Last Thursday's 'Financing net zero forum' brought together 580 registered attendees across the renewables sector to listen to the expert panel discuss managing renewable merchant risk. Joining the chair of the meeting were experts from across the industry, with Shoosmiths sponsoring the afternoon discussions.
Merchant renewables – the development of renewable assets without direct support through policy or subsidy – have faced an interesting year, with the pandemic creating a unique set of circumstances.
Across the panel, there was a consensus that the pandemic gave us a glimpse of what a managed net zero system would look like. This has drawn attention to the situation of renewables in the market, with price volatility, price cannibalisation and curtailment all heightened during this time.
It was no surprise to the panel that these issues were major concerns of the attendees. They expressed the hope that developers and investors can and will "get comfortable" with this new market and its problems. The undercurrent of instability in the industry from a policy and regulatory perspective makes this difficult for merchant renewables to manage.
The panel argued that the many industry institutions from the government through to National Grid should consider how we transition to net zero and the look of future market design. However, they praised the ambition and recognised the need for a coherent strategy. The panel was concerned that the institutions run the risk of reducing confidence in the market they want to bolster without the connected thinking. But they agreed that a more joined-up approach between the relevant institutions would give those developing and investing some stability and confidence.
It may be up to the government to take the lead, the panel suggests, by boosting coordination among different parties to ensure a longer-term view is taken to create more certainty and confidence in a rapidly evolving landscape. This will, in turn, help mitigate some of the risk currently being faced by merchant renewables. According to the panel, the benefits will transcend not just investors and developers. The government will be able to "piggyback" off them with green economic recovery and boost green jobs.
Overall, Great Britain is going to have a more renewables dominated system. While the developer appetite is there, and the pipeline is growing considerably, the panel mentioned a lack of a clear long-term view and a misalignment to the net zero goals. They called on the government to create an actionable net zero roadmap for the decades ahead to boost investors and developers' confidence.
If you are interested in this topic or would like to attend one of our 'Financing net zero' forums, please contact Bertie Bagge on firstname.lastname@example.org.