FALLING COSTS OF SOLAR AND WIND PRODUCTION COULD HELP TO DISPLACE FOSSIL FUELS BY 2035 

Reports from the Carbon Tracker thinktank have this month claimed that huge steps are being made in the green revolution of global power, in that renewable energy sources may be able to displace fossil fuel generation by 2035. Estimates made in the reports in question state that rapid falls in the cost of wind and solar generation may be the driving factor in pushing fossil fuels out of global energy production; solar generation is to play a crucial part in catalysing the renewable takeover, with all existing solar PV capacity predicted to be cost-competitive with fossil fuel generation by the year 2030.

GLOBAL ENERGY DEMAND SET FOR POST-PANDEMIC RECOVERY

Energy demand is expected to reach levels more reflective of pre-pandemic times this year, with a predicted 4.6% increase in global demand which would see levels surpass those seen in 2019, according to the International Energy Agency (IEA) in their Global Review report. The first quarter of 2021 has already seen electricity demand reach notably high levels due to a string of cold, windless weather across the first few months of the year. IEA forecasts predict demand to remain at a high level throughout the remainder of the year and cited the effects of the ongoing global recovery from the Covid pandemic as a key proponent of this trend.

ELECTRIC VEHICLE SALES HIT RECORD LEVELS IN EARLY 2021 

Record numbers of EV and hybrid vehicle sales in the UK were recorded over Q1 2021, indicating an acceleration in the shift away from petrol and diesel-powered cars. Battery electric cars and plug-in hybrids accounted for 13.9% of the market share in April, showing an increase of 7.3% from the previous year as confirmed by the Society of Motor Manufacturers and Traders (SMMT). SMMT Chief Executive Mike Hawes noted the positive trend in EV sales as a step forward in the UK’s green recovery plans, however reiterated the increasing need for more widespread and accessible charging infrastructure in continuing the progress being made in the EV sector.

POWER PRICES SOAR ON RISING CARBON AND GAS MARKETS

The last year has seen notable deviation from historic seasonal power market trends due to the influence of a number of global drivers. Over the last month we have seen markets spike to a higher level than we would usually expect to see at this point in the year, with long-term contracts reaching a 28-month high in late April. With prices remaining notably high, the Carter Jonas energy brokerage team are looking to extend PPA clients further out as far as 2023 or 2024 to take advantage of the current high markets.  Any generators interested in advice on how current markets will impact their 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.


SOLAR DEVELOPMENT – PLANNING FOR THE FUTURE

The UK Government’s withdrawal of subsidy payments for solar in April 2019 led to a period of market adjustment and subsequently the emergence of what is now termed large-scale subsidy-free solar. In the absence of subsidies, for solar schemes exporting the generated electricity to the grid network, project scale is now important, with developers typically seeking schemes covering 100+ acres. Large-scale subsidy-free solar comes with its challenges, and the impact of planning constraints is amplified by the scale of development. National Planning Policy sets the parameters for development, but whilst in some areas policy is clear cut, others are open to interpretation, increasing planning risk as to what may gain consent. 

As it stands, solar projects over 50 megawatts (MW) in England must secure approval as a Nationally Significant Infrastructure Project (NSIP), a process administered by the Planning Inspectorate instead of local planning authorities. Similarly in Wales, solar projects over 10MW are now required to go through the new Developments of National Significance (DNS) process, a process administered by the Planning Inspectorate Wales. In both cases the process can be drawn-out and unwieldy for the uninitiated, but provides competitive advantage to those with the appetite.

Plans for the largest solar farm in the UK, a 350MW (890 acres) development at Cleve Hill Solar Park in Kent were granted a Development Consent Order through the NSIP process in May 2020, and since then  two further schemes are ongoing; 150MW  (555 acres) Little Crow Solar Park near Scunthorpe which is currently in examination, and the 500MW (1400 acres) Longfield Solar Farm near Chelmsford which is expected to be submitted to the Planning Inspectorate in the latter half of 2021. In Wales the 63MW Elwy Solar Farm, which was negotiated by Carter Jonas, is going through the DNS process and an application was submitted to Welsh Government this month.

