The next Heat Networks Market Framework webinar will be on the investment perspective. Keith Hutton, Regulation Director at BUUK, and Lux Nova’s Tom Bainbridge will be providing their expert insight.
The series, co-run by the Heat Trust and Cornwall Insight, offers insight into the opportunities and challenges in the heat networks sector, and areas that imminent regulation will look to address.
The next webinar is on Thursday 25 March at 11.30am. You can join free of charge on the link below: https://lnkd.in/d9677Q5
Decentralised energy and electricity licensing: one week left to have your say
The Government’s “Call for Evidence” on the regime for exemptions from electricity licensing is due to close on 1st March 2021.
All those involved in the decentralised energy sector should pay attention to this and consider responding.
Whether you consider yourself to be a generator, distributor or supplier of electricity or involved in electricity storage or demand-side management or simply an owner or manager of property let to multiple occupier tenants, whether you realise it or not, you are likely to be relying on the class exemptions to avoid committing a criminal offence. Changes that might flow from this call for evidence could be good, bad or terrible for you. Having advised many businesses over the years on related regulatory issues we don’t want to understate the potential significance of changes in this area.
There are a number of problems with the class exemptions (under the Electricity (Class Exemptions from the Requirement to hold a Licence) Regulations 2001 (as amended) (Regulations)). Firstly, there are probably more people relying on them without realising it than there are those who are fully aware of the class exemptions and how they apply to their operations. Secondly, the drafting of the Regulations is complex and confusing leading to misunderstanding and potentially different interpretations. These are things that the Government could certainly do well to tackle. But, tackling them badly could make things more complicated or even make criminal what was previously lawful. This is definitely about the detail and getting it right. This cannot be taken for granted.
However, whilst the call for evidence asks for views on scope for reform, and focuses questions on the details of the Regulations, stakeholders would do well to thing about the broader context in which this review is being undertaken. The decentralised energy sector has suffered - and may suffer further - as a result of various charging reviews undertaken by Ofgem. These have been undertaken ostensibly with a view to ensuring that all stakeholders pay their fair share of the costs of operating the electricity system. The Government refers to this in its Call for Evidence. At face value, paying a fair share seems beyond reproach until you ask: fair for who?
The system of electricity regulation and licencing was set up for regulating a relatively small number of very large businesses involved in moving large volumes of electricity around the country and delivering it to a large number of consumers. The burden of complying with the heavy regulation of their activities is high but their business models are entirely dependent upon the transmission system. Decentralised energy businesses typically depend on the class exemptions to avoid being subjected to this system of licensing and regulation written for someone else. So regulation also serves as the industry’s way of keeping out competition. As a result, it stifles competition and innovation. And yet innovative decentralised energy business models can reduce the burden on the transmission system so who would think it fairer that they should bear a bigger share of the cost for its upkeep?
This Government has published its Energy White Paper and a 10-point plan to accelerate us towards a net zero energy system. It wants to encourage competition, investment and innovation, which we support and welcome. So why not use this review to give decentralised energy better access to the markets that they’re currently all but barred from participating in? This could involve more radical reform but even some relatively simple changes could help.
Take a look at our response to the call for evidence to see what we think.
Hydrogen taking shape - Lux Nova supporting Shoreham Port's first hydrogen production plant
Lux Nova is pleased to be supporting Shoreham Port to deliver a commercial hydrogen production plant in collaboration with H2evolution.
Planning will shortly be submitted to develop a 20MW electrolysis plant which will produce hydrogen, fully certified as green, produced from a combination of captive renewable energy sources available at the Port and green energy, with guaranteed certificates of renewable origin from the Grid.
The hydrogen hub, which Shoreham aims to have operational in 2024, has the potential to produce fuel cell grade hydrogen to supply local and regional operators of fuel cell electric vehicle (FCEV) buses, HGVs and waste collection vehicles, as well as vessels and the Port’s own cranes and forklift trucks.
Tom Willis, Chief Executive at Shoreham Port commented “Through the creation of our hydrogen hub, which will supply zero emission green hydrogen, Shoreham Port can form part of the solution to the region’s net-zero challenges. As a community organisation we would like to work with everyone to make this new stage of the Port’s growth a success.”
Lux Nova advise German developer WKN GmbH on two Polish wind farms
Lux Nova have advised existing client, WKN GmbH, on the construction project financing of two wind farms in Poland: Krzecin and Kuslin.
The two parks will have an installed capacity of 59MWs and will benefit from the Polish renewable energy auction support scheme (contract for difference).
The investment volume for the two wind farms is around €100 million, plus significant additional facility lines to provide letters of credit for the construction contractors. The project debt is provided by the European Bank for Reconstruction and Development (EBRD) and Bayerische Landesbank.
The transaction financing was structured across four jurisdictions, and the wind turbines will be provided by Vestas and Nordex.
WKN GmbH is a member of the DAX-listed PNE Group.
