Q&A – Rezolv: Alastair Hammond on vilification of Chinese tech and Europe’s manufacturing prowess

The push to decarbonise power generation combined with the pertinent need for energy independence urged on by two global conflicts has, for the most part, boosted the uptake of renewables, only for the sector to have yet another hurdle thrust in its path. Cue the politically fraught debate on the use of Chinese-made renewables technology and hardware for projects in Europe.

Policy makers in Europe – and also the US, but that’s a can of worms for another day – appear to be doubling down on the concept of “nearshoring.” But what does this mean in practice? Is there a legitimate security threat posed by Chinese tech and if so, can Europe resurrect its manufacturing capabilities to compete with a market that has had over a decade of a head start? What does this mean for the price of the supply chain and ultimately, the price of energy?

To answer these seemingly impossible questions, we sat down with Alastair Hammond, the chief executive officer of European renewables developer Rezolv Energy. A veteran of the industry with a 25-year track record of delivering solar and onshore wind projects, Hammond (pictured right) is at the coalface of this rapidly evolving sector. Despite being a relative newcomer to the sector, being founded in 2022, Rezolv, under Hammond’s leadership has amassed an impressive 2.3GW pipeline of solar and onshore wind developments in Central and Southeastern Europe. The company, recently, successfully debt financed a 461MW, private offtake backed, onshore wind farm in Romania. It is also in the process of energising a 229MW solar park in Bulgaria and securing financing for 1GW solar plant in Romania. The proposal and delivery all these projects have had to be examined through the evolving mandates on nearshoring and what that means in practice.

“Supply chain crunch” has become common parlance among large-scale renewables developers of late, is this still the case? And does it matter to you where this supply chain originates?

Hammond: Procuring supply chain contracts has become challenging because there is a drive to secure the lowest levelized price for energy, which means you need competitive and affordable equipment.

At the moment, this means sourcing technology and equipment from China, whether it is PV panels and inverters or onshore wind turbines. Even “European turbines” are actually built in Chinese factories. We sourced the transformers for the Vifor project from a production facility in Hungary. Even the ones that come through major European players are actually manufactured in China. It is just the simple fact of the world right now.

Is there a difference between Chinese and European equipment? Is European or American made equipment generally better to warrant the higher price tag?

Hammond: Most European manufacturers have factories in China, so most equipment is manufactured in the country. They also have factories in Europe, but equipment made at these facilities tends to have a long lead time and are slightly more expensive. Lead times are crucial for projects, especially ones backed by PPAs or even CfDs, you need to have the project online within a certain period, which is usually two years or less. That is not enough time to sit and wait for supply chain becoming available. You have to take what is available and right now, that is mostly Chinese made.

There are some new technology variants coming to the market, but Chinese and European equipment are largely the same. The Chinese have improved on the tech that was developed in Europe. When it comes down to it, most developers are technology agnostic, it doesn’t really matter where it was developed, be it Europe, China or India, it needs to be affordable to keep energy prices low.

With this as a goal, putting barriers on the supply chain much like what the EU is proposing to do is counterproductive.

Take a look at the Americans, they went hard on nearshoring, but at what cost? They forced Chinese manufacturers to establish factories in North America and supply the same technology at two to three times the price. Not to mention the technology was developed two or three years ago, it is not the latest version. Developers are having to pay a premium price for old tech.

Europe has not made that choice yet, but we are starting to see a shift that way. For example, one of the selection criteria under the latest French tender award (A08) was the use of locally sourced turbines. This creates a level playing field for the bidders, but also means that the price of energy produced by that project will not be as low as it could be.

There is a lot of rhetoric around renewables being expensive, the fact is they are not. No CCGT plant will be able to deliver power for €50/MWh if it was built now. Most of the operational ones are subsidised by the government or owned by state utilities.

There is a wider political push to procure equipment closer to home with some developers accepting higher CapEx costs to adhere to this directive, is that a feasible strategy for developers not backed by the state?

