NextEnergy Solar Fund heralds arrival of subsidy-free UK solar

Against the backdrop of the post-Brexit weaker pound and rising electricity prices, solar is making its way to the top of U.K. investors’ safe haven list. As the costs remain on the downward trajectory, developing solar projects seems to be no longer dependent on the government’s financial support.

In what may prove to be a landmark turning point for the U.K. solar market, NextEnergy Solar Fund has announced that it has acquired project rights to build 59.8 MW of solar plants, all of which have permission for construction and grid connection, without the aid of government subsidies.

Noting that it currently has around £100 million of cash and credit facilities available to fund new investments, NESF is expecting to remunerate the costs of construction through the sale of electricity either to the market or via PPAs with individual off-takers.

However, the fund said it would start building the projects once the financial returns are attractive enough and, according to its expectations, subsidy-free solar plants are set to become viable in the U.K. over the next 12 to 24 months.

The new projects will make a notable addition to the fund’s already substantial solar portfolio of 48 operating solar PV plants, with a total capacity of 483MWp and an investment value of £554.4m

According to Bloomberg’s recent data, the leading British solar funds have experienced a doubling in trading volume since Brexit. Among others, NextEnergy Solar Fund saw 18% investment returns, thus outperforming the FTSE 1000 Index, which is returning 11% on average.

Following radical changes to the country’s subsidy scheme, which included the early closure of the Renewable Obligation Certificate (ROC) program and drastic cuts to the FIT, the announced arrival of subsidy-free solar could change the U.K.’s solar outlook for the better.