Greencoat Solar II LP Set to Purchase 156MW solar portfolio in the UK

Commercial Solar Panels

An agreement is underway for the UK asset management company Greencoat Capital to buy a solar portfolio with an output capacity of 156MW from BlackRock Real Assets and Lightsource bp on behalf of a number of the UK’s largest pension funds.

Financial details for the deal have not been made known though the companies have said that Greencoat will acquire 100% ownership of the assets. This purchase increases the solar generating capacity of funds that are managed by Greencoat to approximately 880MW.

Greencoat Capital official Karin Kaiser is very happy with the deal and said:

“This is a brilliant portfolio of proven operational assets that will provide our clients predictable cashflows with inflation protection over the long term, whilst contributing to the decarbonisation of the UK’s electricity sector. The acquisition takes installed solar capacity to over 880MW, across the funds we manage, generating enough power across the year to power all the homes in a city the size of Manchester. We continue to see a strong opportunity for solar aggregation in the UK, and an active near-term pipeline. This transaction delivers to investors in Greencoat Solar II long term secure income cash flows that over the long lifetime of these assets will be uncorrelated to general stock market factors.”

At the same time Lightsource BP’s chief investment officer Paul McCartie said the transaction was “testament to the strong growth of the UK market”.

“The portfolio was originally developed and constructed by Lightsource BP and is today a strong operational portfolio,” he added. “We look forward to working with Greencoat and continuing to provide operational services in the future.”

The solar PV portfolio is broadly made up of projects backed by Renewable Obligation Certificates (ROCs) with an average of 16 years of support remaining but one of the assets, the 14.4MW Charity solar project in Shropshire, is backed through a Contract for Difference.

Under the Renewables Obligation (RO) scheme, introduced by the UK government as a support mechanism for large-scale renewable projects, suppliers must generate an increasing proportion of their electricity from green sources. Operators are issued RO certificates (ROCs) based on the amount of electricity they generate for a period of 20 years. This scheme was closed to new generating capacity in 2017.

A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades.

BlackRock’s Global Renewable Power team acquired a 90% stake in the portfolio in 2017 via its partnership with Lightsource bp. Lightsource bp maintained a 10% stake in the portfolio at this time. The partnership has delivered financial and operational improvements throughout its holding period and realised the de-risked portfolio at a premium for investors.

Lightsource bp will continue to provide asset management and operational services for the projects which generate enough electricity to supply around 45,000 homes while offsetting 65,000 tonnes of carbon emissions annually.

BlackRock Renewable Power global chief investment officer and Europe head Rory O’Connor commended the purchase maintaining it demonstrated the resilience of the renewable sector despite the Covid-19 pandemic.

“The structural transition to a lower-carbon future is providing attractive investment opportunities in renewable power globally. There is a significant re-allocation of capital underway that underscores the resilience of the sector, even while public markets face uncertainty as the world addresses the COVID-19 pandemic.”

He added that the recent close of Blackrock’s Global Renewable Power II Fund at $1.5bn provided further evidence of “strong ongoing demand from our clients looking for renewable power and climate infrastructure investment opportunities that can deliver attractive and sustainable returns”.

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Multi-Billion Pound Wind Farms are on Track for Delivery

Scottish Wind Turbines

Britain’s biggest green energy companies want to help power a cleaner economic recovery after the Coronavirus pandemic. Companies across the North-East of England and Scotland are ready to deliver multi-billion-pound wind farm investments in order to achieve this. Scottish Power are planning to reopen Scotland’s oldest commercial wind farm as part of a £150m scheme to establish a clean energy cluster in central Scotland able to supply 100,000 homes with green electricity.

It is anticipated that the wind farm cluster will generate 600 jobs at its peak and 280 long-term jobs which is a welcome, albeit not immediate respite to the worst economic downturn in 300 years caused by the Coronavirus pandemic. These actions will help the UK to emerge from this crisis while taking steps to meet its climate goals.

