Renewable developer Anesco has agreed to build a 200MW subsidy-free solar portfolio for investment firm Gresham House, with the “shovel-ready” sites ranging in size from 20MW to 50MW.
Engineering, procurement and construction will all be handled by Anesco, which will also provide long-term operations and maintenance for the solar farms once they are powered up.
Construction on the first site is anticipated to begin later this year and all 200MW is expected to be completed within three years.
Gresham House acquired its first subsidy-free solar farm – a 12MW project in Buckinghamshire – from Anesco in January last year.
Gresham House investment director Wayne Cranstone said: “By building on our existing relationship with Anesco we are securing access to a quality pipeline of unsubsidised assets developed by one of the leading developers in the country.
“At Gresham House we take sustainable investment seriously. This portfolio provides new renewable energy generation to support the UK’s net zero carbon emissions targets and its biodiversity plans align with our wider ESG objectives. Anesco’s ability to develop, build and operate these assets in a sustainable way while delivering strong returns for our investors makes them an ideal partner for us”.
Anesco chief executive Mark Futyan said although Gresham House could still sign power purchase agreements for the solar farms or enter the projects into the upcoming Contracts for Difference auction, the firm is “happy with them as they stand” as “the economics are attractive even without those”.
Anesco opened the UK’s first subsidy-free grid-scale solar farm at Clay Hill in Bedfordshire in September 2017. It was partly able to do so by utilising an existing grid connection built for an adjacent solar project, thereby lowering the cost.
Futyan told Utility Week that “nobody else at the time was building subsidy-free solar” and the economics were “very difficult”.
“The reality for Clay Hill was, given power prices at the time and build costs at the time, the investment case was a very borderline one,” he added. “But in our attempt to pioneer the sector and get the first subsidy-free assets out there and get people building, we went ahead and built that on our own balance sheet.”
The site was sold to Gridserve in August last year. Although they “covered all of our build costs and made some money along the way”, Futyan said it was an investment that others would have “struggled to approve.”
But he said prospective solar sites “don’t have to have anything special anymore” to be viable: “A decent site will make the grade.
“It’s always the case in any development that you’re trying to get low-cost, a low-cost grid connection, with a shorter cable run from your site to the substation because that’s a big driver of cost as well, with good irradiation so you’re getting as much output for every solar panel that you put in place, but no site is ever absolute perfect and so you take some compromises.”
He continued: “Build costs for a solar farm compared to 2017 are about two-thirds of what they were. Now the numbers just add up and you can typically make an 8 per cent unlevered return on a solar investment, which works for many investors.”
Since being established in 2010, Anesco has built more than 100 solar farms with a combined capacity of 525MW, as well as 150MW of battery storage. Its operation and maintenance arm has more than 1GW of renewable energy capacity under management.
The latest deal, worth more than £100 million, marks its largest transaction to date. Futyan said it nevertheless represents only a portion of their overall development pipeline of 1.5GW, although he conceded that some of this is comprised of early-stage projects that are “a bit more speculative.” He said there is around 500MW in which they have “high confidence” and will “almost certainly make it onto the grid.”