As in 2022, we expect to continue seeing the aggregation of operational renewable generation assets by parties looking to hold them over the longer term. There is also likely to be continued interest in investing in existing renewables developers and fund managers as those with funds to invest look to deploy capital in the infrastructure space with an eye on their ESG credentials and their own net zero targets.
Onshore wind
The UK Government recently announced its intention to relax the ban that has effectively been in place in respect of new onshore wind developments in England and Wales. Since 2016, planning requirements have been such that it has effectively been impossible to obtain planning permission for a new onshore wind development in England and Wales. During this period, it has been possible to obtain planning for such developments in Scotland, where control over planning is devolved to Scottish government. As a consequence, England and Wales are lagging behind Scotland in the adoption of onshore wind. Indeed, RenewableUK recently reported that there were only two small onshore wind developments completed in England in 2022.
It should be noted that while this is a positive development, it is by no means opening the floodgates to new onshore wind developments. It will continue to be the case that developers will need to engage with the planning departments at local councils which can be a lengthy and costly process. There will also be no certainty that local councils will be receptive to onshore wind developments, which will likely result in significant differences in the deployment of new onshore wind generation across England and Wales. If the planning changes are brought into effect, we would expect, however, that there will be increased interest in onshore wind developments in England and Wales in the latter part of 2023.
Offshore wind
The deployment of offshore wind generation continues to receive the strong backing of the UK Government which is targeting reaching 50GW of capacity by 2030. A further 3.2GW of offshore wind capacity was added in 2022: a record year for new capacity being added to the UK grid. We do not see any reason why offshore wind will slow down in 2023 with the further development of offshore wind following 54.9GW of offshore wind leases being granted in 2022 and with further lease rounds expected to begin in 2023. That said, the ongoing impact of inflation and the 45% windfall tax on the profits of electricity generators could have a dampening effect on the enthusiasm amongst developers of new offshore wind projects.
Solar
With the ongoing energy crisis and soaring energy bills, we expect to see rooftop solar being more popular than ever as businesses and homeowners seek to protect themselves as much as they can against being a hostage to wholesale energy costs. The UK government taking the step of removing VAT on solar panels for residential accommodation will also assist with the affordability of panels.
Ground mounted solar falls somewhere between offshore and onshore wind in terms of likely development this year. Solar does not have the same support as offshore wind but it is also not as dramatically hampered by adverse planning rules as onshore wind (although there has still been plenty of coverage of statements made by Liz Truss opposing solar as an indicator of the uncertainty that still prevails over the industry). We expect solar development to continue on its current trajectory but as with offshore wind, it remains to be seen how inflation, the windfall tax and supply chain issues impact on new developments in 2023.