The increase in solar NSIPs is driven by one of the key characteristics in the current solar market; economies of scale. Most solar farms either recently granted planning consent or currently in the planning process sit in the 30MW to 49.9MW range as this scale of development is widely considered to be needed to make subsidy-free schemes financially viable. Development costs, application fees and overall planning risk for such schemes are significantly lower than for NSIPs. Consequently it is almost inconceivable that a 51MW solar park would ever be proposed under the current NSIP regime owing to the higher costs associated in preparing and submitting an NSIP application and the increased planning risk involved. To justify the increased costs and risk associated with an NSIP, the scale of development needs to be large enough to provide a level of return reflecting the higher risk, taking into account the proposed grid connection as well.

Last year, a change to the NSIP and DNS regimes meant that battery energy storage developments over 50MW in England and up to 350MW in Wales would no longer be considered NSIP or DNS, and therefore gain consent through the local planning system. In England, this change has stimulated debate on the NSIP thresholds for solar farms and whether they should be changed.

The 50MW threshold has undoubtedly created fierce demand over the last few years and competition for sites and grid capacity keeps growing. The developing market for large-scale subsidy free solar and the importance of this technology is about to be reflected in National Planning Policy as solar now joins wind turbines in being recognised as ‘Essential Infrastructure’ in the flood risk vulnerability classifications in the latest draft revisions. This change sees solar become an appropriate use in flood zones 2 and 3. Further tests need to be passed for a scheme to be approved in flood zones 3a and 3b; it must be demonstrated that the proposed development will provide wider sustainability benefits to the community that outweigh flood risk, and that it will be safe for its lifetime, without increasing flood risk elsewhere and where possible reduce flood risk overall.

Planning constraints for large-scale subsidy-free solar also include the usual suspects; green belt, landscape and visual impact, ecology, archaeology and agricultural land classification.

For a solar development to be considered an acceptable use in the green belt, very special circumstances need to be demonstrated. This will only be proven if the benefits of the proposal demonstrably outweigh the potential harm and inappropriateness of the development to the green belt.

There is an emphasis on planning for climate change within National Planning Policy which seeks to help increase the use and supply of renewable and low carbon heat and energy. It is recognised that large-scale renewable energy developments such as solar farms will have an impact on the landscape character and setting of an area, so proposals for large-scale subsidy-free solar need to satisfactorily address and mitigate any adverse impacts by appropriately siting and screening the development. Solar farms are far less visually intrusive than wind farms, but cumulative landscape and visual impacts do still need to be considered as part of any development proposals.

In terms of agricultural land classification, National Planning Policy states that the economic benefits of Best and Most Versatile (BMV) agricultural land should be taken into account, with preference being given to areas of poorer quality land. BMV land is defined as being classified as Grades 1, 2 and 3a. A number of factors should be taken into account by Local Planning Authorities when determining applications, including encouraging the effective use of land by focussing solar farms on previously developed and non-agricultural land, provided that it is not of high environmental value and, where a proposal involves greenfield land, considering whether poorer quality land has been used in preference to higher quality land and whether the proposal allows for continued agricultural use and/ or encourages biodiversity improvements around arrays.

However, a recent decision on a solar farm in Skegness where Anesco are the developers, saw planning consent given to a development on agricultural land that was classified as Grade 1, 2 and 3a. The loss of Grade 1 land was strongly objected to by Lincolnshire County Council but this did not preclude the development from being approved locally. This case provides an example of where the wider sustainability benefits of the development outweighed the impact of taking Grade 1 land out of agricultural use for the 40-year operational life of the solar farm.

National Planning Policy recognises the temporary and time-limited nature of solar farm development and planning conditions can be imposed to ensure installations are removed once no longer in operation and the land is restored to its previous use. 

If you are a renewable energy developer or owner with land that you consider potentially suitable for solar farm development and require specialist planning advice for any of your proposals, whether it be matters considered in this article or any other aspects of energy planning, then the team at Carter Jonas are always on hand to offer advice.

Please contact George Oldroyd on 07765 745103 or george.oldroyd@carterjonas.co.uk.

