Supporting Ecotricity on its new business line: Virtual Power Plant and “aggregator” services.

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As has previously been reported (here and here), Ecotricity Group has been preparing to offer virtual power plant / aggregator services, using the German “NEMOCS” software platform, developed by Next Kraftwerke.

Ecotricity will provide its services to the National Grid, the balancing market and other buyers of “flexibility”.  This development is significant, as enhanced flexibility on the National Grid is a critical enabler for the take-up of more renewable energy generation.

This has been topical for some time, but the very specific need for more flexibility has been exposed during the Covid-19 pandemic, with reducing demand for electricity and acute volatility in wholesale prices.

In order to bid into such flexibility auctions, Ecotricity will require actual flexibility to be provided by end-customers, such as owners of batteries, industrial users of electricity, or generators of renewable energy. These end-customers may benefit from Ecotricity’s offer of a “Virtual Power Plant”, as the financial rewards available to the end-customers may exceed the price that can be obtained from exporting electricity to the grid or using the electricity for industrial purposes.

Lux Nova are proud to have supported Ecotricity in this important and exciting endeavour, through strategic advice and preparing the documentation for the Virtual Power Plant aggregation product.

Nikola Zahariev and Tom Bainbridge advised for Lux Nova.

Nikola commented:

“We are proud to partner with Ecotricity, one of the most innovative and green businesses in the UK. The ethos of the Ecotricity team is very much aligned with ours, and it is always a pleasure to work with like-minded people, working towards a “net zero economy”. In an (effectively) subsidy-free UK renewables market, the need for pioneering companies to lead the way with new ideas is so important, and we are very happy to be supporting Ecotricity in this.”

Together, we are now working on a number of projects that will benefit from this business line – watch this space!

Lux Nova support Alpha Real Capital on the acquisition of Innova Energy

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Lux Nova are proud to have supported Alpha Real Capital (“Alpha”) on its largest solar PV transaction to date.  Alpha, the specialist manager of secure income real assets, completed the acquisition of Innova Energy Ltd, a multi-asset operating portfolio, in December 2021. 

The addition of the 61.5MW portfolio takes Alpha’s annual low carbon electricity generation to circa 540 GWh, equivalent to powering 186,000 homes. List Solar News has reported a valuation of £86m for the portfolio.

Alpha was advised on the acquisition by Lux Nova Partners (English law), Moore Kingston Smith (tax and financial), ITPEnergised (technical), Mills Selig (Real Estate) and Harper Macleod (Scots law). 

The Lux Nova team was comprised of a 3-Partner strong team, led by Nikola Zahariev (Due Diligence, M&A, Finance and Derivatives), together with Louisa Cilenti (Due Diligence, Corporate PPAs and Project Development) and Stephen Lister (Due Diligence and M&A).

Nikola Zahariev, transaction lead at Lux Nova Partners, said: “We are very pleased to have supported Alpha all the way from bid stage to successful completion of this strategic acquisition. This diverse portfolio is representative of the many facets of renewables generation in the UK today, all of which come with their own opportunities and challenges. Whether it be legacy ROC/FiT regimes, zero subsidy generation, corporate PPAs, grid sharing, or greenfield development opportunities at scale – all of them will be needed to move the needle towards our climate change goals. We look forward to continuing our collaboration with Alpha’s investment team, led by Will Morgan.”

Among the highlights of the transaction was the diverse nature of the portfolio that was diligenced by Lux Nova. It was recently project financed by Nat West, comprises the corporate PPA for Coca-Cola’s largest European bottling plant, in Wakefield (see links here and here), and a rooftop corporate PPA for Greenyard’s frozen peas packaging plant in Boston (here).

Will Morgan, Head of Renewables at Alpha Real Capital said: "We are delighted with the addition of this portfolio, that takes our renewables assets to 340MW. Following a strong market recovery we anticipate remaining active in the market as we continue to source opportunities that will deliver the UK’s energy transition.”   