PNE and EBRD have also released statements about the transaction (click on the respective links to read them).
The transaction is significant, as it forms part of Poland’s strategic commitment to the EU climate and energy targets for 2030, which include a reduction of at least 40 per cent in greenhouse gas emissions. Currently, Poland still generates 80 per cent of its energy from coal, with harmful effects on the environment and human health.
Nikola Zahariev, Partner at Lux Nova – WKN’s legal advisors for the transaction – said:
“We are delighted to have supported WKN on this project financing governed by English law. It was a real privilege to work with such a professional and committed development team, and we look forward to supporting WKN with its ongoing international investments.”
Allen & Overy LLP were the legal advisers to the Lenders.
Dauerkraft provided valuable commercial and project management services to WKN.
BSJP provided Polish legal advice to WKN.
Lux Nova advises SASC on West Sussex community energy refinancing, increasing income for local communities and its Corona Crisis Fund
Ferry Farm Community Solar, a local energy enterprise which serves the West Sussex communities of Selsey and Sidlesham, completed a part-refinancing with Triodos Bank in October 2020, followed by a full refinancing through a community bond offer in December 2020.
The solar array has been up and running since 2016 and generates enough clean energy to power approximately 1,300 homes per year. Ferry Farm Community Solar is supported by Communities for Renewables CIC.
This successful refinancing follows on from the original acquisition financing in March 2020, on which we reported here.
The transaction was originally funded by a loan from Leapfrog Bridge Finance, advised by Lux Nova. The senior part-refinancing achieved by Triodos Bank in October 2020 represented the next step in the journey for this community solar asset, further increasing the significant income stream to the local community. Triodos were advised by CMS. Ferry Farm Community Solar were advised by Stephens Scown.
Since the original acquisition financing, Leapfrog have been acquired by Social and Sustainable Capital LLP (SASC), a significant community energy funder. The acquisition of Leapfrog was reported here. Leapfrog Bridge Finance are now called SASC Bridge Finance and remained a mezzanine lender to the project until December 2020.
The strong fundamentals of the project were confirmed by an over-subscribed community bond offer, which raised over £850,000 within a week. The proceeds were used to fully repay SASC Bridge Finance. For further information on the bond offer see here.
To date, surplus income generated by Ferry Farm Community Solar (around £50,000 per year since inception, due to increase following the refinancing) has been used to support:
An energy and fuel poverty advice service, helping individuals and families living in fuel poverty reduce their energy spend, maintain a healthy living environment in their homes, deal with energy debts and access energy-related benefit payments.
A community grant fund, supporting local organisations and projects in Selsey and Sidlesham.
A £40,000 Corona Crisis fund to support local people facing hardship due the outbreak, shut down and likely recession.
Over the solar farm’s lifetime of 25 years, it is expected to generate up to £2,000,000 of community funding.
Louisa Cilenti and Nikola Zahariev, Partners at Lux Nova – SASC’s legal advisors for the transaction – said:
“We are delighted to have supported Leapfrog (and now SASC) in its new capacity as mezzanine lender to the Ferry Farm Community Solar Project, with increased cash flow for the local community following this refinancing. It is testament to the expertise, vision and commitment of the Leapfrog, SASC, CfR and Triodos teams that community projects like this continue to be successful amid the current economic and regulatory uncertainty. We continue to be filled with optimism that we will emerge from the COVID-19 pandemic with a stronger focus on the value of communities and the enabling role of social finance to advance a bigger societal mission and positive social impact.”
Ben Rick, co-founder and Managing Director of SASC, said:
“I am delighted to see Triodos supporting community energy projects with this refinancing. When SASC acquired Leapfrog Bridge Finance in September, we did so not only to build on the strong work we have done in this space but also to support the existing Leapfrog portfolio borrowers. Ferry Farm Community Solar delivers clean energy, strong social impact and involves the local community in determining their energy future. It is great for SASC to be able to work with them and we hope they will provide a template for many more SASC Bridge Finance investments.”
Lux Nova's Louisa Cilenti joins SASC's Renewables Investment Committee
Recognising the value of communities in tackling climate change
Louisa Cilenti has been appointed by Social and Sustainable Capital to join their newly established Renewables Investment Committee to drive further investment in the community energy sector. Louisa commented:
“I am delighted to accept this appointment and to work with an impact investor that can bring a fresh approach to the particular financing challenges faced by community energy groups. Community-led local solutions can and must play a bigger role in accelerating the decarbonisation of our energy system in ways that will create benefits for all.”
SME energy efficiency - Lux Nova help make “ESCO-in-a-box” a reality
For the last year Lux Nova has been working on an innovative multi-disciplinary project to enable an increased uptake of energy efficiency projects in the SME sector. The project, called “ESCO-in-a-box” was led by EnergyPro Ltd, with funding from the BEIS “Boosting access for SMEs to energy efficiency (BASEE)” competition. It involved working closely with Low Carbon Hub Oxford and Oxford Brookes University.
