Given the current recession and economic uncertainties in Spain, big deal flows have virtually come to a halt. But one sector is holding up strong and continues to attract investments, across asset funds, large corporates and startups.
Spain's renewable energy sector is "booming," says an industry survey by online business media platform El Economista. Noting a slew of major investments closed in the sector despite the country being under Covid-19 lockdown since March 14, the report linked the sector's attractiveness to its predictability and boost from favorable regulatory conditions, as well as from the ruling government's commitment to transitioning to a 100% renewable energy electricity system by 2050.
Those major deals include a 40% share sale in Spanish renewable energy play Viesgo to Australia's Macquarie Group for €1.2bn and a 33% stake sale worth €600m in another renewable energy giant, Acciona, by KKR, which saw Acciona raising its own control to 75% from 66.67% and French insurer Axa taking over the remaining 25% share.
Indeed, José Manuel Entrecanales, CEO of Acciona, affirmed his bet on renewables last week. “I believe that this crisis [as a result of the pandemic] will create opportunities for social change that would have otherwise cost us heavily to adopt in the previous ‘business as usual’ conditions," he told a shareholders' meeting.
“Spain is facing a historic opportunity to bet decisively on renewable energy, energy efficiency, the electrification of transport, micro mobility and new storage or hybrid technologies as central axes of the fair ecological transition process.”
Such a boom is expected to have a trickle-down effect on startups in the renewable energy sector, which so far make up a small, but fast-growing, segment. The large corporates still account for over 85% of the Spanish energy sector. Many of these conglomerates are working with accelerators and R&D centers to give a helping hand to the sector's startups.
Spain’s central bank says the economy could shrink between 6.8% and 12.4% this year while the government has forecast a 9.2% contraction.
Programs and partnerships
On a global scale, Fidelity International has found that during the worst bear months of February and March 2020, equity and fixed income securities that ranked highest in its sustainability rating scale have outperformed those with weaker environmental, social and governance (ESG) credentials on average, and “with a remarkably strong linear relationship.”
Barely two years ago, the Spanish government enacted a new climate law targeting 100% renewables use by 2050 and banning new gas and oil exploration. Ever since, the country's startup ecosystem has been forging ahead to achieve the target, underpinned by programs and partnerships led by established players.
The ambitious renewables plan, announced in November 2018, includes the installation of at least 3,000MW of wind and solar power every year till 2028 and investments totaling €236bn in renewables from 2021–2030, with a guaranteed fixed price for the power generated.
Since the bold announcement, the Spanish government has embarked on infrastructure development to accelerate energy projects and support startups. Red Eléctrica (REE), a partly state-owned public company that operates the national electricity grid in Spain, announced last year a €3.22bn plan through 2022 to facilitate the transition to renewables by expanding its transmission network and creating new access points to integrate renewables.
According to Judith Cruxent, Business Creation Manager at InnoEnergy, it is important that entrepreneurs find a strategic partner that provides them with funding and guides them in the development and approach to the market.
Cruxent, who leads InnoEnergy's Cleantech Camp program that focuses on early stage startups developing cleantech solutions for the energy sector, added that projects that have their origin in research centers from a technology perspective have a lot of potential. “The teams are usually very good but they require better market knowledge and business strategy in order to accelerate the project to the maximum.”
The importance of R&D was also emphasized by Antonio Brufau, President of the Repsol Foundation. Brufau told a convention on "Energy transition and the new European cycle" last year that energy transition is a great opportunity to which companies must respond "with innovation, promoting R&D and employment."
The Repsol Foundation launched a €50m social investment fund last year to invest in and develop a portfolio of social enterprises focused on energy transition. The Foundation's aim is to back companies from their early stages of development and assist them throughout their growth phase building solid business models towards profitability.
Acciona also has a similar program for spotting and nurturing potentially successful startups. Selected startups in its Open Innovation program get the opportunity to pilot and validate their technology in real business environments. The Spanish conglomerate, which provides renewable energy, infrastructure and water services in over 40 countries, established its I'mnovationprogram in 2017 for startups with technological solutions aligned to its own. Completed projects include business models for energy storage, traceability of contracts over a project lifecycle and the exploitation of data and AI to optimize energy consumption and plant control systems.
INCENSe by FIWARE, another acceleration program in the cleantech and energy sector, provides facilities and a customer base to help pilot and validate startups’ MVP. Formed with funds from the European Commission and leading energy providers, nearly one-third of the startups from the program are now working with leading energy companies like Enel and Endesa, creating solutions based on technologies developed during the program.
Local acceleration programs backed by big industry players also reflect the mutual desire for collaborative projects among startups, corporations and public institutions. Naturgy Energy Group's InnovaHub, for example, provides a place to learn about the latest digital and technological trends from a network of experts. Enagás Emprende, an Enagás subsidiary, accelerates startups focussed on renewable gases (Biogas and Hydrogen), sustainable transport and energy efficiencies, through collaboration with technological centers, universities, suppliers, clients and public institutions.
