The deployment of offshore wind generation continues to receive the strong backing of the UK Government which is targeting reaching 40GW of capacity by 2030. The fourth contracts for difference allocation round closing in January 2022 has allocated over two thirds of the total budget to offshore wind: Underscoring the continued dominance of offshore wind in the UK Government’s approach to decarbonising the UK power system by 2035.
Onshore wind and solar PV have, however, for the first time since the first contracts for difference allocation in 2015 been permitted to participate in the contracts for difference albeit with a comparatively low allocation of £10 million across both asset classes. Their inclusion nevertheless marks an acknowledgment that both technologies have a part to play in achieving a net zero power system by 2035.
The number of solar developments in the UK has increased markedly since the post-subsidy dark days of 2017 to 2019. There is now a significant pipeline of solar projects which for the first time in the post subsidy era could result in new large scale solar PV (rooftop and ground mounted) in excess of 1 GW being developed in 2022.
In the case of onshore wind, whilst development of new wind farms has been able to proceed in Scotland the picture in Wales and England is markedly different. The planning regime in England in particular continues to play a significant role in preventing the development of new onshore wind much as it has done since 2016. Unless the UK Government gives a clear direction to planning authorities to permit onshore wind development then 2022 will continue to see the development of onshore wind being stifled in England. Onshore wind development in Great Britain is set to continue to be concentrated in Scotland with the balance largely in Wales.
In relation to existing renewable generation assets, in 2022 we expect to continue to see the aggregation of these assets by parties looking to hold them over the longer term. There is also likely to be continued interest in investing in existing renewables developers and fund managers (e.g. the recent acquisition by Schroders of 75% of Greencoat) as those with funds to invest look to deploy capital in the infrastructure space with an eye on their ESG credentials and their own net zero targets.