GREEN ENERGY RECORDS BROKEN AGAIN AT THE END OF 2020

In what is expected to be the greenest year on record, Britain saw the first coal-free Christmas day and Storm Bella helped set new wind generation records on Boxing Day. Wind power generated more than half of the Britain’s electricity for a full day for the first time at 50.67%.

The previous record of 50% was set in August 2020 and will likely be broken again in 2021 as more turbines come online.

The Energy White Paper Sets out UK Net Zero Vision

The long-awaited White Paper builds on the PM’s Ten Point Plan and details the governments decarbonisation plans across the entire economy including transport, energy and infrastructure to support the UK’s net-zero emissions target of 2050. Whilst the paper largely just reiterates commitments that have already been announced, the White Paper has been broadly welcomed in the sector as it provides greater certainty as to how the national energy and electricity mix will change over the next 20 years. 

The Carter Jonas energy team will continue to monitor opportunities and keep landowners and businesses updated on these throughout 2021 and beyond.

The UK Energy market continues to recover from lows, providing a window for higher PPAs

A surge across power markets over the last month due to tight supply and demand margins has provided an opportunity for the Carter Jonas brokerage team to improve on our clients current Power Purchase Agreements (PPAs). In the last 3 weeks alone, we have locked in over 20 PPA renewals with an average improvement on previous contracts of 16%. If you are a generator with a PPA renewing within the next 6 months, please get in touch with the team for advice. 

Mendip District Council has instructed Carter Jonas as its energy investment advisor

Carter Jonas will be responsible for introducing energy investment opportunities, undertaking due diligence and helping it deliver sustainable returns in support of its Climate Change Emergency objectives.

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SUSTAINABLE INVESTMENTS – A HOT TOPIC!

There has been an increasing appetite for investors to secure renewable energy investments over the years. This has been driven through both the security offered from long-term government-backed subsidies, an ever-growing demand for sustainable investment and renewable energy being seen as a future proof investment. 

As the impact of Covid-19 is being felt across various markets, the energy market is one which has not been immune to the effects of our changing habits. This is supported by the findings of a new report published by Octopus group on the impact of Covid-19 on the renewable energy market. After surveying institutional investors they found investor appetite remains as strong as ever, mirroring our current experience. 

Global institutional investors expect to increase allocations to renewable energy from 4.2% to 8.3% in the next five years and increasing to 10.8% (amounting to $742.5 billion) over the next 10 years. 

According to the report, with interest rates forecast to remain depressed for a while yet, more than half of global investors are looking to renewable energy as a source of stable and predictable income. 
 
We have seen this reflected in the market in the tightening of yields applied to energy assets brought to market and through a more bullish outlook on the future hope value of schemes being repowered. The increased appetite for freehold, leasehold and operational energy assets has also seen a number of new entrants to the market, increasing competition for what is a limited number of opportunities. 

Looking forward, the current green rhetoric being seen will only serve to drive the value of these investments higher. Boris Johnson’s 10-point plan, announced on the 18th of December, outlines the strategy for a ‘green industrial revolution’, with the government investing £12 billion to promote three times as much private investment by 2030. As a result, it is relatively safe to say that the renewable energy market outlook remains strong despite the recent turbulence encountered. 

For many operational energy sites, such investments have now typically approached their peak value, presenting the ideal point to sell. It is important any party wishing to dispose of their energy sites or make investments seeks appropriate advice to ensure they achieve the best price possible. The Carter Jonas Energy Team is well-positioned to provide the best advice, with our strong links to active parties in the market ranging from infrastructure & pension funds through to high-net worth individuals and investors. 

For more information or for advice, please contact Tom Allen on Tom.allen@carterjonas.co.uk or 07775 562023.

THE UK ENERGY MARKET

Following lower levels of wind generation moving into the first week of the month, prices soared to £112/MWh on December 5th, their highest level in over a year. Prices then began to fall, settling at £45.33/MWh on December 11th, and stayed relatively stable moving into mid-December, with fluctuation in the gas market and lower wind forecasts causing a short rise in prices around the third week of the month. An upward sentiment began to show over the Christmas period, with lower renewable generation and the influence of the post-Brexit UK-EU trade agreement on wider markets contributing to the rise. Prices spiked significantly during the first week of 2021, seeing Day Ahead markets hit £148.67/MWh on January 5th, with cold weather and low wind generation again the key drivers in this bullish movement – temporary unavailability of the BritNed interconnector provided additional support.

Markets remained tight moving into December and continued along the same rising trend we saw at the end of November. December 9th saw the beginning of a week-long rise in power prices, culminating in a mid-month peak on December 15th, influenced by rising gas and carbon markets. From here, concerns over Covid-19 infection rates and a patch of warmer temperatures caused a brief fall in power prices, however the latter end of December saw recovery as curve contracts continued to rise over the Christmas period. Prices reached a peak moving into January with April ’21 contracts finding themselves at £55.13/MWh on January 4th, aided by wind generation outturn of around 8GW, almost double that of the previous few days.

The recent cold snap helped drive prices upwards therefore we think it likely that any further prolonged cold weather periods over the next month could help bolster prices further.

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, Senior Energy Specialist at Carter Jonas on 07467 335587 or helen.melling@carterjonas.co.uk.

In other news

The project will see 231 turbines installed by Danish firm, Orsted and, once complete, could power the average daily needs of over 2 million homes in the UK. Meanwhile, construction has now started on the biggest wind farm ever built off the coast of North Yorkshire.  The Dogger Bank windfarm will total approximately 200 of the world’s most powerful turbines with each turbine powering the average daily needs of 16,000 homes. This scheme, along with Hornsea, is an exceptional feat that marks a step change in the growth of the UK renewable sector.
The EU Commission document states that the new EU-UK Agreement includes guarantees on security of energy supply and “will facilitate continued flows of energy – essential to the functioning of both economies – by putting in place new trading arrangements over interconnectors”. It also established an ambitious framework for cooperation on renewable energy and tackling climate change.
The figure for 2019 is at 90.1% which is an increase of 13.4% since 2018. Onshore wind delivered about 70% of the capacity, followed by hydro and offshore wind as Scotland’s main sources of renewable power.
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Helen Melling
Senior Energy Specialist
0113 426 9868 email me about Helen
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Helen is a Senior Energy Specialist based in our Leeds office.

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