Mark Futyan started work on transforming Anesco just before the lockdown started. But as he told New Power in this interview first published in August 2020, transforming a relatively small company like Anesco was a very different prospect than making change in a large corporate like his previous company, Centrica.
At the time the Covid-19 lockdown started, Mark Futyan had spent several weeks in the chief executive’s chair at Anesco working out future plans for the company and he was faced with implementing changes during lockdown. But the company is one that has been able to stay in operation during the crisis and he says that has only made some of his reshaping more difficult. For other parts, he says, it has worked out quite well.
How does Futyan see Anesco evolving? It focused on battery storage after solar subsidies dropped, he says, but he plans to take it back to its roots: “We built a fantastic capability in storage and we will still offer that, but we will be a solar-led company that does batteries, rather than battery-led that does a bit of solar. That’s one of the strategic principles.”
we will be a solar-led company that does batteries, rather than battery-led that does a bit of solar. That’s one of the strategic principles
That focus on solar is purely led by the market opportunity, he says: “There is a huge opportunity coming with the reintroduction of Contracts for Difference (CFDs) and the market competitiveness of solar. There is a very significant near-term opportunity – in order to reach our Net Zero targets we are going to see gigawatts of solar built in the next few years.” Battery storage, in contrast, has a role now in frequency regulation, but he says that is short-term. After that, storage will have to wait until they can develop a balancing role with energy arbitrage. That, he says is a little bit further out. For batteries now, “Many investors are finding it difficult to make their investment case work, whereas for solar everybody gets there now, it is mass market and a whole suite of investors can make their numbers work. We have seen a resurgence of interest.`’
Another of Futyan’s strategic principles is to go “Back to our core business of being a services company”. Anesco had amassed about 1000 MW of assets but they are being sold, in order to release capital for growth.
Now, Futyan says, “Our model is one whereby we can do everything to enable investment to happen, so we develop sites and bring them forward for investment. We will do EPC [engineer, procure, construct] contracting. We will do O&M – we already have a gigawatt of assets that we operate in the UK – and market optimisation.” It will launch a third party optimisation service – Futyan says, “We already do that for our own assets, but once we sell those assets we suddenly have no conflict of interest and we can be quite neutral in providing this service to any customer.”
The company had set up a team to install residential solar and heat pumps on a large scale, but Futyan says closing that business line was an early decision, because, “The size of business that we are, we could not chase every market.” Instead it is focusing on large commercial and industrial and on grid-scale installations at the upper end of the scale where he sees most impact. He says, “We are seeing a lot of rooftop inquiries coming in. We are in late stages on some pretty big rooftop solar projects … but ground-mounted tends to dominate”.
“We are agnostic about whether we are in front or behind of the meter,” says Futyan, but solar and storage is most competitive and effective at the large scale, so “large rooftop install or grid scale. They can be projects we develop ourselves or projects someone else has developed and they are looking for a contractor to build an operate”. That was the model for Anesco’s first European project in the Netherlands: “Someone else had developed it and they were looking for someone else to build it and operate it for life and that’s where we came in.”
Futyan expects that for most of the new capacity in Anesco’s portfolio the company will bring it through the development pipeline from start to finish. But he says, “we will grow at all points along it”. The large commercial and industrial projects, in particular, often have an entry point where companies are competing to provide a construction and maintenance package.
He runs through some recent examples. Anesco will remain as operator for the 12MW Bumpers solar power project, which was sold on to Gresham. It has taken on O&M for around 50MW of capacity for Alpha Real.
Repowering is beginning to be an option for some longstanding sites but according to Futyan, “The bulk of the opportunity is starting fresh with new sites. Sometimes they are an extension of existing ones where there is already a connection and infrastructure in place and a relationship with the landowner.” Anesco is looking sites across the country: “ You tend to get a tradeoff. Further north you have less sun but cheaper land and more availability of grid connections. If you can find a sweet-spot site in the Southwest with grid connection and a good deal on your land that’s a wonderful investment, but they don’t tend to exist any more. It’s about finding the right balance between different cost drivers.”
The bulk of the opportunity is starting fresh with new sites.
The biggest challenge is the grid connection. They are available, but, “Getting grid connections at a competitive cost is an increasing problem and that is the difference between a good and not so good project.”
I ask about co-location with battery storage. Futyan discusses Anesco’s experience at Clay Hill, one of the first co-located sites in the UK. He says, “They are interoperable and you could use the solar to charge the battery and so on, but we are finding that the way that is optimal is to treat them as if they were completely separate [and may as well be ] at the other ends of the country.
“That may change in the future when there is more value in arbitrage and time shifting .. but as it is now the real value in a battery is in providing frequency regulation and balancing services and there is not a particular benefit in doing that from the same site as a solar farm.”
He adds, “The main reason why we see an opportunity for co-location is that there are construction cost savings and grid savings when you put the two on the same site.” That might make a case for co-location but “Investors tend to prefer one or the other.” There are specialist storage investors but although mainstream investors can get comfortable with storage that is exposed to long-term liquid markets, “they struggle with the exposure to complex short-term regulated flexibility markets. Most of our investors don’t want to be exposed to both and therefore choose not to develop co-located sites. That is why there just aren’t that many.”
