INTERVIEW: Watch out for the renewables comeback

Written by Rebecca O'Connor on 18th September 2017

The thing about renewable energy is: it makes total sense. So much so that it’s hard to understand why any energy would not be renewable, now we have the technology to harness it. Its marginal cost is basically zero, its supply is infinite and contrary to some opinion, reliable, when used in conjunction with other renewable sources (if you have hydro, solar, wind and tidal – you have no reason to worry about black outs).

Sure, the transition takes a bit of effort, but once it’s done, it’s done. And it really will be done.

Last week, the amazing news broke that offshore wind has become the lowest cost option for large-scale, low-carbon power in the UK, after the price paid for electricity from the turbines fell by more than 50 per cent in two years.

If common sense were the only factor behind energy policy, this news should mean curtains for projects such as Hinkley Point C. However, policy decisions never seems as straightforward as: “this is lower cost and lower carbon, let’s make it happen”.

Another example of energy policy failing to make sense came in 2015, when, just as small scale wind and solar were really cranking up, with the costs and subsidies meeting at just the right place for mainstream investors and developers to see real appeal, the Government swiped away the bulk of the subsidies. Just like that. The move put the brakes on a rapidly accelerating sector over night.

Many developers put the last few projects in the ground, then shut up shop. Homeowners who had been in two minds about getting panels suddenly saw their sums didn’t add up.

It looked like a victory for the anti-wind turbine lobby (which also contains a fair few climate change sceptics). The message from the Government was that it was time for the sector to stand on its own two feet – which had, to be fair, always been the goal. But the sector wasn’t quite ready.

At the time, that decision felt like game over. But Matthew Clayton, managing director of Thrive Renewables, offers a long term perspective, seeing it as a lull from which the sector will soon recover.

Few people understand the UK renewable energy market as well as Matthew Clayton. The managing director of Thrive Renewables has been in the industry for more than 20 years, planning, installing and raising finance for projects, from wind farms in Scotland to solar farms in the south west.

“We will see development again. The industry is in an odd place at the moment, where it had the benefit of support that has now been removed.,” he says: “Projects need to deliver power at a lower price. It needs to demonstrate true sustainability. I think we are 18 months to 2 years away from that.”

In the meantime, in the absence of lots of shiny new projects, luckily, there are still opportunities to invest: “We are being flexible and finding a way to contribute,” he says.

This means plugging funding gaps. Thrive, which last week received a Good Egg mark from Good With Money, has been putting investors’ capital to work by providing “mezzanine” finance for projects agreed but not yet developed. For instance, earlier this year, Thrive formed a joint venture to finance the purchase and build of a 6MW wind farm in Scotland, built on a former coal mine.

It has also been stumping up cash for community solar projects, where the community hasn’t had the chance to raise finance for themselves yet. “We’ve been incubating the project, while the community group does a capital raise to buy it. If they don’t raise the finance, we can enter into a joint venture.”

The market for existing, operational renewable energy projects is a different thing altogether. “Buying and selling operational projects is as hot as ever. Many of the EIS funds that bought them have a three-year shelf life, so they are now going to the yield co’s, the Blackrocks, etc. Pension funds are also piling in, for the inflation-linked, long-term returns.”

There remains a need for new developments, however. There is still a target to achieve 50 per cent of energy coming from renewable sources by 2030 and there is a priority to deliver a subsidy-free model at the smaller-scale end.

For its part, Thrive is working on what Mr Clayton calls “win/ win” projects, where it develops a project and the power is used by the host. A wind farm on a potato processing plant in Cambridgeshire is the top example: “the potato packagers are really happy – it saves them money, elevates their sustainability and helps them negotiate better deals with their customers.”

Investors seem to get the logic of renewable energy, too. Thrive attracted 1,000 new investors last year. Shares in Thrive Renewables are sold via a Matched Bargaining Service (a way of buying and selling unlisted stocks). The next auction is on September 29.

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