Bluefield Solar Income Fund (BSIF), an investor focused on large-scale renewable energy assets in the UK, has released its annual results for the year ending June 2024, claiming that its operating portfolio is now responsible for 5% of UK solar power generation .
BSIF owns and operates a UK portfolio of 1.5 GW of solar assets, comprising 824.7 MW of turnkey and 776 MW of operational solar capacity. The pipeline also includes battery projects of more than 600 MW. According to the company’s fourth interim dividend announcement, published alongside its annual results, BSIF has successfully paid one of the highest equity dividends in the infrastructure sector.
This is despite reports that transactional activity in the UK renewable energy market has declined. It also claims that the UK development market continues to be driven by factors such as increasing customer preference for clean energy, ambitious decarbonisation targets, demand for ESG investments and the inclusion of solar energy in Contracts for Difference (CfD) auctions.
Battery storage development activity has been “noticeable,” according to the dividend announcement, as developers look to provide network management solutions; Grid constraints caused by the grid’s inability to manage large amounts of intermittent renewable energy sources were blamed for the slower development of solar energy during the quarter.
Supply chain issues and higher development costs have proven to be a barrier to construction activity, although some activity has been seen in the UK’s solar and battery storage areas. Yet converting the UK’s development pipeline into operational solar and storage projects over the next five years will require developers to overcome high construction costs, grid connection lead times and access to new capital.
Regulatory environment for solar energy and storage
Given Labor’s pledges to triple Britain’s solar power generation capacity by 2030, thereby “igniting a revolution on the roof”, regulation is expected to slow down the rollout of solar and storage to support and encourage.
In particular, BSIF mentions the Electricity Generator Levy, a temporary tax on income from electricity sold above the benchmark price, which will be in force until March 31, 2028. This is applied to extraordinary revenues from renewable energy generation, nuclear energy and waste to energy and reduces the profit potential for projects, especially those that may be shut down by the grid during periods of curtailment. The levy does not apply to projects that have been granted CfDs.
The interim announcement also covers the second revision of electricity market agreements (REMA), which concluded in May 2024. The market is awaiting a formal response to the consultation, which will address the possibility of zonal location pricing and possible changes to the CfD scheme.
Without certainty on these matters, it will be difficult to gain investor confidence – something that will be crucial to achieving net zero targets. Although the government has pledged to channel £8.2 million into the renewable energy sector through its flagship Great British Energy Company, this will fall short without private investment.