CEO of Scottish Power, Keith Anderson, told the Guardian that the upgrade of Hagshaw Hill, Scotland’s first commercial wind farm will come alongside two separate agreements to buy two nearby development projects to create a clean energy cluster in South Lanarkshire totalling 220MW.

The company plans to develop 1,000MW of onshore wind power and battery storage after the government’s turnaround on support for onshore wind. The government Department for Business Energy and Industrial Strategy (BEIS) announced in early March this year that it will now allow onshore projects to compete in the Contracts for Difference (CfD) auction rounds.

The Hagshaw Hill project is only part of what Scottish Power are proposing but could also play a role in reviving the UK economy.

Keith Anderson said:

“We’re kickstarting as many of our projects as we can so they are ready to help boost the economy when the pandemic ends. Not only do these projects help funnel money back through the supply chain and into jobs but they also make sure that the economic recovery is based on sustainable investments.”

Ignacio Galán, the chairman and chief executive of Iberdrola, which owns Scottish Power, said it was vital that the financial recovery is aligned with climate goals.

He said:

“As we begin to emerge from the coronavirus crisis, investment in green infrastructure can quickly be delivered, creating jobs and offering immediate economic and environmental benefits. This will help to support the UK’s overall recovery at this critical time.”

Plans have been revealed separately by SSE and Equinor to use the Port of Tyne to host the operations hub for the world’s biggest offshore wind development, creating 200 permanent jobs and supporting a local supply chain industry based on clean energy. The port was picked through a competitive tendering process, following its £10m overhaul to prepare for a surge in demand from windfarm developers.

Equinor will construct the facility. The joint venture partner will base its Operations & Maintenance teams at the centre of the facility and operate the windfarm for its expected lifetime of more than 25 years. Construction of the wind farm, led by SSE Renewables, began in January 2020. Recruitment activity will begin in early 2022, with the first phase of the wind farm due to start producing renewable electricity the following year.

Stephen Bull said:

“The north-east has a strong industrial heritage and a supply area that stretches north and south of the River Tyne. The Port of Tyne is clearly well set up to attract other clean energy investment which we hope will complement our activities.”

The wind farm comprises three 1.2GW phases, with each phase based more than 130km from the North East coast of England. When fully operational it will be able to provide enough renewable electricity for over 4.5 million UK homes and it is expected to trigger capital investments of around £9bn over a six-year period.

Secretary of State for Business Alok Sharma said:

“This new facility is fantastic news for Tyneside and the North East of England. Renewable energy is one of the UK’s great success stories, providing over a third of our electricity and thousands of jobs. Projects like Dogger Bank will be a key part of ensuring a green and resilient economic recovery as well as reaching our target of net zero emissions by 2050.”

Equinor North Sea new energy solutions senior vice president Stephen Bull said:

“The UK government has legislated to cut carbon emissions to net zero by 2050. Major scale renewable energy projects like Dogger Bank ensures Britain’s leadership as the #1 offshore wind nation. Moreover, the project brings new investment to the UK, at a challenging time for us all, and secures over 200 jobs in the region as well as new opportunities in a future-fit growth sector.”

The Port of Tyne’s chief executive, Matt Beeton, believes that the project is “extremely important for the wider region” as it will bring economic benefits for the local supply chain and create employment opportunities. Recruitment will begin in early 2022, with the first phase of the wind farm due to start producing renewable electricity the following year.

Matt Beeton said:

“This announcement is a huge step towards developing a cleaner future for the Port, the region and for industry in the north-east.”

Offshore wind has halved in price in the last two years setting a record of £57.50 per MWh. This is all good news for the green jobs sector which has seen employee numbers drop by a third in recent years. Offshore wind is still one of the UK’s most attractive markets.

