Daniel Calderon: He’s got the power

Currently, a fifth of the world’s electricity is produced by renewable energy. New solar power accounts for half of all new capacity, followed by wind power, which accounts for a third – making this the first time in history that added solar capacity managed to outstrip all other electricity producing technology. Despite the best efforts of French President Emmanuel Macron, Donald Trump might be saying a long goodbye to the Paris Agreement, but there is nothing even he can do about the fact that the cost of producing clean energy is plummeting by the day, making it an increasingly cost-effective and viable solution for many countries.

“Back in 2006, if you wanted to build mega solar plant in somewhere like Germany, it would cost you $10m. For those plants to make a profit they would have to sell electricity at 50 euro cents per Kilo Watt hour (kWh). Today, in Egypt we have plants selling at eight cents per kWh.

“In 2006, a solar panel had an efficiency of just seven percent – meaning only seven percent of it was converted by sun rays. Today that number is in the twenties, while the cost of plants has dropped below $1m/MW. For example, you could be building something at less than 10 percent of the cost in 2016, and it is three times more efficient just a decade later,” says Calderon.

Little wonder Calderon, a German-born Colombian who previously had leading roles at General Electric and Masdar, has a lot to smile about. During his five-year stint as Masdar’s head of origination and investment management, he helped acquire, develop and operate projects in the renewable energy sector, investing $7bn in wind and solar projects.

“There was an opportunity to do the first ever wind farm in Jordan, and I saw how renewable energy could significantly lower the cost of power generation. We were producing electricity at just 12 cents per kWh. It opened my eyes to the opportunities that lay ahead in this field and the sustainable impact we could make,” he says.

In 2006, a solar panel had an efficiency of just seven percent. Today that number is in the twenties”

In 2014, Calderon teamed up with the late and legendary co-founder of Petrofac International Maroun Semaan to create Alcazar Energy, with the primary goal of being an independent developer and power producer for renewable energy generation across the META region. But with a key difference: rather than enter the top end of the market dominated by government-owned entities that focus on large, industrial-scale energy generation projects, Calderon decided to home in purely on the mid-market segment.

Storage wars

Battery costs mean solar power is becoming more viable

It may be early days but Alcazar Energy is one of many players in the market eagerly watching the rapid growth of electric vehicles. India has already targeted complete electrification of all vehicles by 2030, with China, the US and Europe heading in the same direction.  Much of this is being propelled by falling battery costs. According to the latest Bloomberg New Energy Finance Report, lithium-ion batteries have seen a 79 percent drop in costs since 2010, “making the idea of storing energy a possibility in the coming years.”

The report says that cheaper batteries would allow utilities to store up electricity that was generated during the day by solar farms and use it at night.

It adds: “Adding a battery to an existing wind or solar plant can give it access to high-value hours. By 2025, four-hour battery energy storage will start to compete with gas plants, even in countries with cheap gas generation like the US.”

Renewable energy sources now deliver a fifth of the world’s electricity

Public-private partnerships

This has been the pattern in more mature energy markets, with private investors occupying a big role in developing medium-scale renewable energy facilities – more than 190 independent players already exist in this market in Europe and the US.

This, of course, is where the serious opportunity is. According to Bloomberg, 72 percent of new capacity worldwide will be wind or solar by 2040. In the META region, 680GW of wind or solar energy is required, equating to a market worth a staggering $400bn.

That would help explain Alcazar’s impressive array of shareholders that include Blue Stone Management, Jordan-based Dash Ventures International, IFC (a member of the World Bank Group), AMC and Mubadala Infrastructure Partners. He says they have been a central part of the company’s success and the reason they have grown so quickly.

What is different about our company is we want to build a plant and operate it for the long term”

“There is a gap for us here, whereby we are not competing with the big players. We have the right project finance, equity and construction teams that can deliver these projects for us, and that’s exactly what we have been doing,” he says.

He can say that again. The company already has one solar and two wind projects in Jordan, a wind project in Turkey and four solar projects in Egypt. Calderon has specifically been targeting countries with the right legal framework in place – with governments in those three countries seen as largely supportive to early entrants in the market.

“These countries really benefit from their renewable energy policies and these are the markets that have grown. Having the right legislation is one of the key points when we look at coming to a new country, we look to see if there is a renewable energy framework because we want to invest long term,” he says.

“The region has many developers that come to develop a wind plant then they sell it to make a profit. What is different about our company is that we want to build a plant and operate it for the long term. So the legal framework is important. I think many regional governments have actually done an excellent job and for us, being in DIFC allows us to have all the right compliance. And in Egypt, Turkey and Jordan we can now sell electricity at a lower cost than other forms of power generation,” he says.

