The UK government has announced the reinstatement of ‘Pot 1’ technologies such as onshore wind and solar PV for the next Contracts for Difference (CfD) allocation round in 2021.
What is Contracts for Difference?
The Contracts for Difference (CfD) scheme is the government’s main mechanism for supporting low-carbon electricity generation.
CfDs incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from volatile wholesale prices, and they protect consumers from paying increased support costs when electricity prices are high.
Renewable generators located in the UK that meet the eligibility requirements can apply for a CfD by submitting what is a form of ‘sealed bid’. There have been 3 auctions, or allocation rounds, to date, which have seen a range of different renewable technologies competing directly against each other for a contract.
Successful developers of renewable projects enter into a private law contract with the Low Carbon Contracts Company (LCCC), a government-owned company. Developers are paid a flat (indexed) rate for the electricity they produce over a 15-year period; the difference between the ‘strike price’ (a price for electricity reflecting the cost of investing in a particular low carbon technology) and the ‘reference price’ (a measure of the average market price for electricity in the GB market).
What is the opportunity for landowners?
An increase in solar development brings with it an increase in the requirement for suitable solar sites. Typically, the developer leases the land from a landowner on a long-term lease which will often span over 30 years. The lease rate is approximately £1,000 per acre per year and lease income is index-linked so it will rise annually with inflation, providing landowners with a secure revenue stream for several decades.
Solar panels and equipment typically occupy only 40% of the leased land. The design of the solar farm can incorporate grazing of small livestock allowing owners to draw competitive income from their land.
At the end of the lease-term, the solar plant will be decommissioned, and the land restored to its original condition. Landowners will typically retain full ownership of their land throughout the process and can continue farming it as usual in the years to come.
What makes a suitable site?
Aside from the need for available capacity on the local electricity network, proximity to a suitable power supply, typically a 33kV distribution line or substation, is one of the main criteria for solar farm sites.
Smaller 11kV lines are usually unable to handle larger capacity, while 132kV transmission lines (carried on steel pylons) are too big to connect into.
Ideally, sites need to be reasonably close to a suitable connection, although the maximum distance varies depending on the project.
Also, it’s best if connections don’t need to cross third-party land, as this can complicate matters and add cost.
Sites should be flat or on a south-facing slope and reasonably secluded from residential areas, he says.
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If you believe you have land which may be suitable for solar or you want us to take a look into your land's suitability then please get in contact with us here.