The transaction received press coverage from numerous news sources:

https://realassets.ipe.com/news/alpha-real-capital-buys-86m-uk-solar-portfolio/10057582.article

https://www.privateequitywire.co.uk/2022/01/24/311451/alpha-real-capital-acquires-gbp86m-uk-solar-portfolio

https://renewablesnow.com/news/alpha-real-capital-buys-615-mw-solar-portfolio-in-uk-770358/

https://renews.biz/75119/investment-manager-acquires-62mw-uk-solar-portfolio/

https://aronhealth.com/alpha-real-capital-buys-61-5-mw-solar-portfolio-in-uk/

Alpha real capital acquires £86m UK solar portfolio (electronicspecifier.com)

https://www.built-environment-networking.com/news/alpha-real-capital-acquires-86m-energy-portfolio/

https://www.poandpo.com/companies/alpha-real-capital-acquires-innova-energy/

https://list.solar/newshttps://www.linkedin.com/posts/clean-energy-pipeline_alpha-real-capital-acquires-17-project-uk-activity-6891320835009773568-9tmi/financial-investment-1/

Lux Nova joins the World Ocean Council

Lux Nova Partners are pleased to have joined the World Ocean Council as members, supporting the vital efforts the Council are leading to bring together those at the forefront of ‘Corporate Ocean Responsibility’ to advance industry-driven solutions, and in mobilising the capital needed to address the many ocean sustainable development challenges. 

This reflects our own strategic direction which recognises the importance of protecting and enhancing our natural ecosystems in helping us to transition to a more sustainable world. Our decarbonisation expertise naturally straddles the green and blue economies through our existing work with ports and in the advice we give to energy companies on the marine aspects of offshore wind farm developments (including licensing, fishing rights, marine life impact assessment, creation of safety zones and wreck disposal). We look forward to expanding our work supporting innovative companies to implement solutions that improve ocean health and sustainability.

We are hiring!

Photo by Jason Blackeye on Unsplash

Are you a lawyer who wants to do more to fight climate change? Do you want to have real impact on shaping a better world? 

 At Lux Nova, we believe we all shoulder a responsibility to achieve climate positive and nature positive outcomes in the real economy. As lawyers, we have a special role to play in driving equitable innovation and solutions that will help keep the world inhabitable for all. We work across the entire Net Zero market, both in the UK and internationally, deploying a whole raft of green technologies, strategies and solutions. We share with our clients, from start-ups to large corporations, social enterprises to financial institutions and funds, developers and local and central government departments, a single common goal to achieve real world emission reductions across key sectors of our economy, notably energy, the built environment and transport. This is why we are consistently ranked as a market leading firm in Legal 500 for our renewables and low carbon infrastructure work, with nearly all of our lawyers individually rated. 

This deep decarbonisation transformation is our defining purpose. We also believe we will only achieve our climate goals if we work collaboratively and embrace diversity of thinking. So, we have built a law firm that allows us all to be our creative best selves and to be more effective in pulling together to achieve the highest climate and environmental impact. This is the only work we do. 

 But we want to do even more. We want to expand our ability to support more clients wanting to make a real difference in achieving Net Zero, a circular economy and greater biodiversity.  Be ambitious, come and join us, join the movement and make a real difference in helping us and our clients create a more sustainable world.

We invite applications from partners and other senior lawyers (at least 7 years PQE) with expertise in clean energy and low carbon projects. Lawyers with expertise in ESG and wider sustainability are especially encouraged to apply. We can offer a more traditional law firm remuneration model but are also actively seeking interest from proactive lawyers who want to take more control over their work and how they work through our consultancy model. You still benefit from the same resources, support, and being part of one team and working in teams to deliver client work, but with more freedom to run your own practice and set your own hours and goals. 

For a confidential chat, please do reach out to Louisa Cilenti (louisa.cilenti@luxnovapartners.com,Tel: 07803755964)

And what now? Reflections on COP 26

Thank you to the Association for Distributed Energy for their invite to attend COP26 as part of their delegation.

I have penned a few thoughts on the two weeks in an article published by the ADE here.

Lux Nova support WKN on sale of two Polish wind farms to Octopus

Image: Thomas Galler @t_galler

Earlier this year, we reported on the successful construction project financing of two wind farms in Poland: Krzecin and Kuslin, with a combined installed capacity of 59MW.

Construction has been progressing very favourably ever since, with practical completion expected for Krzecin in Q4 2021 and for Kuslin in mid-2022.  

