Energy news - October 2024

• Energy planning policy updates
• Onshore wind opportunities following the recent Government policy change
• An overview of industrial outdoor storage and how it relates to energy generation and battery storage
• Carter Jonas helps deliver a further 100MW BESS project
• Energy market, partnerships and funding updates

Acceptance of Solar NSIPs

Ed Miliband, the Secretary of State for Energy Security and Net Zero, has already granted Development Consent Orders (DCOs) for four major solar infrastructure projects, totalling over 1.9GW of renewable energy capacity. This marks a significant step in the UK’s effort to combat climate change. On July 12th, the following projects received approval for construction:

• Gate Burton, Lincolnshire: 500MW solar and energy storage park, led by Low Carbon, near the former Cottam coal-fired power station.
• Mallard Pass, Lincolnshire: 350MW solar project by Windel Energy and Canadian Solar, connecting to the grid via Ryhall substation.
• Sunnica, Suffolk: 500MW solar plus storage farm, featuring solar panels, battery storage, three private substations, and a cable route to the Burwell National Grid Substation.

An additional project was granted a DCO at the start of September:

• Cottam, which spans across Lincolnshire and Nottinghamshire: 600MW of solar plus a battery energy storage system project to be delivered by Island Green Power

David Walker, Head of Consents, at Carter Jonas had the below to say regarding the acceptance of these four DCOs

‘With the approval of the DCOs for Gate Burton, Mallard Pass, Sunnica and Cottam, the new Labour government has sought to demonstrate its strong commitment to renewable energy, tackling the climate crisis, enhancing energy security and renewing the UK’s infrastructure. On the face of it, these four projects alone represent a significant contribution (1.9GW) to our renewable energy generation potential.

The new government has also indicated a commitment to streamlining the DCO process for Nationally Significant Infrastructure Projects (NSIPs), as part of its broader strategy to encourage and invest in the renewal and improvement of our infrastructure across a number of sectors, and we are already seeing evidence of this through updates to the NSIP advice documents published by the Planning Inspectorate (PINS) and policy support.

However, there is only so much the Government can do through these measures. Risks to delivery of NSIPs across all sectors remain and fresh challenges arise. For example, the introduction of the Levelling up and Regeneration Act 2023 brings changes to the requirements for environmental impact assessments delivered to support the DCO process.

Resource and constraints across the public sector remain a significant challenge and are likely to continue or worsen if the government seeks to make cuts to public spending. This in turn may lead to delays in the DCO approval process arising simply from insufficient resource being available to provide the necessary support.

Supply chain constraints are also a factor and include the availability of suitably skilled personnel to support the design and development of projects, and subsequently the availability of materials and labour to build them.

Finally (and inextricably linked to the above), economic uncertainty in UK plc generally will impact on the private sector’s confidence in making significant investments in these long-term projects, and ongoing uncertainty about government spending commitments and priorities adds to this uncertainty in the short term.

Against this backdrop, the freshly approved Sunnica project faced a legal challenge (in the form of a potential judicial review) from local authorities affected by it. They claimed that they would be impacted by the need for considerable additional work and therefore cost, at a time when they are already facing financial challenges. Whilst this particular challenge has now been dropped by the local authorities concerned, it serves as a possible indication of the shape of things to come as already stretched public sector resources are expected to engage with the delivery of these major proposals, and the government seeks to make good on its commitments.

In summary, whilst the new governments approval of the three DCOs was intended to send a strong signal to the markets and UK plc that ‘things will be different’, with so many external factors to consider, only time will tell how effective its aspirations to make a material difference turn out to be.’

NPPF Proposes Increase in NSIP Threshold from 50MW to 150MW

The government has proposed significant changes to the National Planning Policy Framework (NPPF) to support sustainable growth and streamline the planning process for larger scale renewable projects. A key change is increasing the threshold for projects considered Nationally Significant Infrastructure Projects (NSIP) from 50MW to 150MW. By raising the threshold, the government aims to promote the development of larger energy projects, thereby contributing more significantly to the national grid. Additionally, projects below 150MW will follow a more straightforward planning process subject to local authority approval, reducing administrative burdens and hopefully speeding up approvals.

Labour Lifts Ban on Onshore Windfarms

The Labour government has lifted the effective, nine-year ‘ban’ on onshore windfarms in the UK, originally brought in by the Conservative government in 2015. This ‘ban’ had essentially halted new onshore wind projects a due to the implementation of incredibly strict planning rules. Labour is committed to decarbonising the UK’s electricity grid by 2030 and aims to double onshore wind capacity as part of their broader renewable energy strategy.

With the change in the UK government, there has been a significant revival in opportunities for onshore wind in England. The Labour government are committed to prioritising renewable energy sources to provide energy security, combat climate change and reduce carbon emissions.

With this renewed ambition, Labour has officially ended the de facto ban on new onshore wind production in England that was put in place in 2015.

