancing role. This is obviously a long term vision (around 2040), but inevitable nonetheless.
You sometimes operate the projects developed, but most often you sell them to other entities. Why have you chosen this strategy?
We are financial investors, which means we have a certain amount of capital we would like to invest in order to generate profit. From our perspective, investing capital for the shorter term generates a higher return than just building a wind or solar farm and operating it for 20-25 years, and is a model aligned with our preferences.
Do you believe now is a good time for further investments in renewable energy in Poland?
At the beginning of our journey there was a lot of enthusiasm surrounding wind technology and the market was very attractive. In 2015-2016 we installed a record 1,5 GW. But in the meantime the energy markets in EU became subject to tough regulations and many governments have changed their approach towards renewable energy.
Something similar happened in Poland in 2015 when the new government decided they would not support development of wind anymore. The now famous 10H rule, that requires to keep a minimum distance between wind installations and residential homes equal to ten times the turbine height, has effectively stopped new wind projects.
When we realized wind was not going to be as welcoming as it used to, we analyzed our options and came to the conclusion that we should focus on solar, especially if we consider summer peaks.
During this brief time you managed to develop an impressive footprint in the solar sector. What is driving opportunities here at such a galloping rate?
Solar technology has two advantages above all other technologies: to deploy several thousands of solar MWs can be done in a matter of three to four years and the cost of technology is constantly going down. When we analyzed the support system we concluded that small scale projects of <1MW would be the best approach. This is because they will have no other technology to compete with in the <1WM basket in the auction systems, and from the grid perspective they are easiest to connect.
We participated in the first auction in 2016 and won 10 MW. We built and operated them for a while, to make sure we understand this business as well as we did wind, and once we were comfortable with solar technology we sold these capacities to long term investors. In 2017 we won 9 MW and in 2018 another 66 MW.
Our intention was to build and sell them afterwards, but the demand was so strong to buy the projects’ rights straight after the auction that we sell all the projects in accordance to demand.
Do you have a message for investors eyeing the energy market in Poland?
I encourage investors to come because unlike other markets in Europe, Poland has a structural and voluminous need for new RES capacities. The energy demand is growing and electricity prices will continue to be relatively high compared to neighboring markets. Imports are not a solution because there are many physical limitations on interconnectors and it will be years before this is solved. As long as CO2 prices are high, electricity will be expensive in Poland and RES capacities a necessity to mitigate such price growth.
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