2020 will be a big year for clean energy investment, with subsidy-free development under power purchase agreements (PPAs) starting to gain significant momentum, according to Jonathan Maxwell, CEO of Sustainable Development Capital Limited.
SDLC launched sustainable energy investment fund SEEIT 12 months ago, initially raising £100m. Since then it has almost tripled in size while launching and acquiring a number of heat and power projects in the UK and abroad, including co-generation projects in Europe and North America and a 5MW rooftop solar deal with Tesco in the UK.
Maxwell suggested the Tesco project, which could lead to £20m worth of investment, represents “a watershed moment in the UK … to deliver cost effective onsite power through rooftop PV without subsidy to the UK’s largest retailer is a great signal”. He thinks falling costs and increasing market confidence in commercial arrangements will create a booming PPA-driven market.
“The cost of delivering rooftop PV installations has decreased substantially … which means they now make sense without subsidy,” said Maxwell. “Confidence that these projects can be done is building in the market, which creates momentum: We generated first power at Tesco a few weeks ago having signed off in June, which shows how quickly these projects can be done. I think there is massive capacity for rooftop solar in the UK as well as other technologies, so we see a very substantial marketplace for us and others to participate in.”
Local Authorities: Act now
Maxwell said SEEIT is also keen to play a role in delivering net zero ambitions for local authorities. But he said those serious about fulfilling pledges, particularly those setting 2030 targets, must act fast.
“They will need to get the ball rolling much more quickly than they are at present,” said Maxwell. “ is completely doable, and we are at the table to support well structured projects that deliver value for the long term, but they require highly co-ordinated processes.”
Heat: Use best available tech
While fossil fuels can have little to no role in a fully decarbonised economy, Maxwell believes there is “significant opportunity to reduce carbon emissions right now using the best available technology.” He said highly efficient gas engines can burn bio fuel where available, and potentially hydrogen when cost and carbon intensity problems are resolved.
“It is incredibly important to look at the best available and proven technologies with the lowest carbon fuel stocks over the next, ten, fifteen, twenty years,” said Maxwell. “We want to see immediate and dramatic impacts on carbon reduction, and technologies like CHP play a very important role in that.”
SEEIT is evaluating in waste heat projects, primarily in North America, including recycling flue gases and using rejected heat from data centres within heat networks. It is also “watching the anaerobic digestion market very carefully”.
Outlook: Healthy market
While political uncertainty has made overseas investment more attractive, alongside “deeper, more advanced markets” in continental Europe and North America, Maxwell said the company will make further UK investments in 2020.
“100 per cent of our seed portfolio was in the UK, and we do see more follow on projects, particularly in healthcare, district energy and heat networks, and some further industrial and commercial opportunities,” said Maxwell.
“There are some pretty significant drivers [for UK clean energy investment], including carbon reduction targets at corporate level as much if not more than at government level. Electricity prices are relatively high and there is a significant risk that they are going to hang around.”
Resilience concerns are also bringing forward investment, suggested Maxwell.
“The grid is coming under strain. Coal is being decommissioned – fantastic. Renewables penetration is increasing – fantastic. But that increases volatility and requires different types of solutions … around decentralised energy and providing balancing services to the grid, so we see some opportunity there.”
Jonathan Maxwell will speak at The Energyst’s ‘Delivering Net Zero’ conference and exhibition, 22-23 April, Silverstone.
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