We're delighted to have a guest blog by Jenny Allan & Robin Hutchison, Partners and Renewable Energy Specialists at law firm CMS. Below, they have a look at the challenges and trends facing the Renewable Energy sector.
It is unsurprising that the UK Government’s decision to close certain renewable energy subsidies has triggered a reduction in the creation of new onshore generating projects. Most notably, the closure of the Renewables Obligation to all new generating capacity from March 2017, and the closure of the FIT scheme to new applicants from 1 April 2019, albeit with some exceptions. The sector has had to adapt to this challenging environment through a variety of innovative ways to maximise output and returns from existing projects.
For existing projects coming to the end of their subsidy, lease or consent term, developers are seeking to upgrade the equipment. For example, this might mean removing the original generating equipment and replacing it with new technology, such as more efficient turbines. In addition to this, developers are also looking at applications to extend the life of existing projects.
Several developers are engaging in varying their existing planning consents, thus allowing them to take advantage of newer turbines before the approved project is complete. This is of particular benefit to offshore and unsubsidised projects and improves their financial viability in a subsidy-free environment.
Another key trend in new renewable energy projects is the growth of community-led projects. These are usually well-organised and also often utilise a management company to oversee the project and investment process. Community projects generally find it easier to coordinate themselves and attract external financing through lenders as well as sourced directly from within communities. This can be either through bond or share issues and via crowdfunding platforms.
As the UK’s renewable energy sector faces some significant challenges in the post-subsidy market, it is encouraging to see that a range of options remains available to those projects and developers who can adapt and continue to prove their viability.
Engaging with strong and well-established parties, ensuring contracts are well negotiated and working with specialist advisers are crucial factors in producing a robust financial model for new or repowered projects. Developers of new renewable projects, as well as owners of existing projects alike, can continue to attract investment and progress viable projects to completion.
We'd like to thank Jenny and Robin for taking the time to speak to us. If you've enjoyed this article, read some more about Bruce Stevenson's involvement in the Renewable Energy industry.