Guests at the opening of the UK’s first subsidy-free solar farm were greeted with a somewhat murky morning as they gathered in a muddy field in Bedfordshire for a tour of the site.
Donning hi-vis vests and plastic shoe covers, the throng of around 30 journalists, investors and representatives of project developer Anesco, National Grid, UK Power Networks and trade body the Renewable Energy Association gathered to hear energy minister Claire Perry speak.
Perry breezed in undeterred by the clay clinging to her well-worn boots, and joked that the site was appropriately named. “I was very keen to come today,” she said, adding that she thought the event was “historic”. “I spent last week in New York at Climate Week and the UN general assembly, where we heard the prime minister talking about the importance of dealing with climate change and the Paris Agreement.
“That all sounds wonderful and is very aspirational. But what is really tangible is the progress Britain is making thanks to the people here today and thousands of others who are really delivering on this aspiration for a low-carbon future,” she said.
Perry’s excitement at the project is understandable. For a government whose enthusiasm for renewable energy always carries the caveat that it must be affordable, a subsidy-free renewable plant is a dream come true.
A landmark development
The 10MW Clayhill plant has been developed by renewable energy and storage developer Anesco. Panels on the 18 hectare site will generate 9,634MWh of renewable electricity per year, enough to power 2,500 homes.
Clayhill is a landmark development, paving the way for a future where solar farms do not need to rely on subsidies, according to the appropriately named Steve Shine, Anesco executive chairman. “It proves that the government’s decision to withdraw subsidies doesn’t have to signal the end of solar as a commercially viable technology,” he said.
A meeting between Anesco and its supply chain at the outset of the project turned out to be fundamental for the scheme’s development and viability, according to Lily Coles, Anesco technical director. The developer asked suppliers how the project design could be improved to mean it would not need subsidy, and looked at all aspects including design, technical specifications, the latest technology and the costs of components.
Rather than the manufacturers bringing new products to Anesco, the developer has been working with manufacturers to develop the best solution for its sites, she said. “For example, we’ve been working with BYD –who manufactured the batteries – for two and a half years to come up with a bespoke solution for us.”
Key to the financial viability of the project are five energy storage units with a total capacity of 6MW. The batteries can access three separate revenue streams: fast frequency response; capacity markets; and triads, according to Coles.
Clayhill also benefits from being next to one of Anesco’s existing projects, the 5MW Hermitage solar farm, which opened in 2016 when it could still qualify for subsidy under the Renewables Obligation (RO). The co-location also meant that Clayhill’s grid connection was cheaper, Coles explained.
The project is also using 135 1,500V solar inverters, manufactured by Chinese company Huawei. This is the first European project using the technology. The technology will now be rolled out to other sites, said Coles. Anesco is already working on replicating the model used at Clayhill at five solar farms. With a portfolio of 100 solar sites in the UK, the company has plenty of opportunity for co-locating new plants incorporating storage with sites that already receive subsidy, and can share infrastructure and grid connections in the same way.
Prohibitively risky
While few would argue with Anesco’s achievement, the specific circumstances of the site and its business model mean it is not necessarily easy for other solar developers to follow suit.
Renewable Energy Association chief executive Nina Skorupska says: “There will always be people who innovate, whether there’s a subsidy or not. But we still need some money so we don’t have a boom-bust cycle.”
That boom and bust is clearly evident from government data on solar farm deployment. No plants over 25MW have been built since last year, and there has been no development of 5-25MW projects since the grace period for the RO expired at the end of March.
Leonie Greene, head of external affairs at the Solar Trade Association (STA), says Clayhill is a “trailblazer” project. “The scheme itself is fantastic. It’s exactly where we want to be, solar with storage, clean power when you need it, it’s great.”
The STA expected to see schemes like Anesco’s emerge, Greene says. “There’s a lot of pent-up pipeline, lots of people who sunk costs getting a project together, getting grid connection and planning. So there are a lot of projects looking for any opportunity.”
But she says that the milestone should not be seen as the start of a rash of subsidy-free solar farms. Indeed, Greene does not know of any developers who are working on a similar model.
She explains that there was potential for a lot of sites like Anesco’s, but most developers are being held back from co-locating projects by uncertainty over whether existing schemes will still be eligible for payments under the RO once they have battery storage on site.
“If the RO is your main source of income, it’s just too great a risk. We’re working with Ofgem on this, but it’s incredibly slow,” she says. Anesco seems to have found a solution to this, but the rest of the industry is in the dark as to Ofgem’s criteria for allowing RO payments to continue. She says: “We’re looking to Ofgem to clarify a coherent, harmonised approach on what qualifies.”
The STA wants the government to readmit solar PV projects into the contracts for difference (CfD) auctions to provide a level playing field with other energy technologies. Solar could achieve a price of £50-54/MWh or possibly lower, which is so close to the wholesale price that projects would effectively be almost subsidy free, Greene believes.
“But without the CfD, your costs of finance are higher, the risks are higher. Projects just need that to reduce that final cost element. It’s very close, but it’s not quite there yet,” she says.
Energy minister Claire Perry on solar energy and the clean growth strategy
Claire Perry was clearly excited by what Anesco had achieved at Clayhill, which demonstrates “a level of ingenuity and creativity” that she wants to celebrate, she said. Though subsidies have been a great way to get markets moving, renewable energy does not need to rely endlessly on them, she added, particularly praising the innovation of Anesco’s supply chain for achieving cost reductions. “This is an example of where it comes together and it’s just brilliant.”
“I think we can replicate sites like this. The economics work, I know Anesco has other sites in play. It’s a really, really good model and it would be great to see this replicated right across the UK.”
She conceded that she did not know of other developers who were working on subsidy-free solar plants but said “that doesn’t mean that there aren’t any. What I want to understand is what are the barriers are them. I think this is a really sensible idea, storage and production, the innovation in the supply chain, I want to make sure that happens.
“What I heard today is that there is very clearly an appetite among investors to work with this sort of site again, but I need to understand what companies need from regulators, from the grid and from government to make sure that certainty is there,” she said.
She believes that it was right to change the subsidy scheme supporting solar farms because lots of sites were being built entirely based on government support and the industry was not innovating.
“There is always a question about the right time to withdraw subsidies, but the fact is that you have examples like this coming forward, Britain’s first subsidy-free solar farm, which is using the world’s best technology,” she said.
The long-awaited Clean Growth Strategy will be published “very, very soon”, Perry told the assembled media. Publication of the suite of policies needed to meet the government’s climate change targets has been repeatedly delayed.
But Perry said that the strategy had been complex to develop. “We’ve done really well decarbonising energy but now we need to do the heavy lifting and do more right across the economy – transport, business energy efficiency – doing that is not as simple as one minister standing up; it’s a very concerted cross-government effort with lots of policy initiatives,” she said.
She denied that the delay of the paper would hamper the UK’s ability to meet its climate change target: “I think it’s given us time to be more ambitious and look more closely at things like the subsidy regime.”