On the 8th of July 2024 the Chancellor of the Exchequer, Rachel Reeves confirmed the introduction of a revision to the ‘National Planning Policy Framework’, putting onshore wind on the same footing as other energy technologies. These changes are expected to accelerate the growth of onshore wind, helping to contribute to the target of net-zero emissions by 2050. With these changes, the government has also produced the target of doubling onshore wind capacity from 15GW to 30GW by 2030.

This shift in government policy presents numerous opportunities for both landowners, developers and energy off-takers.

For landowners, the leasing of sites to developers can yield secure long-term rental income, with most developers looking for lease terms of more than 35 years. This can be particularly valuable to landowners with large, unused parcels of land which would not typically yield much profit and where landowners are looking to diversify their income streams. In addition to wind, given the relatively small footprint of land required, there is the additional opportunity to co-locate alongside other renewable technologies such as solar.

It is important for landowners to note that sites that may have been discounted for previously being constrained with issues such as aviation and radar, among others, may no longer be an issue. This is thanks to the progression of technology and experience with construction techniques surrounding these developments.

In addition to completely new sites, existing sites that are coming to the end of their life/lease could present as an opportunity for repowering. Wind turbine technology has improved considerably since they were last developed in England. Larger and more efficient turbines are now available, and as a result developers are looking to existing sites coming to the end of their life for the next generation of turbines.

For high-energy consumers, the re-emergence of onshore wind presents an opportunity to offset consumption with a cheaper renewable source. Where the land available does not permit technologies such as solar, wind turbines can present a viable alternative. Many turbines that are commercially available on the market now range from 500kW to 6+ MW per turbine, which presents a diverse range of turbines to suit each site and user.

Carter Jonas has seen a sharp increase in approaches to landowners seeking wind development opportunities, ranging from single turbines supplying high energy users through to schemes ranging from 3 to 10 plus along with lease extensions for existing sites. In addition, we are being approached by a number of developers who are looking for sites, be that new sites which have not been previously explored, or sites that were previously explored prior to the effective onshore wind ban. Please get in touch if you would like to understand the onshore wind potential of your land or site in more detail from a team with a strong background in onshore wind developments. Carter Jonas is a multi-disciplinary property consultancy that can provide a range of services including, but not limited to:

• Valuation and Due diligence
• Site screening
• Planning and Consenting
• Grid Consultancy
• Land Promotion and Land Assembly
• Agency and Investment
• Development consultancy
• Option and Lease negotiations

Please get in touch with Tom Allen if you would like to understand whether your land may be suitable for a wind development.

Andrew Smith is head of the Industrial Outdoor Storage (IOS) team at Carter Jonas and gives his view on this evolving market.

Energy Generation and Storage is part of a growing broader class of property known as Industrial Outdoor Storage

IOS, also known as open storage, refers to land and sites used for outdoor storage, distribution, processing, servicing, and parking. As the name suggests, these sites are characterised by minimal building cover. Carter Jonas have been monitoring this market since 2019, a period which has witnessed its rapid growth and development as an emerging UK property asset class.

Traditional uses for IOS sites include scrap metal recycling, scaffolding storage, and waste recycling. Whilst these remain important, the IOS sector has recently emerged as a vital link in the UK’s supply chain. Demand for freight and parcels deliveries is rising sharply due to strong growth in ecommerce, and consumers are demanding ever more rapid and efficient deliveries.

As a result, logistics firms and parcels carriers are significantly expanding their vehicle fleets (both vans and HGVs), which require additional space for parking and servicing. This is not usually possible at existing warehouse locations, where buildings are designed to maximise value by occupying a large proportion of the site (typically 65%). IOS is now meeting this need, facilitating greater capacity and efficiency in urban ‘last mile’ delivery by providing localised parking.

Given the importance of IOS in the supply chain, and for urban ‘last mile’ delivery in particular, ‘blue chip’ occupiers such as Amazon and DHL have been increasing their requirements for sites. But traditional’ IOS users also remain hugely important, notably the storage and servicing of pallets. Palletised freight is a simple but vital element of the UK’s logistics network, and all stages of the supply chain are designed around the industry-standard pallet.

IOS also has an increasingly important role in reducing carbon emissions and traffic congestion by enabling parking and storage closer to where the associated economic activity needs to take place. Another key use is charging for electric vehicles, which is likely to see rapid growth in the coming years, whether for corporate fleets or private vehicles.

Furthermore, the pandemic and a more uncertain global geopolitical outlook have disrupted international supply chains and increased the demand for more resilient networks and higher stock levels in the UK. This requires increased container storage capacity, creating extra demand for IOS sites, notably close to key ports.

On top of this, new uses are emerging, including demand from the energy and renewables sector, adding to the weight of demand. Given their compact nature, IOS sites can make ideal locations for smaller Battery Energy Storage Systems (BESS), especially in industrial areas where there will be less concern around its visual impact. We see the potential for sites of anywhere from 1 to 2 acres, and those with a good power connection will be particularly attractive. A key proviso is that the site is close to a substation to minimise connection costs and electrical losses (ideally within 3km of a 33kV substation and 2km of a 132kV substation). Demand for this use is likely to increase as more renewable energy sources become operational.

