Where next for clean energy?

The government's policy on clean energy has become a little murky this year but there are still opportunities for landowners.

Last December at the UN Climate Change Conference in Paris, the UK government signed up to an agreement to limit the increase of global temperatures to below 2°C. Renewable energy has a major role to play in reducing the greenhouse gas emissions that contribute to global temperature rises, so it would make sense for it to feature prominently in the UK government’s strategy.

Yet the withdrawal of subsidies for on-shore wind and solar power from January this year suggests a different approach. "The government seems to have an anti-wind agenda that is relying on nuclear and gas," says Nick Green of Savills Energy.

With its plans to build a new nuclear plant at Hinkley Point in Somerset, Thomas McMillan of Savills Energy believes the government is out of step with energy providers. “e market is moving away from big centralised power plants and towards renewables and energy storage,” he says. "Yet by not following that trajectory the government is causing a temporary blip in the direction of the market."

Even Energy UK, the lobbying group that represents the Big Six providers, announced in February that it would be championing low-carbon technologies.

Plans for the future

Energy secretary Amber Rudd has said she will produce an emissions reduction plan later this year, which should bring some clarity to the government’s position, but what could landowners hope to see in this plan?

"From farmers’ and landowners’ points of view, it would be best if Amber Rudd’s plan focused on renewable energy with storage: new sites and infrastructure would mean more opportunities," says Nick Barber of Savills Energy. "This would also benet the energy sector as a whole since, unlike the gas price, which fluctuates, the cost of renewables is constant and would underpin a more stable market that is easier for investors to gauge.

"Renewables are already competitive price-wise with nuclear. At Hinkley Point, the government’s guaranteed energy price – effectively a subsidy – would be £92.50 per MW hour. The total cost of on-shore wind subsidy was about £90 under the Renewables Obligation scheme, and although generally the cost of utility scale solar power before the recent cuts was about £108, costs have in reality fallen to £80–£90,” he continues.

"Historically, the taris have been over generous," adds Nick Green. "This led to many marginal projects being built that should not have been. The withdrawal of subsidies will force a rethink on how projects are approached and drive costs down. Eventually, we will see parity and there will be no need for subsidies at all."

Energy storage

Key to the future for renewables and the emerging smart electricity grid, is energy storage. Storage allows excess energy that is created on very windy or sunny days, for example, to be stored and used when demand calls for it.

"We are already helping developers locate sites for storage plants,” says Nick Barber. "They are looking for one to two acre sites close to areas of high demand and existing infrastructure, capable of housing a plant supplying at least 20MW. Some developers are landbanking smaller sites, but the viability of these is highly uncertain; costs for batteries are prohibitive for most applications at the moment, unless they are capable of assisting National Grid with an emerging issue termed ‘frequency management’.

The first National Grid auction for contracts providing real support for large scale batteries takes place this summer and there are good prots to be made: we are seeing rents of up to £50,000 per acre. It’s a small, emerging market, but it is set to grow,” he continues.

Storage technology will become increasingly viable over the next two years. The demand is for power that can come on and o grid very fast, providing a surge only when it is needed, termed Enhanced Frequency Response. Lithium batteries are currently the most bankable technology capable of doing this, although flywheels – wheels whose great weight means that they maintain their momentum for long periods when spinning at high speed, thus storing a great deal of energy – are a credible option worth keeping an eye on. Batteries are not yet cost-eective, but omas expects prices to come down by 10-15 per cent year on year until 2020.

Despite all the current uncertainties, the outlook for renewable energy is positive.e withdrawal of subsidies will ultimately create a more sustainable business model.

This trend is well underway: the price of solar panels has fallen by 57 per cent over the past three years, according to Savills Research. "Solar energy should be self-supporting by the end of the decade or sooner, and some providers are talking about subsidy-free wind generation by the early to mid-2020s," Thomas says.

"The pace of development will unsettle the big energy companies, but new players are able to react swiftly to technological advances and will help bring renewables back to the forefront."

Meanwhile, Thomas advises farmers and landowners to take a strategic approach to the market. "It’s vital to stay up to speed with developments to see where the opportunities lie; to take a medium to long-term view; and to take detailed technical and professional advice early on to avoid going down blind alleys," he says.

 

 
 

Key contacts

Philip Gready

Philip Gready

Executive Director
Rural, Energy & Projects Division

Savills Margaret Street

+44 (0) 20 3107 5470

+44 (0) 20 3107 5470

 
 

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