In less than three months’ time, the Great British Solar Build Out will have all but ceased. Certain and very specific projects will of course be developed – either under private wire or in the rare event that a company could make a project work without subsidy – but as soon as the RO slams shut at midnight on 31 March 2017 much of UK solar deployment will go into hibernation.
Disruptive as ever, the solar industry as a whole will not stand still. In place of development is likely to stand the burgeoning market for solar services, be it optimisation, asset management or operations and maintenance (O&M).
It’s an unavoidable point that the RO’s now famed boom and bust cycles (that government so ineptly attempted to avoid creating) have resulted in corners being cut and developments being rushed. To that end, there is a great deal of optimisation work to be done. But it has also created choke points in which large amounts of solar assets are exiting standard two-year EPC warranty periods, causing asset owners to look for better deals.
The next 18 months will see a substantial amount of generating capacity come on the market for O&M firms to compete for, and industry mumblings mention something of a gold rush taking place.
And it looks as if some big businesses are eyeing a portion of that gold.
In its acquisition of Belectric, which completed yesterday, innogy is preparing itself for a pan-European solar rush. In a statement, the energy giant said the deal would propel it “right to the forefront as a global player” in the utility-scale solar sector, an area in which its expertise is currently fairly limited.
Innogy chief Peter Terium admitted that innogy – a division of RWE – was lagging behind in solar and that Belectric would fill that competency gap. “With our new subsidiary Belectric innogy is now in an ideal position to successfully implement large-scale photovoltaic projects in Europe and our growth regions. Moreover, the combination of expertise in renewable energy and battery storage technology solutions will help us keep our energy system stable, despite the increasing influx of fluctuating renewables,” he added.
Innogy paid a fee in the “high double-digit million euro range” for a company it said posted low double-digit million euro EBITDA in 2015 and so hopes are obviously high, with Belectric expected to make a “significant contribution” towards innogy’s ambitions in decentralised generation.
Innogy will obviously harbour ambitions of developing a fairly significant amount of utility-scale solar across Europe with Belectric now part of its stable, but perhaps the more interesting element of its UK-facing side will be O&M. Belectric will continue to offer its third-party EPC and O&M services, but with innogy’s clout behind it could create quite a splash in a market built on bankability.
Speaking at December’s ‘Raising Standards in Solar PV O&M’ conference, NESF’s Abid Kazim remarked that more modest O&M providers would not be able to cater for large asset owners as they wouldn’t have the requisite balance sheet, a fact which would seemingly price out a not insignificant number of service providers currently active in the market.
Kazim’s NESF of course has its own asset management company in Wise Energy and likewise, Foresight Solar has Brighter Green Engineering. Many of the UK’s most prolific solar companies – the likes of Lightsource, British Solar Renewables and Solarcentury – have too established thriving O&M divisions. And that’s without mentioning the European EPCs who maintain a presence in the UK market.
UK O&M will be a hugely competitive space to operate in over the next 18 months and one that will undoubtedly see plenty of consolidation as portfolios merge and the vultures begin to circle those that fail to reach critical mass. Innogy was not the first to realise this business opportunity, and it certainly won’t be the last.
The next issue of Inside Clean Energy – out later this month – will feature the UK’s O&M market in detail.