THE SHIFT TO GREEN ENERGY TARIFFS FOR CONSUMERS 

Most energy suppliers are now providing renewable energy or ‘green’ tariffs and uptake of these tariffs among consumers has been increasing significantly in the last few years as consumers are opting for the more environmentally friendly option. However, these tariffs are presented by suppliers in different ways which can often be confusing or unclear as to where the energy is sourced from. To discuss your contract options in more detail, please contact the Carter Jonas brokerage team.

2020 SAW A RECORD DROP IN GLOBAL COAL GENERATION

Growth in wind and solar generation drove a record fall in global coal generation in 2020 of 4%. Published research by thinktank Ember revealed that wind and solar now supply almost a tenth of global electricity, with Europe leading the way. It is important to note is that the figures will have been heavily impacted by the low global electricity demand caused by Covid-19, but it is still an important step in reducing emissions from the power sector around the globe.

GOVERNMENT TO PROVIDE £112M FUNDING FOR TECHNOLOGY INNOVATION 

More details have been revealed on the funding which was first announced in the Spring Budget last month. £20 million is due to be provided for EV innovation and £92 million for technologies such as energy storage, floating wind and Biomass. This forms part of the government’s £1billion Net Zero Innovation Portfolio which aims to enable innovators to drive forward the next generation of technologies to support the energy transition. The competition for biomass is now open, while the energy storage and floating offshore wind competitions are to open in the Spring. 


SOLAR - DO’S AND DON’TS FOR LANDOWNERS

Helen Melling, senior energy specialist at Carter Jonas, says that landowners being approached by solar developers should seek professional advice in the first instance.

The market for solar energy development initially grew as a heavily-subsidised sector but 2016 saw the market stall following the closure of the governments Renewable Obligation & Feed in Tariff support schemes.

Since then, however, the technology that underpins the sector has come on leaps and bounds, increasing in efficiency and reducing in price. In addition, solar PV (photovoltaic) panels have become more reliable, meaning that maintenance is easier and cheaper, and their lifespan is much longer. Furthermore, their capacity to produce energy has been given a further boost with new tech such as tracking and bi-facial panels. 

The longer lifespan of panels means that the cost of producing and installing the panels can be spread over a longer period (up to 40 years, rather than a 25-year period which was typical in the past).

All of this adds up to mean that large-scale solar now makes financial sense – even without subsidies – and is why the market is now awash with solar developers seeking grid connections and willing landowners to host projects.  

A grid connection is still the key component required to unlock any development opportunity, and competition in the market means that landowners have to act quickly in order to mitigate the risk of any capacity being lost to competing sites. That said, advice should be sought on the terms being tabled before signing any documentation with a developer, in order to ensure that landowners have the best opportunity of securing market terms for any commercial arrangement. 

The terms of the deal will be negotiated between the landowner and the developer, who will typically be looking for a lease that spans at least35 years. Land rental offers are generally on a rate per acre basis, index-linked annually, with some offering a percentage revenue share as a top up rent to help protect against rising energy costs. 

Rental values have strengthened over the last 18 months on the back of increased demand and, whilst rates vary hugely depending on a sites size and location, offers upwards of £900/acre per annum are now achievable. 
It is important that landowners are, however, aware of the additional value that a site may offer a developer if battery energy storage is co-located with the solar in future.  Seeking professional advice early on will help ensure that adequate provision can be made in any agreements to capture this, whilst also seeking suitable comfort for items such as decommissioning. 

The developer would normally be responsible for the restoration of the land at the end of the lease term and, during the lease, the developer may allow a landowner to graze sheep around the panels – and, in some cases, even pay for that service. 
If you’re approached by a developer, we strongly advise that you take expert advice to ensure that you’re being offered a fair rent and reasonable terms.

Find out more by contacting Helen Melling on 07467 335587 or helen.melling@carterjonas.co.uk.

THE UK ENERGY MARKET

The first week of the month saw day-ahead prices spike at £106/MWh, driven by wind generation levels sitting far below their seasonal average.

This preceded a sharp fall in day-ahead prices to £46/MWh on March 10th as an unexpected surge in wind output alongside a revised forecast of warmer weather caused prices to weaken considerably.

Supply concerns driven by unplanned outages in the BritNed interconnector and numerous fossil fuel-fired power stations across the UK saw prices take an upward trajectory moving into mid-month. This was short-lived, however, as an end to the outages in the aforementioned power stations and a rise in wind generation levels saw short-term contracts fall by around £12/MWh. 

