average UK solar load factor is only marginally greater than 10 %, leaving a substantial volume of unutilised export capacity .
In the current economic and regulatory environment in the UK , the focus for new projects involving BESS tends to be BESS-only projects without co-location or other generation elements . This is because it is simpler and faster to obtain planning permission for , and implement BESS-only projects and many sponsors do not consider the added costs of incorporating generation as sufficiently remunerative in the current UK market . However , owners of existing generating assets , especially solar assets , are actively looking to add co-located BESS assets to share in the existing grid connection and benefit from the efficiencies mentioned above . In the future we may see more new projects being developed with BESS co-location , as indicated by a medium-term pipeline of such projects in the UK .
Project Structuring – single or multiple SPVs ?
Single SPV – new , integrated projects
There are a variety of factors that can influence which corporate structure best suits a given co-location project , but the most straightforward approach is to have a single SPV holding both the renewable asset and the BESS , as well as the grid connection rights . If it is a new , entirely integrated project , this will be the simplest project structure , allowing the sponsor to benefit from all the efficiencies of colocation , in particular :
• Revenue streams from both assets are easily and justifiably aggregated , which can increase the attractiveness of the project from the perspective of investors and lenders . There will be a derisking of the revenue inputs from both assets with a quasi-offset of ( i ) the intermittency and underutilisation of renewable generation , and ( ii ) the lower guaranteed revenues that may be available for BESS offtake . There may also be a mechanism in place to allow for price arbitraging using the BESS .
• The capital costs of contracting for ownership and use of land will be reduced as there will be no need to provide for independent land rights ( e . g . separate leases and easements ) or separate planning consents . Other issues that can arise where two or more corporate entities require shared access to land ( discussed below in respect of O & M and EPC matters ) will be avoided .
• Grid connection and capacity use can be greatly simplified , with any fees , maintenance costs or other liabilities easily allocable , without the need to apportion responsibility between separate owners .
• While the construction process may be deemed to create ‘ project-on-project risk ’, whereby a delay in completing one element ( e . g . the solar generation element ) of a project would impact full monetisation of the other element ( e . g . the BESS element ). However , if the co-location project is structured to enable the independent operation of each element , then this risk is reduced and can even be seen as an advantage ( in the previous example , the project would at least generate some revenue through the BESS element while the solar generation element is being completed ).
Multiple SPVs
Although a single SPV structure is currently the most common and , in the majority of cases , the simplest option , there are plenty of instances in the BESS market of two or more sister companies holding the co-located assets .
A separate SolarCo ( to hold the solar asset ) and BatteryCo ( to hold the BESS ) might be an appropriate structure if the developer intends ( or wishes to maintain the flexibility ) to sell the assets separately rather than as a package . Similarly , this separation may enable separate financing packages for SolarCo and BatteryCo .
Furthermore , as competition for assets increases and the investor pool diversifies , we expect to see more complex structures adopted to facilitate disaggregated re-sale and avoid stranded assets ( for