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Reaching a sustainable future: the future can be beautiful

There are numerous challenges to overcome when it comes to reaching a sustainable future and a welcoming habitat for our children. Not only are we late in this process, but we are also acting too slow. And to multiply our troubles, we now also have to cope with a pandemic. All this can be an eye-opener as well as an opportunity to grab the reins. We can see a sustainable future on the horizon and our vision is to make it happen.

Where we are at: change must come

We are often warned that we are in the 24th hour. There will be no habitable future for mankind if we don’t act now. Earth must breathe. Fossil fuels cannot supply the energy needs of 7.8 billion people: the deposits of these will not last and the planet can no longer bear the ensuing environmental burden. New energy sources are needed to fill the demand of the growing population while keeping the global average temperature from unmanageable rising. With population growth comes growing demand: by 2040, energy consumption is projected to increase by a third. This growth can only be met by reducing carbon-based energy sources, digital distribution, connecting systems and modernising the energy network. While this alone is a tough problem to solve we also face the risk of vulnerability.

The energy market is not purely commercial – it is also a geopolitical tableau. Just think of the examples, where states assert their geopolitical interests through the energy market, or the 1973 American oil crisis induced by oil-rich states which led to tripling prices, followed six years later by a change of power in Iran. We all feel the consequences of vulnerability and dependence on traditional fossil fuel resources. We have to reduce or completely eliminate this risk, at the same time, there is a dire need to diversify the energy market for all these reasons.

Impressive growth even in the shadow of COVID

In 2019, we may have thought we have a handful of problems to solve to create a sustainable world – and then came the coronavirus pandemic, crippling the economy and leaving many countries and markets in a state of shock. It was breathtaking that the Himalaya could be seen from 200 kilometres away in India, but on company governance levels, all management and leadership skills were needed to reduce the blow caused by COVID.

The ALTEO Group achieved impressive growth in the first quarter of 2020 when the global economy and its major players were already seeing the impact of the outbreaks caused by the pandemic. This was mostly due to our diversified portfolio and the general situation in the energy market. While more COVID sensitive businesses such as retail were paralysed, our exposure was relatively low. It is my personal conviction that we overcame the difficulties brought on by the pandemic, as a result of the successful management of recent years.

ALTEO always aims to provide partners and employees with business continuity and safe working conditions, which is why a number of precautions have been introduced in relation to COVID to minimise the risk of further transmission of coronavirus inside and outside the company. In the first quarter of 2020, almost all business lines of the ALTEO Group showed double-digit growth. With a 2,564 million Hungarian forints increase in sales revenue, EBITDA increased by 156 per cent, compared to the same period of the previous year. It was mainly due to the introduction of a new property, a 25 megawatts (MW) wind farm and a 14 MW solar power plant handed over within the framework of the investment program ending in 2019. Consolidated sales increased by 39 per cent compared to the same period last year, mainly due to the expansion of the electricity and natural gas retail segment, excess sales of the heat and power generation segment.

Exploring potential opportunities

Implementation of the planned investment program began in accordance with our 2020-2024 strategy: we are exploring potential investment opportunities, as well as implementing the transformations and necessary processes underpinning other points of our strategy. As part of this, the expansion of the capacity of the ALTEO Virtual Power Plant was started and as the first step of a more than 2 billion Hungarian forints investment program, a total of 9 MW of additional gas engine capacity started operating in early May last year. In the next phase of the development, three more gas engines with a total electric capacity of 9 MW will be installed, thus by the end of the program, ALTEO will expand its gas-fired power generation capacities by a third – and, along the process, strengthening its position as one of the largest regulatory centres in the country.

In 2021, around two gigawatts of weather-dependent renewable energy is expected in operation from electricity producers in the Hungarian electricity system. By 2030 this is projected to grow to approximately 6 gigawatts and demand for scheduling services is expected to increase in parallel. According to our estimates, the total balancing cost of electricity producers operating in Hungary’s METÁR (renewable support) and KÁT (mandatory take-over tariff) systems using renewable energy sources may reach 35-40 billion Hungarian forints (circa 100 million euros) by 2030. This is why we have introduced a service under the new brand Sinergy. For a fixed monthly fee this exempts a producer entitled to a mandatory take-over tariff from the obligation of paying a regulatory surcharge. In addition to a competitive and predictable monthly fee, no other collateral or deposit is required from our partners. Producers joining Sinergy can operate within their own competencies in a stable and predictable path with high added value.

The way to go: a sustainable shift

More and more cities, States and international organisations recognise that renewable energy sources are the key to sustainable development. More than a hundred major cities around the world cover 70 per cent of their energy needs from renewable sources; others go even further and target 100 per cent. And not just because they want to protect Mother Earth, but also because there is great economic and innovational potential in renewable energy. The benefits of switching to renewables are obvious, but this shift will be a decade-long process. Coal-based and fossil fuels will not disappear overnight. The International Energy Agency (IEA) recommends that energy companies build multi-source portfolios before switching to fully carbon-free renewables. This is just rational since renewable energy cannot yet cover all of humanity’s energy needs today, as most of these sources depend on the weather conditions and the time of day. In addition, switching requires very complex, system-wide transformations; this can take a very long time to schedule.

In the medium term, the system integration of weather-dependent renewable energy power plants will certainly be the biggest challenge. We need to find solutions that enable and help the spread of environmentally friendly technologies and keep capacity expansion in this direction on an economically and technically sustainable path in accordance with the relevant directive of the Clean Energy Package for All Europeans. We do not yet see every detail of the exact implementation process, but we are sure that the role of aggregators, which bring together different production technologies, consumers and prosumers – that is, both producers and consumers – will be paramount.

Our vision – my vision – is that the future can be beautiful – it is up to us how much effort we are willing to invest in making it happen.

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