Prices showed some recovery towards the end of the month and into the start of April as anticipation of falling wind output caused upward movement - higher power & gas demand seen over the Easter weekend also provided some support. Moving into April, power prices continued to surge upwards, following a rising gas market driven by low LNG arrivals and increased demand due to the significantly colder than forecast temperatures.

Long term contracts saw bullish movement at the start of March, as wind output levels below seasonal averages furthered supply concerns.

Annual contracts rose considerably into the second week of March with Winter ’21 prices rising to above £65/MWh, as lower levels of gas storage and a rising energy complex compounded to push power contracts up across the board. 

Prices remained high into the latter half of the month however saw out a choppy movement profile moving into April. Demand concerns in the European energy market caused by ongoing Covid-related complications put pressure on curve prices, which was furthered by forecasts of warmer weather over the coming weeks. This movement was counteracted, however, by a rise in prices caused by supply concerns stemming from outages in Norwegian LNG supply channels, and the delaying of LNG cargoes to the UK due to the blockage in the Suez Canal.

Slight losses were seen into the last week of the month, with unseasonably warm temperatures pushing prices down somewhat, compounded by an increase in gas supply due to the arrival of those LNG cargoes. These were offset, however, by a recovery in longer-term prices moving into April, supported by a rising European carbon market.

Longer term prices will likely continue to be influenced by the wider energy complex and volatile global commodity markets. The global recovery from Covid-19 will also continue to influence energy prices as economies look to recover. However, recently announced lockdowns in Europe have already had a bearish impact on UK energy prices.

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 T-1 Capacity Market auction cleared at a record £45/kW/year with 2.25GW procured, just shy of the 2.4GW target set by BEIS. Twelve battery storage companies had assets cleared which is a significant jump from the last auction where only two battery assets were successful. An increase in contracts for wind and solar were also seen along with 29 successful demand side response assets. These results show early indications that the market is becoming increasingly flexible and will likely help increase investor confidence in the sector.
Figures from Scotland show that 97.4% of its electricity consumption was sourced from renewables in 2020. This actually falls short of its target of 100% by 2020 which was set in 2011 when electricity generated from renewables was at 37% of Scotland’s electricity. This highlights the progress made in Scotland over the last decade in reaching their net zero target of 2045. 
On the 1st April, the renewables arm of Opus Energy rebranded to Drax Renewables. Opus Energy has been a part of the Drax Group for several years but the rebrand aims to further demonstrate Drax’s commitment to supporting the UK in its transition to a net zero future. 
This is less than a decade since the commodity was the largest contributor to the UK grid.
TALK TO US ABOUT

Energy Valuations - Carter Jonas has valued £175m of energy and utility assets over the last 12 months. The team provides professional valuation and due diligence advice to clients such as developers, banks, private asset owners and operators of assets including solar farms, wind turbine, AD plants and battery storage sites.

Electric Vehicle Charging Points – The installation of EV charging points is a great way to futureproof your site, as the market is set to soar over the next decade. Securing grid capacity early is key, as this could restrict future deployment. Return on investment can be sought through the owning and operation of charging points, or the lease of a site to an operator for an EV charging service station. Find out more here.

Solar PV – Carter Jonas is actively site finding and advising clients on the development of over 64 sites that will enable the development of circa 3.8GW of subsidy-free solar schemes across the UK. For high energy users, self-development options are also still available beyond the closure the FIT scheme in March 2019.

Battery Storage – The market for behind-the-meter battery storage and Demand Side Response is evolving quickly. The income streams are becoming more uncertain, but the possibility of tying in batteries with Solar PV is making the financial model more favourable, particularly for energy-intensive industries with an annual electricity spend of higher than £100,000.

Gas and Electricity Brokerage – Volatility in wholesale markets, combined with rising non-commodity charges, could force energy prices up by 50% by 2020 compared to 2016 prices, according to recent figures. Carter Jonas can help manage these risks by working with businesses to produce an energy strategy and ensure they are not only getting the most competitive price through our brokerage service, but also taking advantage of other potential income streams. Find out more here.

Agency & Investment Opportunities Carter Jonas has advised on over £75m of energy agency transactions over the last 12 months. Whether you are seeking energy investment opportunities, have assets to sell, or would like advice on the marketability and potential valuation of sites or operational assets, our Energy Agency team would be delighted to assist.

@
GET IN TOUCH
@ Helen Melling
Helen Melling
Senior Energy Specialist
0113 426 9868 email me about Helen
PREV:
NEXT:

Helen is a Senior Energy Specialist based in our Leeds office.

I can provide advice on:

Keep Informed

Sign up to our newsletter to receive further information and news tailored to you.

Sign up now