Q&A – Sonnedix: Creating the conditions for long-term development

Across European markets, as demands on the grid continue to increase, a growing pipeline of delayed projects is waiting on a grid connection. In inspiratia's 2024 report, Illuminating the future: Creating a zero carbon grid, we reported that the UK's grid infrastructure is not fit for purpose.

Energy hybridisation, whether it is solar and wind, solar and BESS, or combining different energy sources within a single connection point to optimise output and grid usage, continues to be the energy developers' path of choice.

These grid constraints, in combination with land availability, are driving this next wave of renewable energy projects.

inspiratia sat down with Sonnedix's Chief Operating Officer, Juan Fernandez, to discuss how the company approaches its project selection process, its entry into BESS, and the trend of energy hybridisation.

How would you describe Sonnedix's approach to project development?

That is an excellent question, because it is very much at the heart of how we plan our future. As you know, the renewable energy sector has been evolving over the last few years in terms of how projects are deployed, especially around the grid.

Projects have been popping up in a rather opportunistic manner. If you can find the right land for wind, the right land for PV, you have the right connection, and you plan the project with the right revenue stream, it can be integrated into the grid.

That has traditionally been our approach, and it has been quite successful, but we are now at a crossroads where the grid is starting to become an active player in how the projects are selected, developed and constructed.

Before, we had a history of looking at the right opportunities where grid connectivity was almost granted. Now, there needs to be a much more thorough understanding of how the project is integrated into the grid, whether the grid is congested or not. How can we ensure that the projects can deliver the value we expected.

Sonnedix is a long-term player in the sector. We are here for the long run. Our financial arm is looking for long-term investments in the infrastructure sector. We model the projects on 30-plus years of life, and we tend to be operating those assets for that lifespan.

Is there a benefit to developing as an owner-operator vs selling at the ready-to-build (RTB) stage?

Our strategy is to build a bright future around renewables, and we are here for the long term.

Our core principle is not to develop, then construct and then flip the project. That may give you some returns from a business standpoint, and that might make sense for some companies with that particular model in mind.

We really want to be an active player in the energy transition, and that means being part of the delivery of the kilowatt-hour down to the end user.

Are you optimistic about the work required to upgrade the backbone grid infrastructure?

We are optimistic. Otherwise, we would not be in this space, but we are also pragmatic and realistic - there are things that need to adapt, and there are things that we need to change.

We need engagement with the key stakeholders and players in the sector at large, not just equipment suppliers or construction companies but stakeholders all the way down the value chain around the evacuation of energy, the grid, and the connection points.

We need to come up with a more concerted planning strategy around how we are going to be deploying renewables because opportunistic project developments and pushing those projects into the grid will create unnecessary restrictions that will not make the projects viable.

It really is a shame to have a project generating energy and not being able to deliver it to the grid because there has not been the right planning beforehand.

We are working with the regulators and different stakeholders as much as we can, including the distribution network operators (DNOs) and the transmission system operators (TSOs), to start creating that picture.

Geographically, how does Sonnedix plan which regions to develop in and why?

We have a mandate to work primarily in Organisation for Economic Co-operation and Development (OECD) type countries.

Our investors are looking for long-term stable revenues, and that is one way to contain the risk level on the investment side.

So, we are operating in Chile and pretty much all of the European countries with a similar level of operations across them all.

Our strategy is focused on where we can actively play in the electricity infrastructure in the countries, but at the same time, make sure that as we participate in this evolution, we can guarantee those stable returns going forward because we are long-term operators of the projects.

Where do you see battery energy storage systems (BESS) in the renewable ecosystem, and is hybridisation the future?

We believe so, and the rationale for this is that the grid and the delivery of electricity to the end user will require flexibility.

The more renewable energy sources that are introduced into the mix, the more flexibility that the grid is going to require.

The resource is intermittent, which generates a number of instabilities in the grid. Including storage is going to be a must.

What it brings to us as sponsors and active producers is that it allows us to flex the energy generation to a curve that an end customer might need.

By end customer, we mean activities that are relatively high, electro-intensive activities where they may need a very fixed or very specific generation profile that you complement with solar, storage and wind.

What are your thoughts on the change in direction that some of the bigger players in the space have made away from renewables?

Clearly, this news generates ripples because when big players and big participants are revisiting some other strategies, people question whether it will create a slowdown or a step back.

The answer is, absolutely, they are going to continue to grow. Frankly, we believe that we have passed the tipping point of whether renewables are going to continue to grow or not.

We see it as an opportunity to be a bigger player in the sector.

With the growth of AI infrastructure, where do renewables sit in that picture?

If we are specifically talking about data centres, they certainly create a significant demand for electricity.

I do know that the big players in the sector are not only conscious of their carbon footprint but actively participate in the deployment of renewable energies.

I think it's a significant opportunity going forward. However, to provide the type of energy curves they require, storage and a combination of multiple technologies are critical.

A data centre is going to require power 24 hours a day, and unfortunately, the sun only shines for a set number of hours a day.

The more that you can tailor the generation curve to the customer demands, the better you are at making your projects long-lasting and profitable.

What will be the impact of the EU's Clean Industrial Deal on the energy transition space, if at all?

For us, it is hopeful progress. It has the right elements around what needs to be done and promoting the development of EU technical and technological solutions, from the equipment side to construction to all across the value chain.

It is a challenging undertaking because it requires a significant amount of investment.

We see that there is a need to have a more concerted approach between the equipment manufacturers, the producers, the sponsors, like us, the grid operators, and the planning of the actual location of the project so that you can plan more holistically.

We see the EU Clean Industrial Deal as a move in the right direction, but more needs to be done to strike the right connections between the private sector, regulators and governments.

Where are you focusing your energies in the near term?

For us, it is about having a very good understanding of customer needs, making sure that we have a customer pool for our developments, and our commitment to being an active player in the renewable energy sector.

Once you understand that the customer is going to need a fairly stable and flexible supply of energy for their demands, hybridisation across multiple technologies is required.

The other point is optimisation. Because we are long-term owners, we are constantly looking to make sure that our assets are optimised and performing with the best possible output.

This includes repowering, which is very much part of our business. We have repowered hundreds of megawatts of solar installations.

Lastly, as we hybridise the sector, data will become far more important.

As we integrate storage, we are going to need to be very actively playing with the market and with the grid, and in order to do that, you need to have good data management and real-time data management.