By City A.M – Mar 29, 2023, 3:30 PM CDT
A leading trust has warned that National Grid needs to speed up grid connections for new renewable projects if it wants the UK’s investment climate to be more attractive.
Chris Gaydon, investment director at Octopus Renewables Infrastructure Trust (ORIT), told City A.M. that grid access is the common denominator for all the different renewable technologies.
He said: “There’s a lot of projects which are available for investment, but they’re just not attractive because their grid connection is so far into the future.
“National Grid has been very active, and made some statements recently about plans to fast track that. From my perspective, that’s very well received and hopefully that delivers on sort of faster grid connections across the place.”
Renewable projects have to join a production queue for grid access, which operates on a first come first served basis – even though only 30-40 per cent of transmission projects come to fruition, leaving many developments stalling behind projects lacking funds or with logistical issues.
National Grid has declared an amnesty for projects in the queue lacking funding – allowing them to back out without incurring fines.
Earlier this month, its electricity system operator also unveiled a five-point plan to expedite grid connections for electricity transmission-related projects.
This included updating modelling assumptions about which projects in the queue were feasible and fast-tracking battery storage projects.
There have been extensive calls within the industry, including from Octopus Energy boss Greg Jackson, for connections to be sped up for new projects so the UK can meet its vast renewable generation targets – however, it is unlikely the government will announce any reforms at the upcoming Green Day.
National Grid chief executive John Pettigrew has previously warned it will have to deploy seven times the amount of transmission cables in the current decades as it has done for the last 30 years of its operational existence.
National Grid has been approached for comment.
Octopus bullish despite sagging share price
Gaydon was speaking to City A.M. alongside fellow investment director David Bird after the renewables trust unveiled its full year results this morning.
ORIT reported solid growth for the second year running with net asset value up 12.3 per cent – and 25.9 per cent up since its IPO in December 2019.
Its gross asset value has climbed from £738m to £1.07bn with the value of all its investments totalling £1.3bn.
ORIT invests in solar, wind and battery projects across the UK and Europe with over 1GW of capacity across its 10 wind sites and 32 solar sites.
Around 86 per cent of its portfolio is operational, with the remaining 14 per cent in construction and development stages.
Once fully invested, the portfolio has the potential to power the equivalent of 522,000 homes with clean energy, an estimated 580,000 tonnes of carbon emissions avoided.
ORIT’s share price has tumbled over the past six months – which it attributes to Truss’ mini-budget (Source: LSE)
Over the past year, it has completed eight transactions including entering a new country, Germany -and committing over £350m of capital across onshore and offshore wind, solar and battery storage.
However, the company has suffered a sharp drop in its share price over the past six months, with the FTSE 250 firm falling from 116p per share on 21 September a low of 89.5p per share earlier this week – meaning it is now trading at a discount.
Bird attributed this decline to a wider investor shift from renewable trusts after former Prime Minister Liz Truss’ mini-budget.
He said: “I think a lot of this was triggered by the dent in confidence in the UK that came from the mini-budget. Since then, I think investors have switched focus a little bit to either investing in bonds where yields have been quite high or to dealing with other areas of their portfolio.”
Rival offering Downing Renewables and Infrastructure Trust has seen its share price tumble from 119p to 101p per share over the same period on the FTSE AIM All-Share, a definitive drop-off but seemingly less definitive than ORIT’s decline.
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