THE UK ENERGY MARKET

The first week of the month saw day ahead prices rise to £62.44/MWh, driven by increased demand as temperatures fell 6 degrees below seasonal averages. This preceded a spike in price as demand concerns continued, with day-ahead prices reaching £93.42/MWh on April 13th, and month-ahead contracts hitting their highest April-time prices since 2008. A fall in wind generation levels and outages at the BritNed and IFA 2 interconnectors provided support to prices at this time. 

Moving further into April, increased wind generation forecasts and an expectation of slightly higher temperatures for the remainder of the month saw short-term prices fall sharply; power prices tracked the gas market downwards, seeing a fall of almost £30/MWh between the second and third week of the month due to the impact of weather fundamentals on demand.

Short-term contracts rebounded towards the end of April, as colder and largely windless weather caused supply and demand imbalances. Continued outages at the Sizewell nuclear power plant and a fall in gas storage levels also provided support by furthering supply concerns. Revised colder weather forecasts and expectations of lower wind generation were once again a factor in causing a rise in short-term markets moving into May, as day-ahead prices hit £74/MWh into the first week of the month.

Longer-term prices began the month with gradual upward movement, as the support of a rising European carbon market on the UK energy complex saw power prices increase by £1.5/MWh. Curve contracts witnessed a brief fall into the second week of the month, as power prices tracked down a bearish gas market pressured by a now falling carbon market. 

Prices saw a significant rise moving into mid-month, as prices surpassed the 27-month high in front annual prices seen in March to hit £62.35/MWh on April 22nd, amongst an increase in demand due to the influence of reduced French and Dutch interconnector capacity and sub-seasonal temperatures on the energy complex. 

Slight losses were seen moving into the third week of the month, as concerns regarding a potential oversupply in the European gas market filtered through to put pressure on power prices. The rest of the month, however, saw long-term contracts rise significantly, surpassing the prices seen mid-month to once again reach a 28-month high in hitting £66/MWh on the last day of April. Supply concerns on the back of maintenance on the IFA 2 & BritNed interconnectors, increasing demand due to continued low temperatures and a rising gas market following the Ukrainian capacity auction all compounded to drive this sharp upward movement.

Longer term prices will likely continue to be influenced by the wider energy complex and volatile global commodity markets. Economic recovery from Covid-19 will also continue to influence energy prices and, considering the ongoing and forthcoming easing of lockdown measures in the UK, we are likely to see the effects of this on the energy complex sooner rather than later.

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

Plans have been unveiled this month to build what would be the UK’s largest electrolyser situated next to a major windfarm. Located next to Scottish Power’s Whitelee windfarm, the 20MW electrolyser would be the key component of a green hydrogen facility at the site and would be able to produce up to 8 tonnes of green hydrogen per day. The facility will be powered by a 40MW solar farm, and a 50MW battery energy storage scheme which are also part of the planning submission – Scottish Power expect a decision on the planning application by the end of 2021.
Located in Newport, Wales, the solar project at Llanwern spans around 260 acres spread across three separate parcels of land and is now being cited as the largest subsidy-free solar installation in the UK following its completion in early-April. At 75MWp, Llanwern edges just ahead of the Bradenstoke Solar Farm, which had previously laid claim to being the largest operational solar site in the UK at 69.8MWp.
Gravitricity’s innovative gravity-based energy storage method saw its first demonstration take place in Edinburgh this month, as the company behind the project aim to contribute to the growing energy storage market. The Gravitricity system acts like a giant battery to balance the electricity coming from renewable generators and uses excess power to raise heavy weights to keep the energy ‘stored’ until needed – the system then generates power once these weights are dropped. The project is still in its early stages, but Gravitricity aims to implement the system across Europe and parts of Africa, intending to house each energy storage unit in disused mine shafts or specially dug holes of depths up to 2km to maximise storage and generation potential.
Ofgem has this month given approval to roll out market-wide half-hourly settlement across the retail electricity market, citing this as a key factor in the transition to a more flexible energy system, which is crucial in achieving net zero. The move is thought to be a means by which energy suppliers can be incentivised to offer new products and tariffs befitting of a more flexible use of energy by their customers. Implementation of the new system is expected to take place over a period of four and a half years and to be complete by October 2025.
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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 55 sites that will enable the development of circa 2.8GW 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 and the influence of global drivers have seen energy prices rise considerably over the last couple of years. 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.

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@ Helen Melling
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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