City Of London To Go Solar!
DECEMBER 2, 2020
By Paul Homewood
Voltalia (Euronext Paris, ISIN code: FR0011995588), an international player in renewable energies, strengthens its presence in the United Kingdom and will build a 49.9-megawatt solar power plant to supply green electricity to the City, London’s prestigious business district, under a 15-year contract.
A ‘pioneering’ £40 million green energy deal could provide a blueprint for local authorities seeking to reduce carbon emissions and cut costs, the City of London Corporation says.
The governing body of the Square Mile has signed a power purchase agreement with Voltalia – an international player in renewable energies – to buy all the electricity produced by a new-build 95,000-panel solar farm in Dorset for 15 years.
The deal, the first of its kind in the UK to be signed directly between a renewables producer and governing authority, will enable Voltalia to leverage cash to build the facility, while saving the City Corporation around £3 million in energy costs.
It says the arrangement will allow cost certainty and avoid the risks involved with local authority-owned energy firms, following recent high-profile selloffs of loss-making council-owned companies in Nottingham and Bristol.
The solar plant will have a total capacity of 49.9 megawatts – enough to power the equivalent of 15,000 homes – and will provide over half the City Corporation’s electricity, powering buildings including its historic Guildhall headquarters, three wholesale markets and the Barbican arts centre.
The new deal forms part of the organisation’s wider commitment to climate action. Its Climate Action Strategy, launched last month, commits it to making the Square Mile net zero for carbon emissions by 2040 – 10 years earlier than Government goals.
Let’s do a few quick sums.
A 49.9MW solar plant, running at 8% loading, will generate 35000 MWh a year.
Over 15 years, the £40m deal will be worth £2.6m a year, which equates to £74/MWh. It is not clear whether the deal is index linked.
City of London say they will save £3m a year on energy costs, which equals £85/MWh, suggesting they are currently paying £159/MWh, which sounds about right.
Given that levelised solar power costs are £44/MWh (BEIS 2020), there is no way that City of London can buy at £74/MWh, unless they are avoiding most of the network and other costs, which the rest of us have to pay.
According to OFGEM, network costs, policy costs (green subsidies) and utility company operating costs account for two thirds of retail prices. It is not known how much the City will pay towards these costs as part of their green deal, but the less they pay, the more everybody else does.
Needless to say, the City won’t actually be using electricity from the new solar farm, which is in Dorset. And they will be totally reliant on grid power, including fossil fuels at night,