Britain's retiring coal fleet gives life to pipeline of giant solar projects

Britain is quietly amassing a pipeline of some of Europe's largest solar projects — developments of up to several hundred megawatts each that would rapidly grow the country's renewables fleet and assist in its pursuit of net-zero.

Eleven projects, the majority at least 350 MW in size, have so far been made public by the U.K. Planning Inspectorate, the government agency responsible for approving nationally significant infrastructure. Notably, most plan to make use of connections on the transmission grid left vacant by long-retired coal plants.

That includes the Cottam Solar Project, which at 600 MW is more than eight times the capacity of Shotwick, one of the U.K.'s largest solar farms built to date. Spanning more than 1,100 acres in the English counties of Lincolnshire and Nottinghamshire, developer Island Green Power Ltd. plans to utilize the grid capacity once taken by Electricité de France SA's coal-fired Cottam Power Station, which closed in 2019.

Developers of other solar projects, many in the central corridor of the U.K. near where numerous coal plants once operated, are pursuing a similar strategy.

"With those [coal plants] going offline, suddenly you've got huge capacity becoming available," Gareth Phillips, a partner at law firm Pinsent Masons, said in an interview.

Developers say the large projects will help Britain in its quest to make its electricity grid entirely low carbon by 2035, while giving investors opportunities to deploy capital at scale. But the sheer size of the developments also introduces new challenges around planning and construction, and some plans are already provoking the ire of local communities.

Starting gun fired

The initial catalyst for pursuing such large projects was a "real lack of grid connections" on the distribution grid, according to John Milligan, managing director at BayWa r.e. UK Ltd., which is planning to build the 163-MW Oaklands Farm project in Derbyshire near the former Drakelow coal plant that went offline in 2003.

The majority of Britain's 13,500-MW solar fleet consists of projects smaller than 50 MW that are connected to the distribution grid. "The grid is really saturated at [the distribution] level ... which naturally pushes you toward transmission-connected projects and larger scale," Milligan said in an interview.

Under U.K. planning rules, power plants larger than 50 MW are deemed to be Nationally Significant Infrastructure Projects and must be approved by the national government, rather than local authorities.

At 350 MW, Cleve Hill was the first solar project to go down the NSIP route. Originally pitched by developers Hive Energy Ltd. and Wirsol Energy Ltd., the facility got the planning green light in May 2020.

"When consent was granted [for Cleve Hill] ... that was like a starting gun being fired," said Phillips, who advised the developers during the consent process.

Since Cleve Hill, 10 more solar Nationally Significant Infrastructure Projects have entered the planning system and just as many could be made public in 2022, according to Phillips, including an up to 1,200-MW site in the Midlands.

The national planning process takes about three years, compared to 12-18 months at a local level. BayWa r.e. started development on Oaklands Farm in late 2020 and filed its scoping information in August. It plans to submit its full planning application in the third quarter of 2022 and does not expect a decision until January 2024.

The company is "actively lobbying" the government to streamline the NSIP process, Milligan said.

Mobilizing capital

It might be early days, but developers are already signing up big-money investors to help finance their projects.

Low Carbon Ltd., which is developing the 500-MW Gate Burton project in Lincolnshire, recently announced a global renewables partnership with Massachusetts Mutual Life Insurance Co., while Island Green Power has partnered separately with Foresight Group Holdings Ltd. and Royal Dutch Shell PLC on U.K. solar development.

"These kind of projects will lead to a step change in the [U.K. solar] market," Ross Driver, a director in Foresight's sustainable real assets division, said in an interview.

For most projects, it is too early to say what their income streams will look like. For a start, all plan to boost their business cases by co-locating battery storage, allowing them to conserve power and sell it to the grid at times of high demand.

Certain projects may opt to pursue a merchant business model, deriving their revenue from the wholesale power market. Others may compete for contracts for difference in the U.K. government's auction program or sign up corporate buyers for the electricity. Some may pursue two or three of those options simultaneously.

Investment manager Quinbrook Infrastructure Partners Pty. Ltd., which purchased Cleve Hill in September, is seeking to take advantage of the wave of enthusiasm in the corporate world for renewable power, according to Rory Quinlan, the company's co-founder and managing partner. Quinbrook is already in discussions with potential off-takers and will also look at contracts for difference, Quinlan said in an interview.

"We are an infrastructure investor, and we look to de-risk our projects by having [off-take] contracts there," he added. Construction on Cleve Hill is scheduled to start next summer.

'Subjective and emotive'

The planned projects will span vast swathes of land in the British countryside. The 500-MW Sunnica Energy Farm, for instance, will be built across more than 2,600 acres.

While the sheer scale of the developments is a cause of contention in some communities, renewables in Britain have come up against so-called "nimbys" — for "not in my backyard" — for as long as the industry has existed.

"It's a very subjective and emotive topic," Phillips said about the issue of local opposition, adding that the main argument has shifted from visual impact to the loss of agricultural land. Developers, therefore, tend to select sites that are unsuitable for farming, or barely arable fields that have historically required high levels of fertilization, Phillips said.

Still, the issue of size remains a key discussion point. Larger projects mean more stakeholders are heard during a more protracted planning process, and connections to the transmission grid are more costly than the typical distribution grid connections.

But while solar developers are entering uncharted territory in building projects of this scale in the U.K., solar by definition is "modular," BayWa r.e.'s Milligan said. "It's really just additional laboring and time," he said.

As such, there are hopes that the projects will help usher in a new era of solar development in the U.K., which has plateaued since the government started removing subsidies for the technology in 2015.

"Subsidy-free solar ... will become as competitive as subsidized solar was before," Foresight's Driver said. "The question [that] remains is, where is the saturation point?"