Renewables Overtake Other Power Sources in the UK for the First Quarter of 2020

Renewable Energy - Claerwen Dam

According to a new report from industry analysts EnAppSys renewables accounted for more electricity than any other power source in the UK for the first quarter of 2020. Blustery winds propelled renewables generation to 45% of the entire electricity mix. In addition to this the nationwide lockdown due to the Coronavirus pandemic looks to have helped in part. Analysis of the data indicated that the novel coronavirus caused a reduction in energy demand as Britain went into lockdown in the second half of March which led to renewables reaching parity with carbon-intensive energy sources.

EnAppSys’ director Paul Verrill said:

“This represents a significant milestone for Britain’s power industry. Whilst the ‘stay at home’ measures reduced demand in the last weeks of March, which increased the contribution of renewables, wind farms generated significantly more power than gas-fired plants, which historically have been the dominant fuel type for electricity generation in Great Britain for some years now.”

 “In the shorter term, as coronavirus measures continue, reduced electricity demand will lead to renewables providing a significant contribution to the GB energy mix.” 

Although EnAppSys stated that the trend is likely to be a “temporary high” as weather patterns are expected to normalise, renewables reached a new milestone generating 35.4TWh between January and March of this year amounting to 44.6% of total generation, more than fossil fuels combined. This is a significant increase from the first quarter of 2019 with renewables exceeding levels of the total fossil fuel generation for that period by a margin of 36%. Not only was there more generation from renewables than gas, there was more than gas and coal-fired generation combined for the whole quarter.

The rise in renewables output was largely due to the storms which battered the UK at the beginning of 2020, bringing record breaking winds. This contributed to a consistently high level of wind generation with output from wind farms exceeding 10GW for 63% of the quarter and 5GW for 85% of the period. For example, two wind generation records were set by Storm Ciara with wind turbines generating 56% of the country’s electricity at 2am on Saturday 8 February, the most at any one time, and accounting for 44.26% of power produced across the whole day.

These extreme weather conditions do not tell the whole story, however. At the same time nuclear generated its smallest volume since Q3 in 2008, producing 12.2TWh in the quarter as “the older reactors have been seeing increasing levels of downtime as they move towards the end of their operational life”.

As nuclear plants close levels of nuclear generation are set to continue to decline although this will be offset by an increase in levels of renewable and gas generation as well as any new nuclear builds.

Though the exceptional conditions experienced by the UK during the first quarter of 2020 noticeably increased the use of renewables, recent trends were already showing that renewables are becoming an increasingly commanding player in Britain’s power mix. The continued build of offshore wind farms and the revival in onshore wind should see these levels being brought about more often in the longer term.

The report from EnAppSys coincided with new data released by the International Renewable Energy Agency (Irena) which showed that solar, wind and other green technologies now provide more than one-third of the world’s power, a new record. According to Irena, in Europe alone, renewable power purchase agreements (PPAs) made by corporates, totalled 8GW in 2019, up from 5.5GW in 2018. Over the past decade $3tn has been invested in renewables globally though Irena believes that annual investments must double by 2030 to tackle the climate emergency. However, even with this growth the number of jobs in renewable energy in the UK has fallen by almost a third.

This period has seen a continued decline in prices which is expected to continue in the second quarter as the effect of less economic activity is fully understood.

Paul Verrill said:

“The COVID-19 outbreak had only a slight impact on overall demand in Q1 as the ‘stay at home’ requirements only came into force towards the end of March. We expect a greater impact in Q2 – especially if the lockdown continues until the end of June. Demand for daily electricity generation dropped around 10% towards the end of Q1, as some offices and manufacturing plants shut down and fewer people travelled on public transport, but demand levels in the evening remained relatively stable as people still cooked their dinners and turned on the lights as normal. The reduction in prices in Q1 was in part driven by the growth in renewables, which reduces the demand for commodities such as gas and coal beyond their historic levels – at least within European markets.”

In April SSE Renewables asked for barriers to the deployment of offshore wind to be removed in order that it could become the backbone of the country’s net zero energy system. If this action is not taken it may be impossible to achieve 40GW of offshore wind come the year 2030, putting the net zero 2050 target at risk as well.