Why this Spanish energy tycoon is an Australian fortune teller

“And then you have something that, I noticed, you Australians don’t see so much as an asset and you’re very concerned about, which is the limitless capacity to attract talent. I mean you have a line standing outside your borders of probably three billion people waiting outside to be allowed in. And you can choose who enters.

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“That asset, along with all the other elements – space, resources, rule of law, democracy, political stability – are all unheard of. Think where you can find it. Maybe Canada, even though they have bad weather most of the year. But Australia is a very attractive long-term proposition.”

Why should Australians care what one European elite thinks about investing here? Some Australians, including most citizens, believe that Europe is wasting time on renewable energy. Their skepticism about Acciona’s boss will only increase if they learn that he has been advocating carbon prices for years.

To make matters worse, he plays polo and his family has a net worth of around $5 billion, which places him 4th on El Mundo’s list of rich people for Spain. But Entrecanales has made that fortune by being smart enough to anticipate changes in global energy over the last three decades. He inherited a construction company and turned it into a renewable energy giant. The infrastructure business remains a large part of Acciona but Entrecanales put money into the wind farms of Spain in the 1990s. Around the time someone else was creating the worldwide web, he was commercializing the power of the net.

It makes his opinion count. Entrecanales know how to run the numbers on renewable energy projects so they make money. And if he thinks Australia is a good place to build more clean power, you can be sure that others will reach the same conclusion. Some will do it for the good of the planet. Others will do it to increase their bank account. However, change will come.

The numbers determine what will happen. Chairman Acciona believes there is a solid rate of return on Australia’s renewable energy when measured in global financial base units, the base point. He evaluates everything by whether it can deliver 300 or 400 basis points, i.e. 3 percent or 4 percent in return on top of the cost of finding capital to build the project.

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“We need from our investment 300 basis points in minimum return above the weighted average cost of capital,” he said.

“Of course, the weighted average cost of capital depends on a number of factors, namely country risk and our financing capacity at home and all those elements, but that’s basically the rule of thumb. That will be the bare minimum. This is often a target and not easy as it is a very competitive market, but 300 basis points would be a reasonable goal. In Australia you are probably somewhere between 300 and 400 points.”

That may not sound like much, but it does suggest that Australia may have a slight edge in attracting investment from Acciona. And, of course, others. “In normal wind and solar, it’s a good risk-return equation, what you have to offer in your country,” he said.

What is next? Maybe hydrogen.

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The hydrogen economy is no fad. Yes, it is a subject that is notoriously premature wired an article in 1997 that said it would be the next big thing in energy. Yes, the commercial barriers are significant. But Europe is now spending a lot of time and money making green hydrogen work as a way to store and transport the energy that has been created by electrolysis powered by electricity from renewable sources.

In the Netherlands, for example, the Port of Rotterdam has struck deals with companies including Shell to import and produce hydrogen to be piped to Europe. In Spain, the company that builds trams for the western light rail in Sydney, CAF, has built hydrogen trains using fuel cells from Toyota. It will be tested on the country’s rail lines by the end of this month. Navantia, the company that built three air war destroyers for the Royal Australian Navy (and wants to build three more), is developing hydrogen-powered submarines.

Australia’s previous chief scientist, Alan Finkel, saw this happen a few years ago. Another experienced government adviser, Ross Garnaut, wrote in 2019 that Australia could become a renewable energy superpower.

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Entrecanales predicts an important role for hydrogen or related fuels – liquid ammonia is one of them – as developed economies have to import their fuels.

“Japan and Europe don’t have room for the size, the dimensions we need in terms of renewable energy to generate electricity for the electrolysis process,” he said. He added that Australia would become a natural exporter of green hydrogen. “Your capacity far exceeds your future needs.”

But will it really work? Or is this just more talk? Entrecanales thinks hydrogen trading will only happen on a large scale when fuel prices are cut in half from current prices of around $12 per kilogram. “Economies of scale have to play a big role, as they have played in every other industry in the world, and we need to have strong demand and we need to solve technological challenges.”

In summary, electrolyzers should be significantly improved, most likely by switching from proton exchange membranes to alkaline technology so that electrolyzers last longer and therefore yield better returns on investment.

Will we see a hydrogen economy with a clean fuel that is commercially viable and can be transported and exported? “We are living a moment of truth in trying to develop this technology,” he said. “I think we are close, meaning I will see it in my shift – that is, my professional life.”

So Entrecanales bet on Australia. He ran with the bull. Some of the crowds will be persecuted, of course. Some will get into some fights.

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