Norwegian state-owned utility Statkraft AS has signed a power purchase agreement (PPA) with British renewables developer Luminous Energy for the 28.5-MW Bracon Ash solar farm in Norfolk. The deal will provide clean energy to thousands of homes while pioneering new financial mechanisms in the renewable energy sector.
A Dual-Financial Mechanism Approach
Situated near Norwich, the Bracon Ash solar farm is one of the first solar projects in the UK to benefit from both a Contract for Difference (CfD) and a virtual corporate PPA. The CfD, secured during the UK’s fifth CfD auction round last September, stabilizes revenues by providing a fixed price for power. This is complemented by a virtual corporate PPA with Bristol Airport, adding another layer of financial security to the project.
Solar Farm
Guy Lavarack, Chief Investment Officer at Luminous Energy, highlighted the strategic importance of the partnership, stating, “Statkraft’s market-leading position, virtual power plant system, and ability to manage the complex metering arrangements convinced us they were the best counterparty to appoint for our first operational solar farm.”
Under the seven-year contract, Statkraft will provide balancing services through its advanced Virtual Power Plant (VPP). This system is crucial for managing the intermittency inherent in solar power generation, enabling Statkraft to offer different pricing for the two portions of the solar farm and provide physical hedges before the financial contracts commence.
Balancing and Downregulation Services
Michelle Lam, Statkraft’s PPA Business Development Manager, emphasized the company’s innovative approach: “Finding new solutions to maximize the returns on behalf of our customers is in our DNA at Statkraft. That’s why it’s been particularly exciting to work with Luminous Energy on this unique PPA. Statkraft has once again proven its innovative approach and willingness to think creatively on behalf of our customers to meet their requirements and to optimize the options available in the market.”
One of the standout features of this PPA is Statkraft’s provision of downregulation services. By responding to price triggers set by Luminous Energy, Statkraft can remotely curtail the solar farm’s output during periods of negative pricing to avoid unnecessary costs and reduce grid pressure. This capability is especially valuable as negative pricing becomes more common in electricity markets due to high renewable penetration and fluctuating demand.
Statkraft’s well-established VPP system, which manages a diverse renewables portfolio across Europe, will be instrumental in optimizing the UK’s flexible generation portfolio. Its robustness and adaptability have already been proven in handling renewables PPAs in Germany and other parts of Europe.
A Milestone for the UK Renewable Energy Sector
The Bracon Ash project is expected to generate enough electricity to meet the annual demand of approximately 9,500 homes, a milestone that highlights the growing potential of solar power in the UK’s energy mix. The project’s integration of both CfD and virtual corporate PPA mechanisms sets a new precedent for financial structuring in the sector, offering a model that other renewable projects could follow.
Statkraft has a strong track record in the UK, having signed CfD PPAs for both onshore and offshore wind projects from successful bids in Allocation Rounds 1 and 3. The reintroduction of onshore wind and solar to the CfD auction process has already led to a surge in project approvals, underscoring the government’s commitment to expanding its renewable energy infrastructure.
This partnership between Statkraft and Luminous Energy represents more than a single project; it is a forward-thinking approach to renewable energy deployment and financial innovation. The success of the Bracon Ash solar farm could pave the way for more projects to adopt similar dual-financial mechanisms, enhancing the viability and stability of future renewable energy investments.
As the UK advances its renewable energy targets, such collaborations are critical for driving the transition to a more sustainable and resilient energy system. The combination of technological expertise, innovative financial solutions, and robust risk management positions both Statkraft and Luminous Energy at the forefront of this transformation.