UK Infrastructure Bank backs subsidy-free solar fund

Renewables investment manager NextEnergy Capital has announced that it has raised £327m of new funding for plans to develop up to 60 solar farms across the UK.

UK Infrastructure Bank backs subsidy-free solar fund

pictured: Solar generation in Llanwern, Wales. Image: NextEnergy Capital

The funding is going towards the firm’s NextPower UK ESG Fund, which exists for the specific purpose of expanding the nation’s solar generation capacity via the construction of new utility-scale projects. NextEnergy Capital is hoping to raise at least £500m for the fund in total, to enable the construction of up to 2GW of solar capacity across as many as 60 sites.

Two projects supported by the fund, in South Wales and Worcester, are already in operation, the former being the UK’s largest.

Pension funds Brunel Pension Partnership, the Merseyside Pension Fund and LGPS Central Limited are among those to have contributed to the Fund so far. NextEnergy Capital forsees pension schemes contributing significantly to the Fund in future, too, as many of them work towards net-zero financed emissions targets.

The firm also announced that the UK’s National Infrastructure Bank (NIB) is acting as a “cornerstone investor” for the fund. In this capacity, the NIB will provide up to £250m to the fund to match contributions made by others.

Launched in summer 2021 to replace the role of the European Investment Bank (EIB) in the UK post-Brexit, the NIB lists support for low-carbon and climate-resilient infrastructure as a key focus. It has received £22bn of financial capacity in the first instance, which could unlock £40bn+ of investment from the private sector.

NextEnergy Capital’s chief executive Michael Bonte-Friedheim said: “I am delighted to announce the first close of the NextPower UK ESG Fund, which comes at a crucial time to help strengthen the UK’s energy independence.

“NextPower UK ESG Fund is the first UK fund that targets purely new-build subsidy-free utility-scale solar assets, and I am proud that NextEnergy Group is driving this forward, showing how solar assets in the UK can provide investors with a significant return while reducing the carbon footprint of the UK.”

Solar state of play

Solar industry associations tracked a  sharp decline in capacity additions in the second quarter of 2019, following the closure of the Feed-in-Tariff (FiT) scheme. This followed declines already underway in 2018, with a halving of installations year-on-year.

Launched in 2010, the FiT scheme provided payments to owners of small-scale renewable generators at a fixed rate per unit of electricity produced, enabling the cost of installation to be recouped.

Following initial decline, the UK is now regarded to host a “fully established” solar market in a post-subsidy context. Solar Power Portal tracked a 34% increase in installed capacity between 2020 and 2021, with installations in the public and private sectors driving progress. In the public sector, organisations including NHS Trusts, local authorities and research organisations have been looking to rooftop and ground-mounted arrays.

The Government is currently facing calls to go further and faster on solar in the face of the price crisis. April’s Energy Security Strategy contained no new targets to expand solar installations nor measures to increase investment – such as changes to the Contracts for Difference (CfD) scheme or to the planning process. Figures released by Turley last week revealed that planning refusals for solar projects in the UK were at their highest rate since 2016, in 2021.

The Conservative Party has favoured offshore wind and nuclear as its preferred methods of zero-carbon energy generation over onshore wind and solar. In her campaign to become next Conservative Party leader, Liz Truss has been very vocally anti-solar, calling ground-mounted panels “paraphernalia”. Either Truss or opponent Rishi Sunak will be elected on 5 September.

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