With more ‘blue chip’ occupiers and higher value uses comes a much greater emphasis on specification and quality which was not previously a feature. This includes surfacing (for example, HGVs require fully concreted sites), excellent drainage, high security fencing, and easy access for vehicles. Planning restrictions are also a consideration, particularly if 24-hour operation is required.

Given this breadth of demand, we believe it is essential to classify IOS sites to help match requirements, and to help landlords better identify demand levels. To enable this, Carter Jonas has established a classification system to assist in differentiating site quality. This unique system uses a grading from 1 to 4 (where 1 is prime), based on 16 parameters across five broad categories of surfacing, services, security, accessibility, and planning.

For example, the battery storage sector typically requires a Class 2 surface (non-highway class tarmac or block paving), Class 2 for accessibility (reasonable access for HGVs), and Class 2 for security (paladin fencing). Given the rising importance of sustainability, we believe an accreditation system will also evolve, possibly similar to BREEAM infrastructure assessments, in the same way that buildings are assessed for energy performance using EPCs.

IOS rents have risen significantly in recent years, particularly in dense urban areas within the M25, with prime rents in West London now reaching £11.00 per sq ft, and still rising. Regionally we are also seeing strong rents, with Birmingham and Manchester as high as £3.75 per sq ft.

Given the strong underlying supply / demand dynamics and long-term structural drivers, there is growing demand from investors to enter this sector with several players, particularly US based such as Mileway (Blackstone), Cerebus and NW1 Investors, featuring heavily. However, investment yields have not yet stabilised to a consistent level.

The outlook is for further growth in demand, but a major challenge will be sourcing sufficient sites in the right locations that can be upgraded to the required specification. Against this backdrop, we expect to see further growth in rental values over the next few years.

Carter Jonas are delighted to have advised the landowner on the promotion and agreement of the land deal to facilitate the development of TagEnergy’s 100MW Battery Energy Storage System (BESS) in Drax, North Yorkshire, which we are delighted to see has now become operational.

Combined with other projects such as the Pilswood 100MW, the UKBS project in York 100MW and Wormald Green 33MW, Carter Jonas have now advised on more than 6% of the operational BESS capacity in the UK.

Please get in touch with Charles Hardcastle if you would like to understand whether your land may be suitable for a BESS development.

Crown Estate & GB Energy Partnership

Announced on July 25th, this partnership will support the UK’s transition to a decarbonised future. The Crown Estate, managing a £16 billion portfolio of land and seabed, will bring its expertise to the partnership, while GB Energy will provide strategic industrial policies and investments. Dan Labbad, Chief Executive of The Crown Estate, commented, “With new powers and by partnering with government, we can drive greater investment into this future for our country, and with it support nature recovery and job creation.” This initiative follows the King’s speech, which stated the government will introduce legislation to modernise The Crown Estate’s investment powers, allowing for more flexibility with investments and borrowing capacities.

Contracts for Difference

On September 3rd, the UK government announced the results for the sixth Contracts for Difference (CfD) allocation round. The Low Carbon Contracts Company (LCCC) will now offer CfDs to successful applicants. The total generation capacity of successful projects was 9.65GW, increasing the overall renewable CfD capacity by 32.8%, assuming all projects proceed. A total of 133 new AR6 contracts were awarded, with solar PV securing 93 contracts (3.3GW) and offshore wind producing 4.9GW. Notably, strike prices from this round are on average higher than those in AR5.

Welsh Grants

On September 3rd, the Welsh government announced a £10 million grant scheme to support the development of Smart Local Energy Systems (SLES) across the country. The grant will help integrate local energy generation, storage, and infrastructure to enhance efficiency and reduce costs. It is open to community energy organisations, social enterprises, public sector bodies, and small/medium enterprises (SMEs). Ken Skates, the Cabinet Secretary for Economy and Energy, emphasised the importance of this initiative, stating, “This £10 million grant scheme is pivotal in our efforts to decarbonise Wales’s energy supply and ensure the benefits of this transition are felt within our communities.” He also highlighted the potential for these projects to alleviate the current cost of living crisis by reducing energy costs

End of Coal

As of the 30th of September, the UK became the first G7 nation to end its use of coal power generation with the closure of Ratcliffe-on-Soar station in Nottingham. The UK is not the first nation within Europe to end its use of coal, with the likes of Sweden, Portugal, and Belgium, among others being coal free prior. However, this change does mark a landmark step towards the UK achieving its target to have net zero emissions by 2050 and its plan to decarbonise the UK’s power system by 2030.

The UK’s reliance on coal as a part of its energy mix has greatly declined since 2013, where coal made up over 39% of the total mix. By 2023 this had been decreased to 1% and with the closure on the 30th, marks the end of coal power generation.

The country has been reliant on coal as a source of electricity generation since 1882. We view the closure of this power station as the start of a new era for energy.