EDP Group’s Vision and Outlook for 2024

Innovation and digitalization as cornerstones of EDP’s strategy for the coming years, the role that conventional generation will play in creating value, and how regulatory changes can impact the business. These were the topics we discussed with Ana Paula Marques, member of the Executive Board of Directors responsible for those areas.

How is the EDP Group planning to continue to lead the way in innovation and digitalization to drive growth in 2024?

Innovation and digitalization are cornerstones of EDP’s strategy for the coming years.

In terms of innovation, we want to continue to lead and drive the growth of the EDP Group in 2024 by delivering value to the business and by strengthening the company’s foresight capacity. We want to promote a more innovative culture in the organization, always in conjunction with the business and on an increasingly global scale.

We will also leverage different ecosystems to identify and test solutions that can bring competitive advantages to the group through open innovation, as well as identifying and investing in startups with high strategic and financial potential.

Finally, we will also continue to anticipate future business trends, consistently develop know-how, and increasingly promote innovation within the EDP Group through the various channels available—including through our intrapreneurship program, The Spiral. The first edition was very well received and a great success. When it comes to digitalization, our main objective for 2024 is to deepen current lines of action.

Among them are working increasingly close with the business units, streamlining the operations of the DGU itself, actively promoting EDP’s digital ambitions, and focusing heavily on efficiency and value creation.

To break down the line of action of promoting digitalization across the group in more concrete terms, we are looking to focus on three complementary vectors in 2024: accelerating the creation of value that digitalization brings to the business, progressively consolidating a digital culture and new ways of working at EDP, and renewing our digitalization ambitions through data and AI.

It is also worth noting the key role that DGU NOW will be playing. This transformation program—launched in 2023 and currently being rolled out— will be a catalyst for these major lines of action for 2024.

What about conventional generation? What role will it play in EDP Group’s strategy and what are the main challenges you foresee?

The role of conventional generation in delivering the Group’s strategic objectives is based on four pillars: a strong cash-flow contribution, creating value in the hydro portfolio, transitioning the thermal power portfolio and preparing the company for the future.

In the hydro portfolio, we want to leverage the existing structure through investments in optimization, pumping, hybridization and storage projects.

With regard to the transition of the thermal portfolio, we want to continue to ensure that we take the necessary steps to fulfil the group’s commitments to coal-free generation by 2025. On the one hand, we will work on optimising the portfolio through partnerships for natural gas conversion and hybridisation projects that will require greater flexibility in adapting the assets, their operation and their performance. On the other hand, we will remain committed to the elimination of coal by 2025, which already began in 2023 with important steps taken in the closure of coal-fired power stations in Spain and the start of the conversion to gas in Aboño. It will be essential to guarantee the delivery of these commitments, preparing the decommissioning of assets and accelerating the projects necessary for their fair transition.

"Another important challenge is the transition of the thermal portfolio, which is essential to fulfil the group’s objectives of coal-free generation by 2025."

The regulatory framework keeps changing. How will that impact the group’s operations and strategy in 2024?

TThe energy sector is known for its large investments, especially in generation assets and grids. They typically have very long service lives and long payback periods.

Therefore, it is crucial to have a predictable and stable legal and regulatory framework. Regulatory uncertainty adds risk to the business and may jeopardize project execution and viability.

At European level, the new electricity market design has just been approved. It introduces clarity into the regulatory framework, particularly regarding investment in renewable energies and networks, which is very positive.

In the United States, the Inflation Reduction Act (IRA) is also already in place to promote the energy transition with clear timeframes and funding earmarked.

In one way or another, all other countries where we operate are also moving in this direction. Overall, this is a positive scenario for EDP Group’s strategy in 2024 and beyond.

However, the regulatory dynamic never stops and there are still several challenges to overcome, such as licensing and permitting in various geographies.

It should be noted that uncontrollable and unforeseen events may once again cast uncertainty on operations, but the group has already demonstrated its resilience in the past and I am sure that, should new situations arise, we will be ready to face them.