Will we see standalone subsidy-free solar in 2018?
2017 saw the first subsidy-free solar farm energise, but as we have written in a previous blog, the scheme was located with battery storage, had an existing grid connection and sufficient import and export capacity on the electrical grid. These factors combined with others to make the site viable without subsidies.
The burning question is when will we see a subsidy-free scheme that is not located with battery storage and is deployed on a new dedicated grid connection?
Behind-the-meter or private wire solar schemes, if appropriately sized and with sufficient and reliable daytime energy demand, can already be viable without subsidies. But it is the larger standalone schemes that aren’t quite there yet.
There have been three significant subsidy-free solar farm announcements in the press in recent months.
- The Anesco site at Clayhill in Bedfordshire was the first subsidy-free solar scheme to energise. It is a 10MW scheme co-located with 6MW of battery storage.
- The Hive Energy site at Cleehill on the North Kent coast is a 350MW proposed scheme. As far as we are aware, it’s not yet in planning. As it is a Nationally Significant Infrastructure Project (NSIP) it will have to go through the Secretary of State rather than the normal planning route. This will take some time. Hive Energy are playing a long game anticipating that the costs of solar technology will reduce before the site is built.
- The Hive Energy 40MW scheme close to their headquarters at Woodington Farm in Hampshire. This site already has planning and Hive Energy has suggested it will build it without storage in 2018.
NextEnergy Solar Fund schemes could be significant
At the end of last month, NextEnergy Solar Fund (NESF) announced that it was expecting to develop four subsidy-free solar sites by end of 2018. It is not yet clear whether any of these sites will be located with battery storage. But, if any are developed without storage, it could be a hugely significant development for several reasons:
- There are two relatively small sites at 9.5 MW and 10 MW. The others are 19.6 MW and 20.7 MW.
- As far as we know, none of the sites are piggy-backing on existing grid connections.
- None of these sites are in areas of high solar irradiation (Cheshire, Wrexham, Worcestershire and Warwickshire).
NESF is an experienced and sophisticated investor who is, perhaps, finding it expensive to expand its portfolio from the secondary market. The secondary market being those sites that have been developed by short-term investors (generally infrastructure funds) who then sell their sites, once they have been de-risked, to a long-term specialist investor.
Speaking to others in the industry, we think that it is likely that NESF will hold on to these four sites until the economics stack up. They would not have bought them if they weren’t confident they could build them before any project milestones in their connection offers became critical and hence risk the Distribution Network Operator’s taking back their grid capacity.
Solar deployment costs are falling
In their New Energy Outlook 2017, Bloomberg New Energy Finance has projected that solar deployment costs will fall 66% by 2030. They also say that 2020/21 will see the levelized cost of solar energy being cheaper than coal.
In a reversal of the recent trend, solar panel prices increased in the first half of 2017 due to an increase in global demand. However, increases in Chinese and Indian manufacturing capability is expected to return us to power cost deflation soon. The extent of this recovery will have a bearing on when subsidy-free standalone schemes become viable.
If these sites announced by NESF, particularly the smaller ones, are not located with storage and are not deployed behind an existing grid connection, then grid parity (when the levelized cost of solar generated electricity is less than, or equal to, the price of buying power from the electricity grid) for standalone schemes will have arrived. The subsequent falls in the cost of technology will accelerate and the subsidy-free flood gates will open.
It would suggest that from 2018 and beyond, standalone schemes of circa 10MW with the right site attributes, good planning credentials and low cost grid connections will be viable without subsidies.
What should land and property owners do?
Landowners and their advisors should be proactive in identifying sites with subsidy-free solar opportunities and maximising their chances of success by enlisting the support of independent and expert advisors.
Our Stop/Go feasibility study quickly establishes if you have a viable site for a scheme before you commit to the cost of a grid application or any professional and legal fees.