The rise of the lean and nimble developer
Roadnight Taylor has started being approached, as an independent consultant, by energy developers seeking expertise that developers have traditionally resourced in house. By word-of-mouth alone, eight developers have beaten a path to our door in the last two months. We see this trend as an inevitability, owing to a handful of recent phenomena that are shaping the fast-changing energy industry.
Both established development teams and new entrants are finding it hard to keep up with regulatory changes, as well as shifts in the technical and commercial landscape. The in-house expertise required to keep a pace with the changes is expensive to recruit, employ, train and maintain.
The introduction of new G99 standards – which came into force on 27 April 2019 – and the introduction in 2018 by distribution network operators (DNOs) of grid application fees (colloquially known as A&D fees, but formally as connection offer expenses) are just two of the challenges now facing power generation and storage scheme developers.
The Energy Networks Association (ENA) G99 Engineering Recommendation (EREC) provides significantly more onerous requirements for the connection of power generating facilities to DNOs’ networks – and a far greater requirement for technical information provision in order for a connection application to be deemed valid. Many developers’ grid teams and grid consultants are being starkly exposed by these new requirements – as without the necessary technical expertise, they are unable to draw up valid connection applications.
In addition, many development opportunities now depend on flexible connection arrangements, such as intertrips, active network management (ANM) and G100 export limitation schemes. Therefore, developers now need genuine, deep grid expertise and in-depth technical, commercial and market knowledge to not only make an appropriate grid application but also to see schemes through to completion. Many developers are realising that they don’t have the genuine in-house expertise they thought they had.
Connection offer expenses
Before the introduction of A&D fees, most developers were applying a scattergun approach – putting in multiple, highly speculative, ill-considered applications for sites without incurring any fees. In one case, a DNO received 250 applications from a single applicant in a two-week period. Starting in April 2018, it costs up to £10,000 per grid application, eliminating the un-skilled, spray-and-pray option. To avoid crippling application fees accruing, connection applications must now be thoroughly considered, be based on thorough network studies and DNO liaison – and be for the right technology and at the right capacity for the right part of the network. It must also adhere to the new G99 standards. Cracks in most development teams’ expertise are being uncovered.
Scarcity of grid capacity
Furthermore, grid capacity has become incredibly scarce. Accessing first-hand grid intelligence from the right DNO System Planners to find out where there is capacity, how much and what technology it is suitable for is key. That includes identifying where capacity will become available through cancelled schemes, grid reinforcements or flexible connection arrangements. Most development teams lack the combination of technical and soft skills needed to achieve this.
Money and staff resources
High profile financial casualties among the energy developer community – including Lark Energy, Camborne Energy Storage and Green Hedge – have highlighted the risks associated with high overheads, including staff costs.
Established developers are seeking to lower overheads and achieve greater agility. This can be hard to maintain with an in-house team. A team of genuine experts in every area is expensive. Energy analysts, financial modellers, grid experts, planning specialists, chartered surveyors, wayleave and easement professionals and project managers all cost money. A smaller team of generalists will come up against barriers that only deep, genuine expertise can overcome.
The growth in opportunities in the UK energy system is attracting new entrants from the UK, EU, China and the US – but, they are also reluctant to commit to the cost and risk of recruiting and employing a full UK-based team immediately, if at all.
By outsourcing specific areas of their project development to experts, rather than using in-house generalists, established developers and new entrants alike, can become more effective and efficient at consenting sites and delivering schemes. Lean, in-house teams can focus on the highest value work of strategic direction, obtaining funding – and the increasingly important challenge of securing and stacking revenues.
How we’re helping energy developers
Whether you are an established or a new-entrant developer – or an entrepreneurial self-developer – having the expertise to find the right technical and commercial keys to make a scheme work is fundamental to getting it delivered.
Roadnight Taylor offer genuine energy expertise to deliver any project across the energy and power technologies – solar, gas genset, battery storage, wind, hydro, heat and biomass. From grid intelligence and project feasibility, to grid applications, planning consultancy and applications and land rights, right through to ICP and EPC engagement, project completion and securing PPAs, we can oversee any or all aspects of schemes cost-efficiently and quickly.
This article was first published on Linkedin on 24 May 2019.