Equity fund DIF has announced a significant achievement in the UK’s renewable energy sector with the introduction of the country’s first financially viable and non-subsidized hybrid Power Purchase Agreement (PPA) and optimization agreement.
This milestone, facilitated by software and advisory firm Pexapark, involves a 55MW solar farm and a 40MW/80MWh battery storage system located in Leighton Buzzard, Bedfordshire. The agreement guarantees clean energy generation and a steady income for both the solar farm and battery storage system over a ten-year period.
The emergence of this groundbreaking hybrid PPA is a result of the growing interest in combining solar and storage projects in the UK. Solar investors are turning to batteries to maximize the value and flexibility of their assets in the post-subsidy market.
In fact, hybrid systems encompassing storage have accounted for 45% of all solar planning permissions submitted in the UK over the past two years. This trend is also apparent across Europe, where 64% of renewable energy businesses are looking to introduce or increase the proportion of energy storage in their portfolios, according to recent survey data from Pexapark.
Although Power Purchase Agreements have played a vital role in providing revenue and risk management for renewable energy developers and offtakers in Europe’s post-subsidy markets, securing PPAs for co-located projects has been challenging due to the complexity of their operational profiles and contractual structures.
This has limited financing options for solar hybrid pipelines. However, with its secure and bankable revenue streams, the DIF hybrid PPA, developed in collaboration with Pexapark, sets a model for the broader market to follow in order to achieve scalability during the ongoing energy transition in the UK and the European Union.
Pexapark emphasizes the crucial role of expertise in negotiations and in-depth quantitative analytics in structuring and finalizing deals of this complexity. Working with DIF as the seller, Pexapark’s PPA Transaction advisory team leveraged the quantitative expertise of its Storage and Flexibility Desk to assess projected revenues and risk exposure.
This analysis enabled Pexapark to design an optimal PPA structure that incorporates both the power generation and storage components of the project.
Pexapark director of storage & flexibility Brian Knowles, said “We’d like to congratulate DIF on this pioneering PPA, which marks the first of its kind in the UK and Europe more widely.”
“The innovative nature of this agreement reflects our commitment to finding new PPA solutions for unsubsidised renewable energy developers and offtakers, with contracted revenues that offer attractive returns and low risk profiles for investors.”
Jack Rankin, PPA transaction advisory regional lead GB & Ireland, added “We anticipate this deal will be the first of many, representing a turning point for the European sector in the deployment of bankable solar hybrid projects. In the long run, agreements like this will be essential for integrating high shares of intermittent renewable energy generation into the grid.”
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