Solar power and battery storage systems are becoming more attractive investment opportunities for asset finance companies, according to new research.
In the past, uncertain returns made it hard for solar and battery operators to raise debt finance. To remain viable they relied on government subsidies, which have been phased out for solar.
However, a new independent study by Aurora Energy Research says that when solar power and battery storage are co-located on the same site, it can unlock additional revenue streams and accelerate deployment.
Furthermore, schemes are likely to be profitable. Aurora’s measure of the likely profitability of an investment discounted over the life of the project deployed in 2020 shows returns of between 6.6-7.6%.
Hybrid systems help investors mitigate the risks associated with instances where wholesale electricity prices fall because solar energy output is high. Instead, energy can be stored until prices improve.
Aurora expects 5GW of subsidy-free solar on the UK power system by 2030, thanks to falling technology costs.
Benjamin Collie, principal at Aurora Energy Research and author of the report, said: “Investing in either standalone solar or standalone storage assets carries technology and policy risks. If rapid innovation and supportive policy lead to fast deployment of solar, then that will tend to increase revenues for storage assets, but decrease revenues for existing solar assets. Conversely, slower deployment of solar would lead to lower revenues for storage but higher revenues for existing solar.
“Investing in a portfolio with both solar and storage can help mitigate these risks, and co-locating the assets allows for cost savings and more efficient use of grid connections.”
Jim Higginbotham (pictured), managing director, asset finance at Wyelands Bank, which commissioned the research, said the potential for investment in the renewables industry showed its growing maturity.
He added: “Until now solar and battery hybrid investments have come with high risks and uncertain returns. Our research shows that the picture is changing and with that we may well see another surge of investment in solar power as subsidy-free solar comes of age.”
The research was supported by renewable energy company Anesco, which has constructed more than 100 solar farms. Anesco was the first company in the UK to achieve subsidy-free solar; first to introduce utility-scale energy storage; and first to co-locate energy storage with existing solar sites.
To date, it has deployed technology that is generating more than one gigawatt of renewable energy.
