Exhibit 1 European onshore wind and solar photovoltaic projects show a €10 billion annual capital expenditure opportunity. Average capital expenditure (capex) opportunity by project category,¹ € billion (estimated) Onshore wind Solar photovoltaic (PV) European onshore wind and solar photovoltaic projects show a €10 billion annual capital expenditure opportunity.
6
4
Total
Total
Wind turbine generator (WTG) Balance of plant (BoP)
PV
2.4
0.6
1.8
2
BoP Grid connection Project overhead
Grid connection Project overhead
1.2
0.8
0.6
0.6
1 Gap between average capex and top-quartile capex of projects commissioned 2019–2021; value per category estimated based on total capex opportunity and relative contribution per category; based on projects commissioned 2019–2021. Source: McKinsey Onshore Wind and Solar PV EPC Benchmark, EU wave
McKinsey & Company
possible to be a top performer in terms of capital expenditure both with an owner-integrated model and with a turnkey model (Exhibit 2). Avoiding a one-size-fits-all approach across their portfolio better accounts for internal capabilities in different regions and asset types, and achieves higher, more consistent results. Companies that selectively chose their operating model all scored in the first or second quartile, while those that chose a default operating model ran the full range of performance from top to bottom. Building—or acquiring—capabilities Although choosing the most suitable operating model based on in-house capabilities is a powerful way to increase capital expenditure performance, the analysis shows that companies with better in-house skills do tend to attain higher capital expenditure performance; capabilities and performance correlated directly across both the wind and solar industries in Europe (Exhibit 3). Scaling up wind and solar plants is therefore not just a question of growing the physical assets—growing
team capabilities matters, too, whether by reskilling and upskilling employees, hiring the right people, or exploring international
Actions to fill the performance gap By focusing their capital performance strategies and execution on levers that help them bridge the gap to top-quartile performance, companies can reap large benefits while sustaining growth. Expanding workforce. Companies can leverage multiple solutions to expand their workforces amid labor shortages. For example, they can attract talent by partnering with schools and universities to develop tailored research programs and by providing mentoring and internship opportunities. Reskilling employees in adjacent industries that are scaling down, such as coal, could also be a pathway for increasing the talent pool. Companies can also play an active role in training their own workforces and those of their key contractors. For example, joint investments in manufacturing capacity— perhaps accompanied by volume guarantees— can provide critical support for contractors to achieve
Accelerating the journey to net zero
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