UK SOLAR DEVELOPMENT PIPELINE RISING BY A STAGGERING 700MW A MONTH

2020 has seen the large-scale solar market go into overdrive with the pre-build pipeline now at 10.6GW. This amounts to over 42,000 acres of land across the country. The Carter Jonas Energy team has witnessed this drive first-hand, seeing a significant rise in site finding for solar developments and advising landowners. We are now working on over 2.5GW of developments across over 55 sites and would encourage any landowner to get in touch with the team discuss any potential opportunities.

WORLD ELECTRIC VEHICLE DAY SPARKS MOVEMENT IN THE INDUSTRY

On 9th September 2020, the world’s first World Electric Vehicle Day, the Government announced further steps to decarbonise road transport with £12m in funding provided for research & development into EV technologies, opening up commercial opportunities which could see cars benefit from a 6-minute battery charge. Furthermore, Highways England are to provide Local Authorities with over £9m in funding to encourage businesses to switch to electric fleet vans.

FIRST TIME PARTICIPATION IN CAPACITY MARKET AUCTIONS FOR RENEWABLES

It has been recently announced that approximately 89GW of capacity was awarded agreement within the T-3 and T-4 Capacity Market Auctions for delivery 2022-23 and 2023-24 respectively. Prices cleared at £6.44/kW/year in the T-3 auction and £15.97/kW/year in the T-4 auction. Whilst more than half of the acquired capacity was secured from gas, almost 1% of entered capacity was from renewables, which is a small shift in the right direction.

CARTER JONAS ENERGY TEAM EXPANDS FURTHER

We are pleased to welcome three new members to the Energy Team this month. Sally Smith has joined to support on the administrative side while Bilal Virji and Shafk Malik have joined the Graduate scheme. They have already got stuck in with several exciting projects taking place across the country!

WHY LANDOWNERS SHOULD BE CONSIDERING SUBSIDY-FREE SOLAR

The market for large scale solar has had its ups and downs but it is facing a resurgence. Martin Williams in the Carter Jonas Energy team gives us the background and explains why landowners should be reconsidering it.

What has changed in the last few years?
Up until 2015, there were government subsidies for solar development – when these came to end, it had a radical effect on the viability, and therefore the market, for new solar development.

However, since then the technology has both reduced in cost and become more efficient and reliable. They also last longer (35 to 40 years, up from around 25), they need less maintenance and fewer repairs, and new technology also means that they produce more energy. So, developers pay less up front, and get more back.

What this all means is that solar development can now be a viable project even without subsidy.

What makes land suitable for solar development?
If you are interested in diversifying into solar, the first thing you’ll need to do is establish whether your land is suitable.

There four key requirements:

  1. The land will need to be free of environmental designations which might affect your chance of getting planning permission.
  2. Ideally, the land will be agricultural land at grade 3 or lower – higher than this and it becomes a more difficult planning prospect.
  3. As a rule of thumb, developers are seeking around 80 acres or more, but the area required will depend on the developer, as well as other considerations such as the cost of the grid connection. This area can cross ownership boundaries if a neighbouring landowner is also interested in being involved.
  4. The land needs to be a maximum of 5km from the nearest substation or be crossed by overhead lines which would allow connection to the grid. This will help to reduce the cost of the grid connection, a key early consideration for developers.

To be confident about whether it is suitable, you should ask an expert to assess your land.

What are the pros and cons of solar development?
The main advantage, and the main reason that most landowners investigate solar, is the financial benefit. You will get an index-linked rent over the term of the lease and many agreements will also entitle the landowner to a share of the revenue. Rents vary, but you could be looking at up to about £1,000 per acre depending on location – with the vast majority of developers offering a minimum of £800 per acre.

You should also benefit from an increase in either the price achieved for the energy, or the amount of energy generated – it’s essential that you negotiate a good agreement and it’s always worthwhile seeking expert advice on this.

Typically, a developer would undertake to restore the land to the original condition after the agreed lease term, though this is something you should ensure is in the agreement.

Finally, you would normally also have the option to continue to graze sheep around the panels – some developers will even pay you for providing this service.

In terms of negatives – most are avoidable pitfalls. Remember that entering into such an agreement is a long term commitment so it’s really important that you assess the developer carefully, ensure that they have a robust business model, and you can trust that they are going to do what they promise.

You should also carefully consider, and seek advice on, any tax implications, insurance, indemnity, and reinstatement costs.

Interested in finding out more?
We strongly advise that you get advice on the suitability of your land, the credibility of developer and the terms of the agreement. To find out more, contact Martin Williams on 07768 542666 or martin.williams@carterjonas.co.uk

THE UK ENERGY MARKET

Short-term UK power prices found support in August and into the start of September. Day-ahead prices spiked to a 19-month high of £55/MWh at the end of August, with Month-ahead prices hitting 8-month highs. A key driver for the rise was a slump in wind and solar output which resulted in a surprising 9-month low for UK renewables output in August. This, combined with rising demand, filtered through to push UK power prices up.
Longer-term power markets rallied over fresh supply concerns and rising gas prices. Further nuclear outage announcements from France fuelled anxiety about the reliability of nuclear output from them over the coming months. This resulted in a significant spike in French power prices which had a knock-on effect into other European power markets, including the UK. Meanwhile, gas prices were pushed higher, due to lower LNG deliveries into the UK as demand rises in Asia, the US and the rest of Europe. Hurricane Laura in the US also forced the closure of half the US LNG export capacity which helped inflate prices further.

The UK energy market outlook remains uncertain in light of Covid-19, however, prices are showing signs of recovery which could continue over the next few months as we enter the colder seasons when demand is generally higher.

Any businesses interested in advice on how current markets will impact their energy contract and/or Power Purchase Agreement (PPA) should get in touch with Helen Melling, Energy Specialist at Carter Jonas.

UK annual power prices

In other news

Battery storage revenues hit an all-time low in August 2020, but they are forecasted to soar to more than £100,000/MW/year as a result of a rising number of available revenue streams and large trading and regulatory changes forecasted in 2021. Asset owners are encouraged to utilise an experienced trader to capture and optimise available revenue streams; particularly as these revenue streams are forecast to increase significantly in number over the next few years.
Zero Carbon Initiatives continue to gain momentum. On Wednesday 9th September, the Government announced £50m of funding to support the retrofitting of renewable and low carbon technologies at social housing through 2020 and 2021. This will not only improve the living situation for millions, but also support green jobs as part of the COVID-19 Economic Recovery Plan.
Uber commit to achieve net zero by 2040. Uber are taking a holistic approach to reducing emissions via four key actions: investing in its network, expanding Uber Green to ensure riders can choose to travel in hybrid or EVs, committing $800m to help thousands of drivers transition to EVs by 2025 to ensure the infrastructure is available for rider demand, and being transparent and accountable. The company is also setting a further goal to have 100% of rides taking place in EVs in European cities by 2030, which will further support this ambition.
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Helen Melling
Senior Energy Specialist
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Helen is an Energy Specialist based in our Leeds office.

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