Hammond: Europe is facing a conundrum between energy security, reducing the carbon footprint of energy and also ensuring the supply of most affordable energy for consumers. The first two issues are addressed directly by renewables; you own your own wind and sun and are not reliant on third-party supplies, and they also reduce the emissions. Where we fall into conflict is when we also say we want the lowest cost. The companies that accept higher CapEx costs are the ones operating in markets where they are able to charge a little more for the energy. It won’t work if we are reliant on CfDs for revenue.

I will always go European where I can. Europe kickstarted the development of these technologies whether it be PV or inverters, but the simple fact is that the companies that led the charge, Siemens and ABB, have since exited the market. They left a vacuum which was filled by the Chinese companies that have rapidly innovated. I believe that Europe will still lead the way in technology innovation to increase efficiency, but we also need to make sure that this is rolled out at scale at an affordable price.

What about the argument that Chinese tech poses a security risk here in Europe? Is there any credence to that?

Hammond: Cyber security is a challenge we will continue to face, but it is important to emphasise that most utility-scale energy generators are now classed as critical infrastructure and that directive adds an extra layer of complexity to project delivery.

Ultimately, though, we come back to the same issue: even “European built” equipment can have components manufactured in China and not every component needed for, let’s say, an inverter is manufactured by every company. So, even some European equipment likely has Chinese and other foreign sourced components in it. My personal view is that the more pressing concern when it comes to security is the management of grids.

We are using Vestas turbines at Vifor. They are amazing machines and given the opportunity and availability we would like to continue to use Vestas or Nordex or even Siemens now that they are back in the market. The same goes for solar. Back when we started building large parks in 2008, we used Siemens inverters, but they exited the markets and left us with a very big problem. We had to scramble to find third party contractors to service the equipment.

So far, we have not used any Chinese equipment in our onshore wind farms and we would like to continue to procure locally if we can, and if the price is right.

The EU has recently launched an investigation into Chinese manufacturer Goldwind for potentially distorting competition through subsidies. One could argue that the Chinese vs European tech debate has transcended pure economics and is increasingly becoming tied to policy and politics. Has this affected lender appetite for projects using Chinese tech?

Hammond: We have had these discussions with lenders, some are comfortable with the use of Chinese equipment, and some are not. Same goes for the Goldwind situation, whichever way the EU rules there will still be private lenders that will fund projects that use their equipment.

When everyone complains of Europe’s competitiveness or lack thereof, it is fundamentally down to the energy pricing. We need to zoom out to look at the bigger picture, what is the most pertinent issue that Europe needs to solve in the short term? Is it building up manufacturing capabilities or reducing energy prices?

We need to accept that as things stand, we do not have an alternative to Chinese manufacturing, not if the aim is affordable energy.

Having said that, there is some very interesting and promising technology being developed locally, I hope they achieve scale fast, so we have an alternative to Chinese tech. At the end of the day, the primary objective for both lenders and developers alike is to secure the lowest levelised cost and bankable technology.

How feasible is it to bet on European manufacturing in the short term?

Hammond: That really depends, developing bankable tech is not the issue but funding it at scale may be one. We do not have the same venture capital environment the Americans do. There is an old adage, if you go to a European VC and ask for €10 million in funding you may walk away with €5 million. The same scenario in the US, they will ask what you can do with €50 million. I think our attitude towards “riskier” investment needs to change if we want to compete on the manufacturing front.

The technology that exists now originated in Europe, it was built upon and refined elsewhere. We just need to make sure that the next wave is firmly rooted here.

Politics aside, what should be Europe’s primary focus in the near term in the interest of energy security and energy independence?

Hammond: It has to start with the grid. This critical infrastructure has been largely ignored for a very long time and in most parts, it is not ready for the large inflow of new generation that is coming online. It is also vital to have a single electricity market within the EU, access to the grid and permitting need to be streamlined.

We should build solar projects where it is sunny and wind projects where it is windy, which has not always been as obvious as it may sound. We have support schemes that prop up projects that may not be built otherwise due to the generation profiles. Instead of building wind and solar everywhere we need to invest in interconnectors so energy can be generated under optimal conditions and be transported to end users as needed.

We need clear decisions on what we are going to do and when we are going to do it and this involves actionable legislation and regulation.