On co-location we are finding that the way that is optimal is to treat them as if they were completely separate
Alongside these changes in the business activities and structure, Futyan says, “We put a lot of emphasis on refreshing the organisation’s culture. [We are ] fundamentally changing its nature into a more trusting, open collaborative one and we have a central mission that’s all about accelerating the transition to a zero carbon future. The green agenda is front and centre and we have a fresh set of values that brings us together. I am trying to make it central to who we are and how we operate.”
I am surprised that change was needed for a company born from solar, but Futyan explains: “The old vision was about helping people realise full commercial potential from opportunities, which is a raison d’etre for any company but is maybe not quite so inspiring… The company was ultimately founded on regulatory opportunity and that was why it had that vision.” The founders capitalised on incentives for solar and ECO, but “Now we are in our next phase I see it differently. We have been fortunate enough to inherit a capability and a legacy that can enable us to make a real difference.” He relates that back to his decision to sell assets, saying, it was, “Tying up our resources .. We can do much more if we release that capital and use it to grow our people and our capacity to do more project work … There is lots of capital out there but very few ‘boots on the ground’ to make it happen.”
He is energised by the ability to put the green agenda into practice straight away. He likes the fact that “Unlike Centrica, which had a corporate social responsibility agenda it was never quite so clear because there were lots of things that were not particularly aligned with the environmental agenda about the company. Whereas it is crystal clear with Anesco: you have solar that is zero carbon, you have flex that can enable renewables and you have energy that is an essential complement that is bringing down the carbon footprint. “Everything that we do aligns with that, so why not make our inside match our outside?”
Changing through lockdown
That is the vision. Achieving it during lockdown was a challenge and an opportunity, he says: “Turning the world upside down has made everybody reflect a little bit”.
Before lockdown he had already made top-level changes to flatten the management structure. A group of C-suite directors each with a leadership team has become one CEO and a set of directors in a flat structure. That meant four or five senior people leaving and one or two senior people coming in. But first that was done quickly, …and secondly at senior level we had the right business lines and the right resources but they were not organised well.”
After making the changes throughout lockdown (see box) now Futyan says flexible working and collaboration spaces will stay. But, “That is what people are going to need post-Covid: a chance to come and connect with other human beings.”
Happily the reorganisation comes as the company is recruiting: “The new model is more asset-light and people-focused so we are increasing our staff. Maybe we will move people across and upskill them. It’s a careful repointing of the talent we have to a placed where it can have most effect.”
The new model is more asset-light and people-focused so we are increasing our staff.
A key growth area is optimisation. Futyan says, “It’s a full market offering for solar and storage. Many investors would go to the trading houses or aggregators to do that. We are offering that same service without having to go to another organisation and the benefit – the key to our proposition – is that we can manage the O&M and the optimisation under one roof. We will have an integrated thinking and choose to do maintenance on a day when there is negative pricing and you wouldn’t be generating anyway. Just by bringing the two together you will be able to get better value from the asset.”
That’s one reason why he thinks this business area can grow. The other is that Anesco operates half its 150MW of storage in the market.
His full suite offering includes: setting the tight monetisation strategy for the asset; longer term PPAs, auctions and bidding – eg Capacity Market prequalification; ancillary services – fast response for a battery or turndown for a solar farm it will be a turn down offering; and Balancing Market, day ahead and within day trading.
However Anesco won’t build a full in-house 24/7 trading capability. For that, Futyan going through the selection process for a trading partner and is in negotiations with four different parties.
“We are targeting a launch of our full offering in November and that’s when we need to have everything and our systems ready to roll,” he says.
Will that put Anesco in competition with the flexibility providers? “It’s not direct competition, because they were founded as DSR aggregators and we are not in the demand response side. This is purely grid-scale – and behind the meter solar and storage asset optimisation.” It will put them in competition for one business line – as it will with one of the business lines of the trading houses. Futyan considers the angles: “You have the aggregators who started with DSR and think they can do the same thing in the flex market; then you have the traders who were monetising nuclear power stations and CCGTs and now say that is relevant to solar and possibly to batteries as well.
“Both sides of that divide are struggling to offer something customers really want in the middle and we think there is room for another specialist.”
He does not believe the company will have to follow other aggregators’ route and take on a supply licence. That would take a while; instead Anesco will use its trading partner’s licence, although it has not finalised the model.
We are already a £75M turnover business that has the financial standing to be able to take trading positions
And Futyan says Anesco won’t be in the position of some aggregators “who just didn’t have the financial strength and resources. We are already a £75M turnover business that has the financial standing to be able to take trading positions and people know we will be around in five years’ time to honour contracts.”
Sites in lockdown
When lockdown began there were questions for many energy asset owners and developers about whether they could access their sites. Anesco had two major projects in train.
Bumpers is a solar farm in England and “we manged to still get people to work and complete the project – just – on the basis that we were essential workers in the electricity industry and we could implement social distancing because of the remote rural nature of the workplace.”
The Netherlands project was more challenging. “No-one was going there on an aeroplane and for a period we could not get our people out or back again, partly because non-essential international travel was advised against.” Anesco switched to a local contractor for as long as possible. “So for a lot of the early work we did what we could, managed around it and kept the project alive, and then in the later stages where there was a bit more relaxation we were able to send people over by car.” The company had to find local B&Bs who could provide the right separation, “Then there was the problem of how to feed everybody.”
Now, “the piles are going in and the structures are going up and the project is amazingly on track and on budget.”
Futyan says, “The easy option would have been to say let’s just push it back three months. But that’s the beauty of working for a smaller, more agile business – you can find a way.