EDPR's Fonseca on Japan Expansion and Renewables

About this expansion, it actually increases your presence in Japan fivefold. Why the timing now here in this country? Well, good morning and first of all, thank you for hosting us. Well, why now? I think that Japan is a very interesting market right now in APEC actually for three main reasons. When there's a clear and stable regulatory and legal framework that allows investments. Second of all, there's a robust climate targets and agenda in the government pushing for circa 40% renewables by 20-30 and there's a clear route to market for us to monetize our investments that I think makes Japan one of the our priority markets in APEC and that's why we are investing more. What are the challenges of this market? We've heard from some firms. So when it comes to renewable business, it becomes a little bit more difficult making inroads in this economy. Yes, I think that's as in all economies, renewables always have their challenges. I think that the the main challenge in Japan have to do with the permitting and licensing. That is usually long. But I think that the upside in Japan is that it's very predictable. And if we put the right effort and we go through the right process, the outcome is predictable. So we have this time to market. We also have the challenge of aligning communities, but that's also our priority and you always need to have the support. And I think that in Japan right now with the dialogue we can have with local communities around solar, we're seeing a, a, a way through. So I think that there's actually a supportive environment when it comes versus other countries when it comes to policies. You don't expect any big changes coming from the revision of the national energy strategy now. I don't think, I think that the the biggest changes already are already into it. I think that Japan has rightly put now an effort in upgrading the transmission grid and the investments there as renewables come in due to the intermittency and the requirements on the network, that's a must. The 2nd is there is a clear framework for us on the route to market. So those of two together, I think put us in a good position. I think that what's required now is to continue the investments in solar, mainly to put energy storage that will be a key component as the penetration of renewables grow into the markets. But I think that right now we have all the tools and the regulatory visibility we need to When you're talking about this partnership with the local communities, tell us a little bit of the challenges that you're seeing there and how you're overcoming them, because it's always the local communities that's an issue, right? Yes, for sure. I think that's in Japan. And especially as an island with limited land resources, there's always the question on the how do the goals in penetration of renewables match the usability of land and the ability of land for other uses. I think that the Fukushima project is a good example. It's over an abandoned golf course, so it was unproductive land that right now it's being put into good use. So I think that the dialogue on the how is very important. A second is, as Japan is very prone to natural stresses, disasters, there's always a concern are these investments and the way we are changing the land use compatible with security of people and resources and economic activity in the region. And so part of the dialogue has also the dialogue and the work has also to be done in ensuring communities that what's being plotted, projected is being done in a Safeway that will protect in the future from natural disasters, especially in places like Fukushima that suffer from the nuclear disaster, right. So how does Japan, for example, compare to other regions when you're trying to really bring in these new technologies and expand your business? Yes, for sure. So between 24 and 26 EDP as global companies planning to spend invest €12 billion out of that we expect over 1 billion to come to APEC and 12 circa 5 gigawatts of capacity installed. When we look into the technologies we work with, solar, wind, storage, hydrogen, I think that looking into Japan and due to what you're saying on the challenges from the community side, etcetera, I think that the big priority right now is solar. Wind does carry more headwinds in terms of community acceptance due to concerns over environment, birds, over visual impact and noise. So I think that solar is clearly a priority. And the second, as I was saying is clearly storage. Storage needs to accelerate and advance. I think that's the conditions are there in terms of markets and the ability for us to monetize. So I think those two are the biggest priorities right now. Miguel, Speaking of solar, how are you managing geopolitical tensions as well? Because we're just seeing even greater focus and scrutiny on China's major role that it plays in the industry. How are you responding to that? Yeah, sure. Thank you. For sure. That as a company. So going to that, it's undisputable that China plays a major role on the manufacturing of solar equipment. We manage. And we as ADP looking into our supply chains and also with the experience coming from the COVID years where there's a lot of stress on valley chains, we are working as a global company trying to diversify that risk. So whenever possible, we try to use a diverse set of manufacturers. Most of them do in fact come from China, but that's nowadays one part of the valley chain. There's also labour structures and other type of work that go into renewable projects that have a very localized sourcing. And so for example, in Japan, it's true that for example on the Fukushima project, we're using solar panels from China, but from a diverse, diverse set of suppliers. We have not faced any constraints in the past and we see no big concerns into the future. But we do work with local engineering, local EP, CS and I think that those are over half of the value chain in terms of value. So looking forward, I do think it's a concern, a concern or should be a priority for governments to think about the concentration of production in China. But to dispute that, given the cost advantage that China has on this production, governments will need to check if they're willing to make the investments so that that's over over costs on taking out production from China can be can be met, right. Yeah. Can you quantify just a little bit? Because if you're saying that you you you're quite dominant on China, like I'm sure a lot of other energy companies or renewable focus companies are as well. Can you quantify that dominance that you have and even de risking away from China, how much can you really do that given the lack perhaps of viable alternatives? Yes. What I, what I, what I meant is most of channel production panels production come from China. So that's the largest share of our sourcing. The way we manage these risk exposure is by having first a good knowledge of all the manufacturers in China and those that are appearing in other geographies, namely the US and even in Europe, and try to diversify to the Max, the sourcing and the partners we use for solar panels.