Given such favourable circumstances, WKN (a member of the PNE Group) was able to take these projects to market in a swift manner, and secured a sale to Octopus Renewables Infrastructure Trust PLC last month. 

We are proud to have accompanied WKN on this journey, continuing our collaboration with PNE’s excellent in-house legal team (led by its Head of Legal, Dr. Jan Messer) and ably assisted by their commercial advisors Dauerkraft (Stefan Küver and team).

The transaction received press coverage from CEE Legal Matters, a publication focussing on Central and Eastern Europe.

Lawyer Monthly also ran a feature, which included an interview with Lux Nova’s transaction lead, Nikola Zahariev.

These transactions are a small but significant step towards reducing the dependence on coal-fired electricity generation in Poland, and we look forward to contributing further to Poland’s journey to Net Zero.

On the Road to COP 26

Next week is of course, COP 26, the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC). Seen by many as the make-or-break COP negotiation, delegates from around the world (including myself) will make the journey to Glasgow from the 1st to the 12th November. Everyone hopes that global consensus can be reached climate mitigation and adaptation measures, aimed at achieving the Paris Agreement goal of:  

“Holding the increase in the global average temperature to well below 2ºC above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5ºC above pre-industrial levels” (Article 2.1)

The conference is set against a year of unprecedented climatic events, undoubtedly contributed to by the climate emergency. The words of the UN Secretary General must be ringing in most people’s ears: “this is Code Red for Humanity”. His words followed the publication of the latest IPPC Climate Report, which made for frightening reading:

“The alarm bells are deafening, and the evidence is irrefutable:  greenhouse‑gas emissions from fossil-fuel burning and deforestation are choking our planet and putting billions of people at immediate risk.  Global heating is affecting every region on Earth, with many of the changes becoming irreversible. The internationally agreed threshold of 1.5°C is perilously close.  We are at imminent risk of hitting 1.5°C in the near term.  The only way to prevent exceeding this threshold is by urgently stepping up our efforts and pursuing the most ambitious path.”

All nations, especially the G20 and other major emitters, need to join the net-zero emissions coalition and reinforce their commitments with credible, concrete and enhanced nationally determined contributions and policies before COP26 in Glasgow.

We need immediate action on energy.  Without deep carbon pollution cuts now, the 1.5°C goal will fall quickly out of reach.  This report must sound a death knell for coal and fossil fuels, before they destroy our planet.  There must be no new coal plants built after 2021.”

The road to Glasgow

The Paris Agreement was reached in 2015 at COP 21. It set out that each Party to the agreement must set out its “Nationally Determined Contribution” (NDC) every five years, to reach that 1.5°C goal. Countries are asked to come to COP 26 with ambitious 2030 emissions reductions targets that align with reaching net zero by the middle of the century and keeping that 1.5°C target alive. 

But targets aren’t enough. In addition, the Parties need to agree mitigation measures to:

• protect and restore ecosystems

• build defences, warning systems and resilient infrastructure and agriculture to avoid loss of homes, livelihoods and lives.

And, in order to achieve these goals, developed countries are being asked to make good on their Paris promises to mobilise at least $100bn in climate finance per year from 2020.

So how are things looking less than a week before the conference? 

Emissions reduction targets 

Unfortunately, current commitments are looking poor, before even examining whether Governments are backing up their commitments with concrete policies, let alone action. This following graph from the BBC is stark:

In fact, the UN’s final report on NDCs published in September, shows that current contributions would result in an emissions increase of 16% by 2030 as against 2010 levels. To be consistent with global emission pathways to the 1.5 °C goal, emissions need to decrease by about 45% from 2010 levels by 2030.

Also making pretty depressing reading is the 2021 Production Gap Report, published by the UN Environment Programme (UNEP). The report found that despite increased climate ambitions and net-zero commitments, governments around the world still plan to produce or permit more than double the amount of fossil fuels in 2030 than would be consistent with limiting global warming to 1.5°C. In fact, the world’s governments plan to produce around 110% more.

A lot of work needs to be done at COP 26!

Finance 

The picture on finance is slightly better, but still not where we need to be. Finance for mitigation and adaptation to climate change has fallen short of the 2020 target. Figures for 2020 are not yet in, but a report last year for the UN concluded that “the only realistic scenarios” showed the $100-billion target was out of reach. Worse still, current estimates are that financing should actually be in the region of $300bn per annum as the costs of developing countries coping with the climate emergency rises.