Value added

Thanks to Alcazar, 357,000 households in the region will be powered by renewable energy, and it is a number that is only heading up – and fast. And despite fears that Donald Trump’s withdrawal from the Paris Agreement would dent the industry, Calderon says that once again, what matters is the numbers.

Wind and solar will be at the core of delivering power to 357,000 households in the META region

Doing the maths

Fossil-fuel-powered stations are no longer economically sensible

The economics of generating electricity from fossil fuels are deteriorating rapidly as renewable energy technology plunges in costs. That’s the conclusion of a Bloomberg New Energy Finance report on the levelised cost of energy, a measure that takes into account the expenses from buying equipment, servicing debt and operating power plants using each technology. In most places, wind and solar will work cheaper than coal by 2023, the research group said.

“Some existing coal and gas power stations, with sunk capital costs, will continue to have a role for many years, doing a combination of bulk generation and balancing,” said Elena Giannakopoulou, head of energy economics at BNEF. “But the economic case for new coal and gas capacity is crumbling.”

The cheapest solar and wind costs can now be found in China and India, which are also among the worst polluters. The tumbling costs will continue until at least until 2040 for both renewable energy sources worldwide and they’ll become cheaper than coal and gas within five years, the report showed. Coal and gas generate more than a third of the world’s electricity. For now, they remain the cheapest sources of electricity even after the sharp drops in the cost of wind and solar power.

Source: Bloomberg*

“Look, we are fortunate we are in a region where renewable energy actually lowers the cost of electricity – in the countries where we operate we are saving money for governments. In the eight plants we have developed, we will save governments around $1.6bn in the fossil fuels they would have to burn. But just as important, with them we are also creating sustainable jobs,” says Calderon.

Job creation is one of the many wider benefits of this sector, one that Calderon is especially proud of. Its current plants will see 4,700 people employed during the one to two year construction period. The development of renewable energy plants is labour intensive, with the construction of one mid-sized plant of 50MW creating an average of 750 jobs. With plants typically located in rural and sub-urban areas, renewable energy can have a massive stimulus on local communities.

We were producing electricity at just 12 cents per kWh. It opened my eyes to the opportunities that lay ahead in this field”

He explains: “We care about developing talent in the field of renewable energy, too, and are working with local communities to train them before construction so that they have the right skills. A word all of us like very much in this company is ‘legacy’. We believe all our projects are sustainable and they are built that way, including our relationships with the governments. Our focus is on creating that sustainability. When I go into these communities in places like Turkey and I see how excited they are about what we are doing, that’s when I see the real value in what we are doing.”

There is, of course, also the added value of tackling climate change. Calderon’s projects are estimated to help reduce CO2 emissions by 710k tons per year and save 1.5 million cubic metres of water each year. Given the META region has one of the highest carbon footprints in the world, creating energy independence can only have a positive impact on the geopolitical landscape.

As for Calderon himself and Alcazar, the future looks bright. Barely four years since starting the company, it has already become a serious player on the META stage and expansion into other regional countries could be on the cards. Along the way he has been supported by a number of high calibre individuals whom he credits for his success and, like him, have left world-class companies to join Alcazar and its vision for a sustainable future.

He says: “Every day is a new challenge and it wasn’t easy to start this. But I was humbled to find that when you explain to people that you want to build a legacy, to catalyse the development of renewable energy, to lower the cost of electricity and create sustainable jobs, just how excited people can get. That was amazing to discover.”

At this rate, there is plenty more excitement to come.

In Egypt, Turkey and Jordan we can sell electricity at a lower cost than other forms of power generation”

Renewable energy is potentially a major job creator

Energy well spent

Daniel Calderon’s resume

Prior to Alcazar Energy, Daniel Calderon worked at Masdar as the head of origination and investment management for five years where he acquired, developed and operated projects in the renewable energy sector.

Prior to Masdar, he worked at General Electric in various M&A and principal investments roles in Asia, Europe, North and South America. At the end of his GE career, he was origination director at GE Energy Financial Services where he covered equity investments in the solar and wind sectors.

Calderon has developed several GW of renewable energy projects, including the first and second utility scale wind farms in the Middle East, two of the first solar PV plants in the UAE and Jordan, the first solar CSP plant in the Middle East, the world’s first CSP Tower project with salt storage, and the world’s largest off-shore wind farm as of 2014.

Prior to founding Alcazar Energy Partners, he also had the opportunity to be an early investor in various successful renewable energy development platforms such as Fotowatio, Torresol Energy and Theolia among others.