Jonathan Selwyn. Credit: Bluefield.
In September, solar industry veteran Jonathan Selwyn joined newly created Bluefield Renewable Developments Limited (‘Bluefield Development’) as managing director.
He is set to lead the new arm of the Bluefield Group as it looks to expand its scope in the UK, looking at self-developed solar projects as well as complimentary technologies such as onshore wind.
Solar Power Portal sat down with Selwyn to discuss his first priorities at the company, the routes to market open to solar and the impact of COVID-19.
What are your first priorities following joining the company?
Really to establish two things. First of all, the inhouse development team, so that we can develop subsidy free projects in the UK and in other European markets, and secondly to work with external developers in the co-development role to work with them on their pipeline of projects as well.
With the emergence of subsidy free development in the UK, it seems the opportunity out there is vast?
Yes there is a big opportunity, but it's still not absolutely clear the economics of the projects. So of course we all know that we need to do more renewables in the UK, we know that there will be a demand for renewable power, we have a short-term worry about forward power prices, but it's still not absolutely clear the route to market.
We have Contract for Difference (CfDs) auctions coming back next year, we've got an emerging Power Purchase Agreement (PPA) market as merchant power, so it's not settled, unlike in the previous markets where it was very clear what the financial model with the feed-in tariffs (FiTs) and Renewable Obligation Certificates (ROCs), and the way that you fund them.
So although there does seem to be quite a big opportunity, it's going to take a while for it to establish what the market is and how it's going to operate.
Do you think COVID-19 will have an impact on people looking to choose PPAs going forwards?
I think in the short-term inevitably because we've all seen the plunging power prices, mainly caused by a plunge in demand. That's already bounced back, but we don't know exactly how forward power curves have been affected over the full investment horizon.
So if you're an energy manager in a big corporate and you chose to fix at 15 years just before COVID19, you probably were quite concerned looking forward thinking that you might have locked in at too high a price.
I suppose the big question is whether they will be proved right in the long time because power prices will head back.
So inevitably that makes people a bit more cautious about committing to long term PPAs at the moment. But I think most people assume that power demand will come back, and that power prices are already back at levels they were before lockdown, so the assumption would be that they will carry on going forwards as before, with maybe a slightly different trajectory.
Do you think the impact of power prices is likely to be the most significant impact of COVID-19 on solar development in the UK?
I think in the short-term it has certainly had an impact, but in the longer term there are other forces at play.
Clearly net zero targets are going to have a massive impact on the whole energy market, as will the collapse in the value of fossil fuel assets. They used to be seen by investors as a safe haven but they really aren't any more, and then a lot of the other safe havens that investors were looking to have proved to be on slightly shaky ground. So if you look at things like commercial property, the retail sector, care homes, student accommodation, you name it, there aren't too many safe havens around at the moment, which is why you're seeing very volatile stock markets, because people are trying to identify what they think are going to be the next big thing, whether it's going to be a certain type of technology or sector.
So I think the fact that net zero is very much a strong driver in the market, and the fact that investors are looking for safer places to put their money than their previous safe havens, means that it is a good time for renewable energy in general in terms of investment class. And you would hope that that would outweigh the sort of risks that are coming from the lower power prices.
How significant do you think it is that the UK government chose to bring back in pot one CfDs?
I think at the moment it's not significant in terms of volume, because our experience previously has been that they were going to be very low volumes in the CfD. It's not clear yet whether this time they are going to have a cap or raise the cap, so the volumes being suggested are pretty small.
But I think it's more about market sentiment; knowing that there is new route to market – or at least a kind of revisited route to market – as a backstop option, for investors that's quite important.
I think if the Solar Trade Association is successful in lobbying alongside other trade associations for the cap to be removed or raised then volume could be significant as well.