PPA-backed solar roll-out sees £20 million pledge in the UK

U.K.-based solar asset manager Zestec, and the U.K.’s largest solar fund NextEnergy Solar Fund (NESF) have entered into a framework agreement. According to the statement made by the two companies, the agreement foresees NESF’s financial involvement in installing commercial sized solar plants across the U.K., while Zestec will implement its proprietary Power Purchase Agreement model to the projects.

Accordingly, Zestec will develop and install the C&I PV systems. Landlords will then buy the electricity under a PPA from NESF, at a tariff that sits below their normal electricity import cost. Reportedly, the U.K. commercial & industrial (C&I) market is largely untapped despite promising market opportunities. It is, therefore, that the two companies are attempting to further develop this market segment.

Potential customers, like businesses or landlords, would receive capital for the construction of a solar array, mounted on a C&I scale roof. In return for having received the necessary capital, customers transfer their remaining feed-in-tariff to the two companies. Per the company’s announcement, “clients continue or receive free solar generated electricity and have no concerns over ongoing monitoring, maintenance, or management.”

NESF is an investment company that makes its investments mostly in operating solar power plants in the U.K. The company can also invest up to 15% of its Gross Asset Value in PV assets in OECD countries.

For 2019, NESF has pledged to invest GBP20 million for the development and construction of C&I projects under the PPA model. Of the GBP 20 million the fund pledged to invest already £5 million have been committed to the first batch of installation. Projects constructed prior to 1 April 2019, will receive a 20-year retail price index linked feed-in-tariff. In general, NESF will enter into 15 to 25-year PPA’s with landlords and business owners.

C&I is a booming market

In August 2018, a consortium of business park owner Rockspring and EPC contractor BSR Group have announced a 15 MW solar park in Westcott business park, which at the time was said to be the U.K.’s first unsubsidized C&I installation. Also, for this installation, the companies opted for a PPA model to circumvent any dependency on government adjusted remuneration schemes.

The U.K.’s Solar Trade Association sees great potential in the countries C&I sector. With large-scale installations in demise and increasingly more corporations attempting to green der CSR profiles the C&I sector could take more center stage.

“[C&I] rooftop solar continues to develop, aided by a strong corporate commitment to reducing carbon,” said Leonie Greene, an STA spokeswoman. “The market is obviously much smaller than we would like here. Partly this is a historic weakness; the U.K. policy framework put little emphasis on factory and office rooftops, surprisingly.

Power purchase agreements are picking up

Power purchase agreements have been lauded as a very viable solution to develop subsidy free solar in Europe, and elsewhere. In Spain, the type of agreement has worked out to realize and finance the first larger unsubsidized PV plants in Europe. Finished just at the end of 2018, BayWa r.e. presented its 175 MW Don Rodrigo site, financed through a 15 year PPA.

And just last week, the world's largest 20-year PPA of 708 MW was inked on the Iberian Peninsula. Under the terms of the agreement, Audax will buy, at an undisclosed fixed price, all the electricity produced by the Solara4 and Ourika plants plus that generated by projects to be developed this year and next by WElink in Iberia. Audax, however, will not be buying the power from WElink, as German insurance group, Allianz Capital Partners will acquire the completed facilities from WElink.