After All-Energy - Innovation in renewable energy

At All-Energy in Glasgow earlier in the month the renewable energy industry looked forward to a post-subsidy world, to unblocking the development pipeline and to continuing the UK’s journey towards decarbonisation. Energy storage is big news – and we’re delighted to be working on a significant pipeline in the sector.

A new optimism

The striking thing was the new optimism in the industry. The effective end of subsidies for established technologies, onshore wind and solar, gives new clarity. But optimism is tempered with a new realism – for the industry to have a future, all participants must adapt.

Pick any two…

There were calls for a quicker, cheaper, better planning system, (recall the iron triangle – quick, cheap or good, pick any two), for continuing cost efficiencies in the supply chain, for greater flexibility in the grid, for more realistic views on returns from landowners, equity and debt providers.

Scaling up

The future might belong to super-scale onshore wind turbines, with a tip height in excess of 150m. However, these require some movement in attitude and perception to accommodate, particularly from planners and local communities. This might mean in part more creative engagement by developers with communities rather than the traditional community benefit model – the local communities hosting projects should be active participants in projects, rather than disgruntled neighbours needing compensation.

Energy Storage

Energy storage is proving a hard nut to crack on the finance side – received wisdom is that the standard project finance model does not work because clarity of income from battery storage is only over a maximum of 4 years, and not the 20+ years required for standard project finance/development finance. This makes for an equity-driven sector, which drives up costs.

However, the detectable move away from long term PPAs in renewable energy project finance offers a clue as to the direction of travel.  And buildings get funded without 25 year leases in place, businesses raise funding without 25 year contracts on their books.

A more imaginative approach is required to fund energy storage, based on a strong grasp of how the energy storage market works. This represents a great opportunity for those who do understand it.

A lawyer’s role

What can a lawyer do to help innovation in renewable energy? Part of the answer is to keep things simple and efficient. Our role is to provide a secure platform for our clients to do business. This means having a clear-eyed understanding of the commercial reality and an appreciation of the needs of all stakeholders in a deal, from the landowner to developer, local community, DNO, senior lender, mezz and junior debt, equity, EPC and O&M contractors and to end buyers.

Too often we have seen deals shoe-horned into the lawyers’ last set of documents, which becomes the “standard”. We saw that on the move from wind to solar, with solar leases closely following wind turbine leases, despite the impact on the land, the development and lead times and the profitability of the project being quite different. We are seeing the same in energy storage deals. This comes from a desire to be efficient. But time is often lost by a first draft that solves the previous project’s problems, rather than addressing the project at hand.

This is where we innovate as lawyers and help the renewable energy industry to grow – by understanding intimately what we are doing and taking the time to address the actual deal at hand, rather than following slavishly what we had done before.

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For More Information Contact:
Andrew Fleetwood
Mobile: 07841 920101
Direct Dial: 0131 516 5365
Email: afleetwood@gilsongray.co.uk

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For More Information Contact:
Donna Kelly-Gilmour
Mobile: 07956 177 541
Direct Dial: 0141 530 2043
Email: dkellygilmour@gilsongray.co.uk

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The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.