Solar comes into its own

As yet another energy ‘crisis’ endures, local authorities are at last grasping the nettle of renewable energy, particularly solar PV projects. At a time when the international targets for global warming are under threat, renewable energy is a key part of the transition away from fossil fuels. Solar PV has enjoyed strong growth in the private sector, but the public sector has lagged behind. This article considers the growth of solar PV in local authority projects, which illustrates a strong push forwards.

It is now 15 years since the targets set by the Climate Change Act 2008 were written into law in the UK. They seemed revolutionary at the time but have since been strengthened from an 80% reduction in greenhouse gases to a position of net zero carbon by 2050. However, the scientists continue to predict doom if the world does not change course. The level of 1.1 degrees C of global warming since industrial times has already been passed and if the international community’s new target of limiting warming to below 1.5 degrees is to be met, radical action is necessary. As Greta Thunberg constantly reminds us, action is currently just too slow. Whilst focus inevitably needs to be on behaviour change and the more difficult areas of changing lifestyles, there are easier ways to help the transition.

Chief amongst these is the transition to renewable energy from fossil fuels. There are many different types of renewable energy projects that a local authority could consider’ from solar PV, to onshore wind, biomass boilers or anaerobic digestion of food waste.

But solar PV is the favourite. Aside from enjoying the highest level of support from the public, this is the easiest of the technologies.

Solar power in the UK has gone from virtually nothing in terms of capacity in 2010 to 15 GW by today (that is 15,000 MW). Even more impressive is that there are now around 35 GW of new solar PV projects in the pipeline. Many of these are giant, privately financed projects promoted by an ever stronger UK solar industry. Such progress has led to suggestions in Government that the UK’s cumulative target, under its Net Zero strategy, for solar PV should now be 70 GW.

There can also be no doubt that the emergence of large-scale battery storage has been a game changer for solar PV. One of the problems that solar farm projects laboured under is that the sun shines predominantly through the day, when electricity prices are at their lowest. The ability to ‘time shift’ the power to peak hours was significant and offered flexibility in commercial arrangements. So the electricity is stored as generated (when prices are low) and then discharged into the grid at peak hours (when prices are significantly higher). This improved the business cases (as seen below) and helped shatter the moratorium on new projects that followed the removal of Government financial incentives around 2018. Suddenly, ground based solar was back and now that projects can survive - and indeed thrive - subsidy free it seems there is no stopping the momentum. But are local authorities sufficiently in this game?

Over the course of the last ten years there has been a noticeable change in purpose. Almost exclusively, the local government projects that I have been involved in since 2009 were motivated by the creation of an income stream from a capital investment. Yes, there were of course environmental benefits, but no scheme went forward without a robust business case in support.

Over the past year, however, a change has been evident. Councils are now promoting solar farms for the carbon benefits, particularly the ability to offset the carbon value of new renewable energy from stubbornly high carbon footprints subject to challenging net zero targets.

Business cases, however, remain strong and so a well-planned scheme will inevitably make a healthy surplus. Internal rates of return of over 5% are possible from schemes without battery storage. Those with battery storage can exceed 10%. Another high value can be achieved by a private wire connection to a nearby off taker. In a recent example, a district council is looking at a return of 12% from selling the power from a relatively small solar farm to a nearby water / sewerage plant. Compared with other investment opportunities, this is undoubtedly spurring more councils on to look at their land holdings.

So what is the position in local government? Well, despite the idea of civic owned and operated solar farms emerging in Cornwall Council way back in 2009, few local authorities have taken the plunge and only around 20 fully developed civic solar farms currently exist. Bearing in mind that a commercially sized solar farm starts at 5 MW and there are now 15,000 MW of solar in the UK (not all land based but mainly land based) this illustrates how much more secure the private sector was in believing in this type of opportunity.

This is very surprising bearing in mind the unique position local councils are in to develop such assets.

Firstly, most have either declared a climate emergency or have a climate change strategy and action plan. These normally pledge to reach a position of net zero by a defined date and there is huge pressure to meet these targets. Aside from the climate change strategies, there are parallel policies on biodiversity and air quality which are also interlinked.

Secondly, local government owns lots of land across the country. Leaving aside the situation with buildings (which is equally positive) there are many areas of land in council ownership that would be suitable for a solar installation. You just have to know where to look.

Thirdly, and perhaps most important, is that local authorities have access to inexpensive capital, via the Public Works Loans Board. Advice clearly confirms that this source of funding is available for solar farm development, which is promoted primarily for climate change reasons. As finance in general gets tighter and tighter, councils need new sources of funding and I once commented that a solar farm is a ‘sausage machine’ that turns freely available capital into vitally needed revenue which is in ever short supply.

The usual way to develop a solar farm is to identify land, procure consultants and then proceed with a design, build and operate contract. However, there are other ways. Forest Heath DC purchased a fully operational solar farm for £14m in 2016 and has been very satisfied with its buy.

Warrington has really gone big and now owns three huge solar farms totalling nearly 90 MW in York, East Riding and Cirencester (including battery storage). Its business cases have delivered considerable benefit, both financially and more widely to the Warrington area.

For most authorities, though, it will be a case of analysing land holdings and drawing up a shortlist of sites. Then consultants will indicate whether they are developable and financially model the business case. Planning and grid will be big issues that need to addressed. One consequence of local government standing by and watching the private sector steam forwards on solar farm development is the difficulty now in getting grid connections.

The reason that most authorities approach solar farms this way is that this ensures that all of the financial value of the transaction is secured within the civic envelope. Talk to any of those councils who have already developed a solar farm and you will not hear many complaints. Most simply regret they didn't start earlier or had not been more ambitious and gone for more than one site. carbon and renewable energy.

But there is a wider point here, returning to the Government’s solar PV targets and the decarbonisation of the entire electricity system in the UK. This is that local authorities are key to the development of more solar PV in the UK at local level.

A ‘place based’ approach is necessary to ensure that we don’t just get the massive commercially developed schemes, but a wider coverage for both buildings and land to benefit authorities and communities alike. Such action would go a long way towards ameliorating the current energy crisis and improving energy security at the same time.

Momentum is definitely growing now in the public sector area and notwithstanding that progress has been slower than anticipated, the public sector will now reach a mature position very quickly.

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