Ref 2: Organisation for Economic Co-operation and Development. Climate Finance Provided and Mobilised by Developed Countries: Aggregate Trends Updated with 2019 Data (OECD, 2021).

Putting the commitments in context, the missed global commitment of $100bn is less than the UK is spending on its HS2 Rail Link and, sadly, the $11.6bn pledged by the UK is in fact taken from our overseas aid budget. 

So where is the UK Government with its plans? 

The Net Zero Strategy

The UK Government has set out its stall with the Net Zero Strategy, published last week. The Climate Change Committee welcomed the strategy, stating that it is a major step forward.  Lord Debden commented: “the UK was the first major industrialised nation to set Net Zero into law – now we have policy plans to get us there. As we welcome world leaders to COP26 in Glasgow, that is an important statement… now [the Government] must deliver these goals and fill in the remaining gaps in funding and implementation.” 

According to the Climate Change Committee, the strategy’s ambitions align to the UK’s emissions targets of Net Zero by 2050 and a 78% reduction from 1990 to 2035 (63% relative to 2019).

However, ambition is one thing and the Strategy has been less well received by others, highlighting the lack of financial commitments, placing too much faith in private sector solutions and a nuclear revolution. 

Others have summarised the content of the strategy so I won’t do that here (take a look at some of the legal summaries published by Lexology for some detail and commentary here and here and for a more detailed analysis, Carbon Brief’s report here). However, I will flag a couple of key points that stood out for me. 

The first was Boris Johnston’s comments on no need for “hair shirts” and continuing our lifestyles “guilt-free”. Although reduction in consumption is an unpopular idea across politicians and consumers alike, if we are to get real about the climate emergency and our ecological emergency, reducing the amount of natural resources we consume has to be part of the picture. Instead, we have seen a focus on the next new shiny investment opportunities (new nuclear anyone?) and an implicit belief that nature will not limit growth. 

Of course, the more realistic view requires tackling the rather unsexy areas that were starkly missing from the Net Zero strategy such as:

• mass insultation of homes (what is replacing the failed Green Homes Grant?);

• a carbon tax, including a substantial aviation fuel tax (rather than the Budget announcement of the removal of air passenger duty on some internal flights); 

• substantial support for energy efficiency, including efficient use of waste heat; 

• a tax on carbon intensive food;

• regenerative agriculture;

• phase out and banning of single use/ non-recyclable products; 

• and the biggest elephant in the room, no new coal, oil or gas exploitation and the very quick phase out of the use of such fuels.

For my part, I will be travelling by train from Germany across to the COP negotiations and will continue to drive down my own personal CO2 contributions as much as possible. 

I will also be hoping, possibly over optimistically, that negotiators will pull some magic out of the bag and we get commitments at COP 26 that are meaningful and aligned with a future that isn’t as bleak as current predictions are forecasting. 

Thankyou again to Legal 500: Lux Nova Partners and five of its partners receive recognition

As a purpose-driven, boutique clean-energy-only law firm of 7 Partners, we’re delighted with the sustained recognition we’re receiving in the Legal 500.

Thanks to all our clients for putting their confidence in us, in doing things differently! We had some great feedback, including:

“The Lux Nova team are experts in their field – they simply know their stuff better than others and can get to the key issues and resolution more quickly.”

“The Lux Nova team has really deep expertise in the energy sector.”

Rated by clients and peers for their ‘deep sector expertise’, the team is described as 'experts in their field - they simply know their stuff better than others and can get to a resolution more quickly'.

“Their key strength is how knowledgeable their people are in this space. Sandy Abrahams is expert at articulating complex and arcane energy sector rules and concepts into clear contracts that are easy to read, comprehensive but intelligible.’”

We still have two of our Partners – Tom Bainbridge and Louisa Cilenti – ranked as “Leading Individuals” (shared with only 20 other lawyers in the UK).

And still have two of our Partners – Sandy Abrahams and Nikola Zahariev – named as a “Next Generation Partner” (shared with only 6 other lawyers in the UK). 

Stephen Lister also received praise, listed as a key name for energy disputes.

