James Armstrong, managing partner of Bluefield Partners. Image: Bluefield
Bluefield Solar Income Fund recently celebrated a "really strong" set of financial results, with a jump in underlying earnings pre amortisation of debt to £48.6 million and a pipeline that now stands at over 700MW.
Over the past year, the company acquired a portfolio of 15 UK ground-mounted operating PV assets totalling 64.2MWp and a single 70MWp asset, while also purchasing the rights and associated land to build 45MWp of solar and a co-located 25MWp battery project for approximately £5 million from EQUANS - its first co-located solar-plus-storage asset.
Solar Power Portal caught up with James Armstrong, managing partner of Bluefield Partners, the investment adviser of Bluefield Solar Income Fund, to discuss the decision behind investing in storage, plans for the Contracts for Difference auction and how the supply chain issues facing the industry are the "biggest single challenge" currently at play.
What would you say is the key takeaway from Bluefield's results?
It's a really strong set of results, particularly with the backdrop of COVID-19.
I think the big news is obviously we made two big acquisitions of solar farms. We did a lot of acquisitions of solar in the period, and we've also really pushed the development of the next wave. So we've got over 700MW in development, and that's a big story in terms of money.
We are really backing the next phase of growth in the UK solar industry; we think there is a big opportunity.
What drove the decision to acquire your first co-located storage asset?
We're really excited about that area. Two years ago we made a prediction: we thought the energy markets would become more volatile because as you try to decarbonise, you take stable, baseload off the energy system, and the net consequence is you have more instability. So storage is very key. That's why we started to invest in that and look into that as a part of the overall strategy for Bluefield Solar Income Fund. For us, it makes perfect sense, and that was a really good deal. We would expect to make more announcements about storage over the coming months and years.
It was recently announced that the government is seeking up to 5GW of 'Pot One' technologies with a budget of £10 million in the next Contracts for Difference (CfD) auction. Is this around what you would have expected?
I think it's kind of as expected. We have moved away from that world where you are beholden to governments and subsidies, so there's a lot more confidence and independence in the industry.
We know there's a huge pipeline coming through, and I do think that it's not all subsidy free. We would certainly expect to be participating in some CfD auctions, and we expect those allocations to increase in the future.
The UK solar industry appears to be in a strong position moving forward, but what are the biggest issues still facing the solar industry as a whole?
I think the biggest single challenge is the supply chain. It's an industry wide, global issue. I remain very optimistic about the solar industry, because you just have to look at the track record in the industry, and its ability to deal with supply issues. It's a commoditised industry and you'd expect these inflationary pressures on modules to be sorted out because that's the way the industry works; it's typically a very efficient industry.
We're not procuring stuff at the moment for the UK business, but certainly for those that are procuring it's going to be quite difficult, because these prices are changing because people are struggling, and there's long lead times at the moment if you need inverters. We have a very good existing portfolio, we sourced out all our spare parts over the past 12 months, so we're in a good position.
How are you managing the power price volatility seen in recent months?
For our investors, the key thing to note is that they are beneficiaries of it, but also that they're very ringfenced from any risk. So we have our counterparts that provide the contracts, the vast majority of which come out of two or three of the largest energy organisations in the world. We have very strong counterparts and we have no exposure to the smallest suppliers. Overall, it's something where earnings will increase, and the benefits of these increases will be seen by our shareholders over the next one to three years, so it's a good position.