Some Spanish renewable energy startups worth noting
Holaluz: The first independent provider of green energy
Founded in 2010, Holaluz is the first independent green energy supplier in Spain. Over the past year the company has grown rapidly, averaging 400 new clients per day and 50 new solar installations every week to any municipality in Spain. Its technology uses data provided by household electricity meters to optimize power usage and slash customers’ electricity bills by an average of €100 every year.
The company was initially backed with seed fundings from Enisa and in 2016, it raised a further €4m from the Madrid-based global investment fund Axon Partners Group. The abolition of the much loathed sun tax in 2018 boosted Holaluz business. Since 2017, it has been EBITDA-positive, with €180m in revenue in 2018.
Last year the startup received €10m from the supplementary pension entity Geroa taking the company to a valuation of €100m just before the launch of its IPO last November. The IPO signaled the independence and liberalization of the Spanish energy sector, traditionally dominated by a few big players like Iberdola, Acciona, Endesa and Naturgy.
“Soon we will be the first among independent firms," said CEO and co-founder Carlota Pi, who is eyeing a five-fold increase in revenue by 2023.
Fundeen: democratizing renewable energy investments
Launched in 2017, Fundeen has built a crowdfunding platform that directly connects private investors with startups. Until now, such investments have mostly been by large electricity companies or investment funds, but Fundeen's platform facilitates cleantech projects without direct involvement of large financial institutions.
Co-founder and CEO, Juan Ignacio Bautista Sánchez told CompassList that Fundeen wants to “contribute to accelerating the energy transition and generate environmental impacts.”
Last year, Fundeen and Holaluz signed a power-purchase agreement (PPA), under which Holaluz will purchase and resell up to 75 MW of clean energy to be built over three years. The partnership between two emerging startups is thought to be Europe’s first large-scale PPA for a crowdfunded plant and a forerunner to PPAs between smaller plant owners and offtakers.
“We work with several energy suppliers but we try as much as we can to partner with whom we share values with,” said Nacho Bautista, one of Fundeen’s founders.
Early last year, the company was authorized by the National Securities Market Commission (CNMV), which has opened up new business opportunities outside Spain. Fundeen sourced €128,200 crowdfunding within a fortnight for a PV project to sell energy in the French market. Since then, the platform has also raked in €721,500 for seven different projects.
Fundeen has passed through several startup programs from Google for Startups Campus to the European Commission that granted €50,000 in three different phases. It is also counting on the support of public funds from the Regional Community of Castilla and León, where the company is currently headquartered.
FlexiDAO: blockchain technology to balance energy demand-response (DR)
FlexiDAO, a startup launched in Barcelona in 2017 has developed a blockchain-powered business applications software for energy retailers to establish a balance in demand-response (DR) based on real-time supply and demand of power. The technology tracks and certifies the journey of renewables from source through sales and consumption. FlexiDAO matches green energy generation with consumption in real time, which in turn allows significant emission reductions.
Within the first two years of operations the company established its presence in six countries with big energy players like Iberdrola or Acciona as business partners. Last year, the company closed a seed funding round of €1.4m from the Dutch fund SET Ventures, mainly for its cleantech businesses and specialized blockchain applications. It has since moved its HQ to Amsterdam.
“Renewable energy tracking is the first use case that demonstrates the commercial value of blockchain in the energy sector today,” said CEO Simone Accornero. "Our mission reaches beyond this initial step: we want to effectively coordinate millions of distributed energy resources on the grid and accelerate the energy transition."
Backed by a mix of private and public institutions since it received its first funding of €75,000 from Acció, the Catalonia Trade & Investment Government’s agency, it was later selected to enter the KIC InnoEnergy accelerator, which has has invested more than €1m in startups in the areas of solar energy production, management, energy expenditure and storage.
"Partner networks and their mentoring programs are invaluable in getting the partners and support necessary to accelerate our growth,” said Accornero, who in the long-term wants to make FlexiDAO a reference marketplace of renewable energies for retailers and consumers. For now, the company is looking to double its revenues and closing 2020 with a turnover of about €700,000.
W’wave: optimizing and preserving wind energy
Setting its sights on a market that counts over 300,000 wind turbines scattered across the globe W'wave is a Madrid-based startup working on concentrated wind power systems that increase the amount of energy produced by wind turbines by 30%, and with a cost reduction of up to 30%.
This way, W'wave's technology helps wind energy operators improve their competitiveness and profitability, while extending the lifespan of the machine components. The startup was winner of InnoEnergy's Cleantech Camp acceleration program in 2018. Wind energy in Spain has massive market potential: on windy days, the power generated by wind turbines leapfrog any other energy sources available in the country. Spain alone has more than 1,000 wind farms. By 2050, about $8.4tn is expected to be invested globally in wind and solar power solutions.
Since its launch in 2018, W’wave has raised capital from the angel investors-focused co-investing platform, SociosInversores.com. More recently, it received Enisa funding. Manuel Alcocer, the company's CEO and founder, comes from the energy sector, with experience in business development, B2B sales, project management and strategy consulting.