We continue to be ranked in Tier 3 of the Power category.

We are especially proud of this, given the breadth of the Power category (which is not solely focussed on Renewables and Cleantech, while we are) and the size of the firms we are competing against. 

Here are links to the Legal 500:

https://www.legal500.com/firms/4330-lux-nova-partners-limited/7570-london-england/

Ofgem and the Climate Crises: what role should our regulator have?

Image: @matthewhenry

The House of Lords “Industry and Regulators Committee” has issued a call for evidence (https://committees.parliament.uk/call-for-evidence/512/), considering Ofgem’s role in the transition to net zero and whether changes are needed to its objectives and powers or its role in the wider energy system.

The Committee is seeking evidence on a number of questions, which examine how net zero relates to Ofgem’s other responsibilities such as affordability and the security of the UK’s energy supply, how Ofgem considers the interests of consumers, and Ofgem’s relationship to Government and Parliament.  It also seeks feedback on how appropriate the current system of governance for the UK energy market is for meeting the Government’s net zero policy aims, and what may need to change to allow Ofgem to better deliver multiple outcomes.

The call for evidence comes in the wake of historic criticism, including from the CBI, that Ofgem is relying on an outdated policy mandate to regulate the industry and set price controls. Under its existing remit, Ofgem is required to keep the government’s climate policies in mind but its primary obligation is to protect the interests of energy consumers. The mandate has not been changed since 2011 after a proposed amendment to the Energy Act 2013 failed to be incorporated. Mid July 2019, a CBI spokesman said that “we believe that Ofgem should be supported with new statutory duties to enable prioritisation of decisions that promote clean growth and progress towards net zero, alongside fair competition and value for money to consumers”  

When previously challenged, BEIS has stated that Ofgem’s existing statutory duty to protect consumers’ interests includes (a secondary duty to take into account) their interests in the reduction of emissions of targeted greenhouse gases – which means the updated Climate Change Act target of 100%. Further, they have stated that the Energy White Paper committed the Government to consulting on an energy sector strategy and policy statement (SPS) for Ofgem during 2021 (we have yet to see evidence of this). The SPS will apparently set out the strategic priorities and policy outcomes of the Government’s energy policy and, subject to Parliamentary approval, net-zero will be a driving theme in the SPS. It is understood that the SPS will impose a legal obligation on Ofgem to have regard to those strategic priorities and policy outcomes when exercising its regulatory functions and Ofgem will be required to report at the outset and annually on its progress and plans for implementation. (See https://questions-statements.parliament.uk/written-questions/detail/2021-06-17/17767). 

 In our view this is not strong enough. The statutory duties of Ofgem are outdated and not fit for rapid decarbonisation the climate crisis requires. The principal objective of protecting the interests of existing and future consumers (although including consumers interest in emissions reductions (see amendments introduced under the Electricity Act 2010, Section 16 and 17)) must be placed alongside an explicit and equal statutory obligation to “reduce gas-supply emissions of targeted greenhouse gases” and “reduce electricity-supply emissions of targeted greenhouse gases” (language and definitions as per Electricity Act 2010) as are required to meet the Government’s Net Zero targets, including reductions of emissions by 78% by 2035 (as such targets may be increased and timelines accelerated over time).

We have responded to the House of Lords call for evidence on this basis, requesting an explicit and primary statutory obligation to regulate energy markets in order to achieve the Net Zero targets and address the climate crises at lowest cost to current and future energy consumers.

Upcoming webinar 15th July: the UKIB - “unlocking investment in low carbon infrastructure”

Lux Nova’s Louisa Cilenti will be joining a panel of experts hosted by SSE Energy Solutions to discuss how the new UK Infrastructure Bank can best support projects and meet its own aim to 'help tackle climate change' through meeting the UK's net zero emissions target by 2050.

In the run up to COP26; Rishi Sunak announced the launch of the new UK Infrastructure Bank (UKIB). Charged with deploying £12bn of Government funding and £10bn of Government guarantees and hoping to unlock a further 18bn of private sector funding.

This webinar is aimed at all public and private sector businesses and authorities who wish to explore UKIB funding options and take positive steps towards achieving net zero targets.

To register: https://register.gotowebinar.com/register/120281489940068109