Portuguese oil company Galp Energia will become one of the biggest players in Europe’s booming Spanish solar market after closing a €2.2 billion ($2.4 billion) deal for the solar assets of Spanish construction firm ACS. 

The deal includes 900 megawatts of operational assets and a pipeline expected to yield a further 2 gigawatts by 2023. ACS, via subsidiary Cobra Concesiones, won 1,550 megawatts in Spain’s 2017 auction.
Galp plans to direct 10 to 15 percent of its future investments toward a "competitive renewable and new businesses portfolio," Galp CEO Carlos Gomes da Silva said in a statement. That percentage is much higher than the amount invested by most other oil companies.
“This deal will strengthen Galp’s position as an integrated energy player and represents a significant step toward our commitment to support a gradual transition into a lower-carbon economy,” Gomes da Silva said. 
Galp said it will self-finance the Spanish solar pipeline and sell completed assets as necessary to keep its total net spend between €1 billion and €1.2 billion annually. 
Spain was the largest European PV market in 2019 with 4,680 megawatts installed, according to SolarPower Europe. Conservative estimates from the Spanish trade body UNEF put annual installs at 3 gigawatts per year through 2030.
Spanish utility giant Iberdrola is targeting a 3-gigawatt solar portfolio in Spain by the end of 2022.
Galp's new solar pipeline puts it in Iberdrola's league within the Spanish market. (Credit: Galp)

According to data from Wood Mackenzie, Spain represents almost half of Europe’s subsidy-free solar pipeline. And it has a huge 15-gigawatt pipeline of projects planned between 2020 and 2024.

"Spain remains Europe's hottest PV market in 2020, following more than 4 gigawatts of installations in 2019," Tom Heggarty, principal analyst at Wood Mackenzie's energy transition practice told GTM. "There is a huge pipeline of assets in development – the key challenge for new market entrants is acquiring projects with grid connection agreements. More companies are looking to take the same approach as Galp by using M&A to enter the market – this represents the sixth announced M&A transaction in the Spanish solar PV market since the beginning of 2020," he added.

ACS is a major construction firm, owned by Florentino Pérez, the colorful president of soccer giant Real Madrid. It also acts as an engineering, procurement and construction provider for onshore and offshore wind projects.

Last April it hired a group of investment banks to assess the prospects of floating its renewable energy development business. ACS’ 2018 annual report puts the firm’s global renewable energy pipeline, covering solar thermal, solar PV and wind at 10.8 gigawatts, with 7.7 gigawatts of that total coming from solar PV. 

Outspending the oil majors on low-carbon projects

Despite annual revenue of $19 billion in 2018, Galp is a relatively small player in the oil sector. BP’s 2018 revenue was $294 billion. Still, Galp has pledged to direct 40 percent of its investment into the energy transition. 

With total annual investment of €1 billion to €1.2 billion, that means the company will designate €400 million to €480 million each year toward low-carbon projects — a comparable figure to far larger oil and gas players. It’s also more than the amount pledged by Saudi Aramco, which announced a $500 million fund as its first meaningful foray into the sector.

On a relative basis, it puts Galp way ahead of the oil supermajors. According to data from the Carbon Disclosure Project, Total has invested the highest proportion of its capex in low-carbon projects (between Q3 2010 and 2018) with a rate of 4.3 percent. BP was second at 2.3 percent. Chevron and ExxonMobil trailed distantly at 0.23 and 0.22 percent, respectively. 

The majors have made a vast number of smaller investments across the spectrum of the energy transition, from EV software to energy storage and emerging-market commercial and industrial solar developers.

In terms of acquiring megawatts of renewable power generation, offshore wind has provided increasingly big wins for Shell and Equinor. BP is targeting 10 gigawatts of developed solar assets by 2023 via its 50-50 joint venture Lightsource BP.