The UK Government’s net-zero 2050 target and the Climate Change Committee’s subsequent roadmap may have made renewable energy’s role in the UK a more pressing and considered strategy. Solar PV is at the forefront of innovation, at a time when action is urgent.
The latest government partnership relating to solar is interesting and, potentially, ground-breaking. We know that solar plants can take up to four years less time to come online than wind parks. And now solar is a commercially viable proposition too, thanks to the role of NextEnergy Capital’s latest fund, NextPower UK ESG (NPUK), which is focused on unsubsidized, new build, utility-scale solar assets in the UK.
Group CEO Michael Bonte-Friedheim explains, “NPUK ESG is something of a snow plough for solar, opening the market up for others to follow. This is because it removes the need for regulatory support from the government to roll out projects, also meaning it doesn’t fall to the end-user to cover the cost through their bills.”
The UK Infrastructure Bank is providing financing to the initial seed assets of NPUK ESG, comprising two major subsidy-free solar farms in the UK. It also plans to invest up to £250m, half of the fund’s total target fund size, on a match-funding basis with the private sector. It is expected that this support will lead to significant investment in the UK subsidy-free solar sector.
“Because the individual cost of installing a utility-scale solar plant has come down so far, we no longer need government subsidy or support for investors to look at solar as a profitable proposition,” says Bonte-Friedheim.
“It’s more of an attractive standalone investment and we’re paving the way for investors to finally capitalize on the quickest and cheapest form of power generation out there.”
The fund already has two seed assets, one being the UK’s largest solar farm comprising 75MW of capacity. The aim is to leverage NextEnergy Group’s internal pipeline, off the back of the company’s pre-existing status as a solar leader in the country.
However, while there are clear sustainability goals embedded in the incentive – the hope is to mitigate 370,000 tones of CO2 equivalent,
the same as taking 250,000 cars off the road – there is also a new sense of pragmatism around solar’s influence.
“Emissions reductions figures alone aren’t enough for investors to justify parting with their money, but that’s why solar in this new framework is so attractive,” says Bonte-Friedheim. “For example, from a financial perspective, once we reach our target of building 1GW of new solar in the UK, this also equates to around £175m yearly in avoided gas purchases from other countries. Over 10 years, this inflates to
nearly £2bn.”
Alongside CO2 emission reductions and financial viability benefits, there is the prospect of wider biodiversity projects and community engagement opportunities as part of a more progressive and pragmatic overall package. This new era can finally capitalize on
solar’s undoubted potential, as part of a broader recognition that net-zero targets are only realistic if we address the challenge holistically, and together.
Bonte-Friedheim says, “The reason why a roadmap has been put in place is to mobilize the entire economy and therefore catalyse the process. Solar is the quickest and most cost-effective way to incrementally increase the delivery of new renewable energy capacity in the UK within the context of pursuing net-zero by 2050, while also providing investors with attractive financial returns.”
“With this in mind, I’d call upon institutional investors to focus on solar as this strong and viable contributor. It’s not a donation or an ethical tick-box exercise, it’s a way to deliver much-needed energy goals and financial returns simultaneously.”
