FELIPE TORROBA

Spain 2021 | GREEN ECONOMY | VIP INTERVIEW

TBY talks to Felipe Torroba, CEO of Energy Business for ENCE Energía y Celulosa, about biomass renewable energy, projects in the south of Spain, and expectations for the year ahead.

ENCE has become the leader in generating biomass renewable energy in Spain. What can you tell us about the company's development?

ENCE Energía runs the entire biomass side of the ENCE business. It emerged from a need we saw in the cellulose business to make full use of natural resources. Trees are the source of raw material in the cellulose world, but only the trunk is used while the bark and branches are cast aside. ENCE makes good use of a renewable natural resource. In 2010, we had a strategic plan to increase our biomass plants independently of the cellulose business, and in 2012 we started up the first biomass electricity generation plant in Huelva. In 2014, we set up a second plant in Mérida, and shortly after that the energy reform came in, which included a moratorium on new renewable projects and forced us to rethink our vision. During those three years the moratorium on renewable products was in effect, we focused more on trying to consolidate the market and bought up ENEL and EDF biomass plants in Spain. We also diversified into new technologies at the end of 2018 by buying a thermosolar plant from Iberdrola in Puertollano.

ENCE Energía has a strong focus on Andalusia. What is the strategy behind this?

This surprises people because when one thinks of biomass, they think of forests, and the north certainly has far more than the south. In 2017, we published a decalogue on the sustainability of biomass together with environmental NGOs such as WWF, and we defined what should be considered as biomass for electricity production. The first thing was moving away from the use of wood that can be used for other purposes. We have been diversifying the use of different types of biomass, and we have seen that the important focus is on agricultural biomass; it is much more recurrent, and there are more durable crops. Andalusia is one of the main areas with agricultural resources such as olive groves, citrus fruits, cereal, corn, and cotton. In short, there are a multitude of resources we can make use of.

In Spain, wind energy has about 24,000MW installed, photovoltaic has about 10,000MW, and biomass there is only 800MW; however, the advantage is that it is very manageable. What are the benefits and vision expected for this energy source moving forward?

We have always defended biomass; we believe it has an important role to play. It is an energy source that carries a fuel charge, although you do not pay for it as such. We are a technology that we are capable of producing 24/7 almost every day of the year. That sets us apart from solar or wind power, which are dependent on weather conditions. At the end of the day, that is especially important. Biomass has other aspects that are hidden behind the electricity bill, and they include the creation of employment and job placement in rural areas and the positive ramifications of this. In just one plant, you can create about 1,500, rural-based jobs. We are developing something that did not exist, such as the use of pruning the vineyards in Castilla-La Mancha. We have developed a logistics platform to collect that and take advantage of it for electricity production, and through it we create jobs. On top of all that employment, our plants pay taxes and, in the end, all the energy tariffs we pay for the biomass plants prove extremely beneficial for the state.

With regards to regulations, what is still needed in order to continue promoting biomass in this country?

There are sides to this. In terms of electricity generation, we need a stable rate and framework. At the regulatory level, what is most important is that the use of these byproducts is regulated. The burning of vine pruning is perceived as a big problem. It is illogical that an industrial business is required to work within strict parameters, and one can be burning openly in a field a few feet away. That should be regulated. We have an interesting project in Almería where we want resolve the issue of greenhouse byproducts. A million tons of byproducts are generated, and only 35% is managed by an authorized manager. The rest is not used and is thrown across the land in an uncontrolled manner. Our project has great potential since we have ecologists and local administration pushing for it to be done. We do not want subsidies; we want the law to be applied or to have one that enforces proper byproduct management.

In 2021, ENCE closed the sale of 49% of ENCE Energía's capital to the Ancala Partners fund and sold the Puertollano plant to Q-Energy. Are there other strategic moves planned for 1Q2021?

We were in investment mode, which led us to find Transactions in which we wanted to increase our portfolio of projects and assets. We realized prices were skyrocketing, and valuations were extremely high, so we thought it made sense to incorporate a financial partner into the ENCE Energy capital. As a company, we got an interesting assessment of the business, and at the ENCE Energy level an injection of new blood and the capacity for growth and investment. Market prices and valuations remain high, which is to be expected due to positive growth forecasts for the sector, and we are more focused on the greenfield development of the projects that we have rather than on making acquisitions. We are not opposed to continued growing if we happen to uncover interesting opportunities, though we currently have projects in the portfolio that involve a significant investment, photovoltaic projects, and a strategic plan that was put into place in 2019 with the intention of investing EUR600 million. Right now, we are solely focused on growth in terms of self-development.

What are your main objectives for 2021?

The main one is to keep the company growing. We also have to complete the administrative processing of projects, which is a complicated and slow process. We have to get everything ready for the biomass auction in order to take on projects and be able to start building at the end of 2021 or the beginning of next year. In the photovoltaic area, things are more or less the same. We have move forward with the projects that we are developing and bring them to fruition.