UK Renewables: Growing old gracefully?
Published May 2016
More than 5GW of UK renewables capacity is already over 5 years old. There are three big reasons why they should be planning for late life now: refinancing, data collection and strategic portfolio development.
It seems like yesterday that I rocked up to the gates of Garrad Hassan for the first day of my first “proper job” in 2003. Back then there was virtually no solar and less than 600MW of wind capacity in the UK. The majority of projects in operation had been so for less than 3 years. Eyebrows were raised when that starry-eyed graduate engineer explained his career choice to his more conservative friends and family. Fast forward 13 years and suddenly the UK renewables fleet is starting to look about as old as I feel.
Don’t get me wrong, if you look at the “demographics” of UK renewables as a whole, as pictured in my analysis above, you could argue that the fleet is still quite spritely. Offshore wind has only come to the fore in the last decade and solar PV is an even newer kid on the block. Onshore wind is far from geriatric but we are starting to see the first generation of projects hitting older age. The numbers say it all:
- 120MW have been in operation for more than 20 years. We are well into asset sweating territory here, pushing beyond original design life assumptions.
- 230MW are between 15 and 20 years old. This is the phase of operation where some serious decisions about the future are looming.
- Around 5,000MW are between 5 and 15 years old. Perhaps our equivalent of the baby-boomers, now reaching their middle aged prime.
That leaves around 13.5 GW in the full flush of youth – less than 5 years in to operation. So “what’s the issue?” I hear you cry. If two-thirds of UK renewables assets are newly built, why worry about aging plant? Well, without wishing to sound like a middle class parent berating a profligate adult child, it’s never too soon to start planning for old age.
Here are 3 reasons why every asset more than 5 years into operation should be looking at late life planning:
- Refinancing to boost returns: With money so cheap and investor appetite for assets so insatiable, there is no better time to look at boosting returns through refinancing in one form or another. And if a longer projected operational life can be demonstrated, those returns start to look even better.
- Collecting data now, to keep options open: Some end of life options may only be open if the right data has already been gathered. Consent extensions may require additional surveys. Demonstrating residual fatigue life and long-term asset integrity may require structural monitoring over a long period.
- Approaching your portfolio strategically: Most projects are part of a larger portfolio with a mix of technologies, contractors and asset ages. Developing a portfolio level strategy for late life operations offers the potential for improved returns right across the fleet, through efficiencies and scale effects – no matter whether the corporate strategy is hold or sell.
For these reasons, my fellow Everoze partners and I have been investing in the development of a holistic framework to support late-life decision making for renewables assets. Watch out for more news on this shortly.
In the meantime, all this talk of late life planning is making me anxious about my own plans. Now, where the heck did I file my last pension statement?
1. Analysis based on data from the DECC Renewable Energy Planning Database (March 2016)