While the UK solar industry is expected to remain in a transition phase during 2018 in terms of new capacity added, activity will continue to be dominated by leading asset owners, both through expansions of existing capacity and also buying distressed assets that could be completed before 2020
This article discusses how site acquisition remains the mainstay of UK solar today, shows the consolidation of large-scale assets across four key players, and explains why each is keen to tap into the market today for distressed assets that missed the ROC cut-off date on 31 March 2017.
The data shown below is taken from the January release of the UK Ground-Mount Solar Completed Assets and UK Large-Scale Solar Farms: The Post-Subsidy Prospect List reports, which provide all the key details on large-scale ground-mount activity in the UK market.
Octopus first to 1GW UK solar portfolio
Within the past few months, the big story in terms of UK solar portfolios was Octopus becoming the first asset owner to hit the 1GW level of operational solar capacity in the UK, dominated by sites accredited under the RO scheme.
2017 also saw further growth in portfolios from the other three key asset owners in the UK: Foresight, NextEnergy and Bluefield. Collectively, these four own one-third of the operational large-scale ground-mounted solar farms in the UK.
The top 10 asset owners account for 54%, and the top 20 approximately 70%.
These percentages are set to increase further over the next six months, with news of Canadian Solar’s UK assets likely to be offloaded, and additional short-term play owners finally selling smaller bundles of RO-accredited sites.
However, the new trend on acquisition would appear to be on sites that have grid-connection offers, full planning application, but missed out on being completed for ROCs or CfDs. The fact that these sites are now changing hands is a clear indication that plans are being put in place for new build-outs in the short-term.
Whether these sites simply get added to the growing energy storage pipeline in the UK remains to be seen, but given that most potential post-subsidy UK solar farms are going down this route, one would expect to see planning amendments being lodged by the new owners to repurpose the consented solar applications.
Large-scale ground-mount pipeline remains at 4GW
The pipeline of solar farms in the UK has been at the 4GW mark for the past few months, spread across approximately 340 sites. These include unused capacity from existing solar farms (that were downsized to 4.99MW for 1.2 or 1.3ROCs), distressed assets from legacy RO and CfD rounds, new applications that have been driven by co-locating new solar sites with energy storage, and continued build-out plans from utilities and water services.
The 4GW pipeline therefore includes a large component that is speculative in nature (approximately 1.8GW), and will not see any build progress for at least two years, at best. Approximately 200MW falls into a more likely build-out portion that could be the mainstay of 2018 solar farm additions.
This leaves approximately 2GW that is made up of sites that have planning consent and could be repurposed given the right set of conditions. However, a major part of this will eventually be abandoned if the economics don’t stack up, or developers give up hope in the absence of anyone to sell the plans to.
Interestingly, about 1.3GW of the 4GW is planned to have energy storage added, and planning provision (for the storage containers) has been made for many of these sites.
In fact, revenue streams from storage will be a key part of any 2018 solar farm builds in mainland UK, but this is just one part of the overall picture. Solar farms builds in 2018 will also likely be on sites that have been partially built with a single 4.99MW site. These sites have much of the build costs covered already, and they should certainly not be regarded as subsidy-free, regardless of the marketing collateral that accompanies them.
Fundamentals remain intact, but UK now on the global bandwagon
With subsidies for UK solar farms highly unlikely to emerge again, the UK now becomes one of many global markets looking for the correct blend of build costs to hit the point where ROIs are risk-free. In 2018, this will need storage and other soft costs to be factored in. Beyond 2018, we simply move one year closer to a true subsidy-free world.
By this point, we are likely to see the ‘big four’ of solar assets in the UK pass through the 3GW mark, providing one of the clearest signs that solar farms in the UK have indeed become a specific asset class, and a technology that will remain in high demand going forward.
Finlay Colville will be speaking on the subject of the UK secondary market at Solar Finance & Investment Europe, a two-day conference organised by Solar Media at London's Grange City Hotel on 30 and 31 January 2018. More details on the event can be found here.