![]() With ever increasing demands for power and a desire for corporates to become carbon neutral more and more of the technology, power intensive orientated growth stocks (Google, Microsoft, Amazon etc.) will seek to enter into long-dated fixed-price PPAs. The vast majority of new solar will almost certainly be built out without a Government support tariff and will have to rely on either a corporate or utility Power Purchase Agreement (PPA). This will undoubtedly drive down the strike price to levels that potentially may even make investment unattractive. At present 3GW of sites will qualify for the auction and given it may not happen for a further 12 months, in all likelihood there will be 5GW of qualifiable sites by then, most certainly far exceeding the capacity on offer in the auction. Ground-mounted solar sites greater than 10MW will qualify for the forthcoming Contract for Difference (CFD) auction, although it is unknown how much capacity will be allocated to UK solar. The importance of CFDs, corporate & utility PPAs ![]() So over time it is almost certain the size of projects and the scale of investment will grow as utility scale solar deployment will become the norm. This is not to say seeking consent for larger sites is impossible – for example, Cleve Hill (350MWp) successful achieved statutory approval on and at least 10 further projects over 200MWp are at various stages of development. The vast majority of these sites are 49.9MWp thus avoiding the need to be approved by the Secretary of State for Business, Energy and Industrial Strategy (BEIS) which applies to sites over 50MWp. While over 8GW is at the screening/scoping stage, some 3GW is consented and ready to build out subject to the satisfaction of planning conditions. By the end of 2018, there was approximately 3GW of solar development (at various stages) and this has expanded to over 13GW at the end of 2020 with 1GW of new developable solar being added to the pipeline each month. While there is a shortage of actual deployment of new solar on the ground, the rate of growth of planning and development is accelerating. Several studies have suggested the UK requires between 70GW and 185GW of solar as part of its energy strategy by 2050 and the UK Government’s own Energy White Paper modelling proposes between 80GW and 120GW implying an annual deployment of 3GW per annum for the next 30 years. ![]() With the curtailment of subsidies, the mainstream banking sector has been unwilling to lend into ground-mounted solar in the UK. ![]() It was the subsidy component of the revenue structure that enabled financial institutions to provide significant debt financing, on favourable terms, in order to enhance the overall equity returns. The underlying unlevered return on investment simply does not justify capital deployment given the subsidies typically represented 50% of previous revenue structures. While the cost of solar panels continues to plummet, power prices have also declined (exacerbated by the COVID-19 pandemic) in the UK and this has resulted in a total dearth of any meaningful deployment in the past four years. Over the past 4 years, only around 500MW have been added, with the majority of this being rooftop.įollowing the abolishment of any meaningful Government support scheme, ground mounted solar deployment ground to a halt in the first quarter of 2017. UK solar deployment enjoyed steady growth from 2011 through to the end of March 2017 with over 13GWs connected to the UK grid. ![]()
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