Norwegian state-owned utility Statkraft AS has signed a power purchase agreement (PPA) with British renewables developer Luminous Energy for the 28.5-MW Bracon Ash solar farm in Norfolk. This deal aims to provide clean energy to thousands of homes and introduce new financial mechanisms in the renewable energy sector.
A Dual-Financial Mechanism Approach
The Bracon Ash solar farm, situated near Norwich, is set to become one of the first solar projects in the UK to benefit from both a Contract for Difference (CfD) and a virtual corporate PPA. The CfD was secured during the UK’s fifth CfD auction round in September last year, and it aims to stabilize revenues for renewable energy projects by providing a fixed price for power. Complementing this, a virtual corporate PPA has been signed with Bristol Airport, adding another layer of financial security for the project.
Guy Lavarack, Chief Investment Officer at Luminous Energy, highlighted the strategic importance of partnering with Statkraft. He stated, “Statkraft's market-leading position, virtual power plant system, and ability to manage the complex metering arrangements convinced us they were the best counterparty to appoint for our first operational solar farm.”
Under the seven-year contract, Statkraft will provide balancing services via its advanced Virtual Power Plant (VPP) system. This system is crucial for managing the intermittency and variability inherent in solar power generation. The VPP will enable Statkraft to offer different pricing for the two portions of the solar farm, providing physical hedges before the financial contracts commence.
Balancing and Downregulation Services
Michelle Lam, Statkraft’s PPA Business Development Manager, emphasized the company's innovative approach, saying, “Finding new solutions to maximize the returns on behalf of our customers is in our DNA at Statkraft. That’s why it’s been particularly exciting to work with Luminous Energy on this unique PPA. Statkraft has once again proven its innovative approach and willingness to think creatively on behalf of our customers to meet their requirements and to optimize the options available in the market.”
One of the standout features of this PPA is Statkraft’s provision of downregulation services. By responding to price triggers set by Luminous Energy, Statkraft can remotely curtail the solar farm’s output during periods of negative pricing, thereby avoiding unnecessary costs and reducing grid pressure. This capability is particularly valuable given the increasing prevalence of negative pricing periods in electricity markets, driven by high renewable penetration and fluctuating demand.
Statkraft’s well-established VPP system, which manages a diverse renewables portfolio across Europe, will be instrumental in optimizing the flexible generation portfolio in the UK. This system already handles renewables PPAs in Germany and other parts of Europe, showcasing its robustness and adaptability.
A Milestone for the UK Renewable Energy Sector
The Bracon Ash project is poised to generate enough electricity to meet the demand of approximately 9,500 homes annually. This milestone highlights the growing capacity and potential of solar power in the UK’s renewable energy mix. The integration of CfD and virtual corporate PPA mechanisms sets a new precedent for financial structuring in the sector, offering a model that other renewable projects might follow.
Statkraft’s track record in the UK includes signing CfD PPAs for both onshore and offshore wind projects, with successful bids in CfD Allocation Rounds 1 and 3. The reintroduction of onshore wind and solar to the CfD auction process has seen a surge in project approvals, underscoring the UK government’s commitment to expanding its renewable energy infrastructure.
This partnership between Statkraft and Luminous Energy is more than a single project; it represents a forward-thinking approach to renewable energy deployment and financial innovation. The success of the Bracon Ash solar farm could pave the way for more projects to adopt similar dual-financial mechanisms, enhancing the financial viability and stability of renewable energy investments.
As the UK continues to advance its renewable energy targets, collaborations like this one will be critical in driving the transition to a more sustainable and resilient energy system. The combination of technological expertise, innovative financial solutions, and robust risk management strategies positions both Statkraft and Luminous Energy at the forefront of this transformative journey.