Many small businesses (SMEs) want to reduce their energy use and save money but lack the time or resources to unlock the wide range of financial, environmental, and social gains provided by energy efficiency upgrades. ESCO-in-a-box equips organisations that want to offer energy efficiency services to SMEs with the tools to deliver low hassle, financially viable projects for clients who want to implement change. ESCO-in-a-box provides standardised processes and documentation based on international best practice, access to competitive loans and finance opportunities, and support with setup and marketing. For more information see this recent Business Green article.
Lux Nova’s role was working collaboratively with our partners on creating the contractual structures and documentation for the licensing business model and the energy efficiency assessment and project implementation process - recently launched as EP Connect.
Alex Rathmell, MD Consultancy at EnergyPro and project leader, commented “Huge thanks to David Short and Louisa Cilenti of Lux Nova Partners Ltd who have done a fabulous job working with us and our colleagues at Energy Solutions Oxfordshire to create a system of standardised contracts for energy efficiency project implementation. This now forms the heart of our ESCO-in-a-box platform.”
ESCO-in-a-box is being used now by Energy Solutions Oxfordshire to help local businesses, and is available for licence by local authority or community based organisations elsewhere in the UK. It provides everything needed to establish and operate new breed of energy services company, locally-focused, community-based, and able to offer SMEs a clear, easy pathway for energy projects.
Please consider sponsoring our Christmas charity: PfP Global
We are donating our firm’s Christmas dinner budget (plus a bit more) to PfP Global, a fantastic charity that is working to bring sustainable solutions for sustainable growth, health and responsibility to some of the poorest communities.
Please would you consider doing the same? There is 24 hours to get your donation doubled with the Big Give campaign.
This Christmas, make twice the impact for children and their families affected by HIV.
From 1-8 Dec, your donations to PFP’s Sustainable Sanitation for PAORINHER project in Northern Uganda will be DOUBLED through The Big Give #ChristmasChallenge20.
PAORINHER is a safe haven for 500+ orphans and vulnerable children living with HIV. PfP have been working with the community to set up farming and improve access to reliable, clean energy. However, poor soil reduces yields from the Centre's farm, which impacts on the community's ability to generate their own income and create sustainable futures for the children.
Your donation will help PfP build bio-toilets and washrooms so that the children are not exposed to infection from poor sanitation and hygiene. What's more, the toilets can generate biogas for cooking and fertiliser for farming; saving costs and reducing carbon footprint. Who knew loos could make such a difference?!
Thank You for your support
To find out more about PfP Global, click here.
Lux Nova are proud to be sponsoring this year's District Heating Diva's conference
The UK’s only networking group dedicated to supporting women in heat networks and associated fields, the District Heating Divas held their first conference in December 2019. Attended by around 100 women (and men!) from across the industry, delegates included policymakers, engineers, designers, manufacturers, heat suppliers, local authorities, lawyers and finance specialists. To find out more about the Divas, visit their webpage here.
The Divas will host their second annual conference virtually on 10 December 2020. This conference is open to all and free to attend. The Divas aim to connect women in district heating and related fields across the globe, provide an innovative and rewarding programme, and an exciting and diverse speaker line-up.
Lux Nova Partners are sponsoring the event again this year and Sandy will be one of the panel speakers, discussing new and innovative business models and financing to support heat networks.
To book, click here.
TCFD and Sovereign Green Bonds: the UK Government takes steps towards a green economic recovery
Marking a major contribution to the Green Horizon Summit hosted by the City of London this week, the chancellor, Rishi Sunak, has outlined the following measures designed to encourage green and sustainable investment as part of the country’s economic recovery and to ensure London’s financial centre takes steps to tackle climate change and supporting the global transition to net zero emissions:
Issuing the UK's first ever Sovereign Green Bond by 2021 (subject to market conditions), with further issuances to be planned.
Implementing a "green taxonomy": a common framework for determining which investment activities can be defined as environmentally sustainable to aid investment decisions.
Becoming the first country to make mandatory TCFD (Task Force on Climate-related Financial Disclosures) -aligned climate risk disclosures for a range of UK companies to be implemented in phases over the next five years.
Details of the new reporting requirements, many of which are expected to come into force by 2023, are expected to be unveiled by the end of the year and we will provide a more detailed analysis when information becomes available.
For more information, see here.
Commenting on the proposals, Lux Nova’s Louisa Cilenti views the introduction of mandatory climate reporting as a bold and positive step from Government and will be welcomed across industry which has been making the case for more transparency in investment decision-making and disclosures around the impacts of climate change underpinned by common metrics and global standards that promote consistency and comparability.
These are just the first steps and all large businesses should take note and consider taking pro-active measures now, to put in place strategies to align their businesses with best practice, ensuring they remain compliant and ahead of the game in this fast-moving space.
