Co-location of energy could significantly cut the cost of expanding renewables

A new report from Cornwall Insight and national law firm Weightmans on the co-location of energy assets, entitled “Co-location, co-location, co-location”, has laid out the significant cost savings of using one grid connection for multiple renewable generation or storage assets.

The report outlines how co-location could incentivise the development of battery storage and the expansion of a variety of energy sources including solar and wind power, as well as low-carbon hydrogen production. It could also help to accommodate new energy needs such as an increase in electric vehicle charging.

Setting up a new site, especially for storage assets, is currently a long and often costly process, involving planning permission, leasing costs and establishing a grid connection. By co-locating a new renewable generation or storage asset behind an existing grid connection, developers will be able to both expedite and bring down the costs of developing the UK’s renewable generation capacity.

Savings can be made by reducing capital and operational costs through using existing infrastructure and land that would otherwise be under-utilised and by taking advantage of spare grid connection capacity. There is also the potential to co-locate the energy generation site with the demand site of a business, which could see savings by cutting the cost of importing the energy.

While costs savings are a primary gain of co-locating, an additional related benefit to adding a new asset to an existing one is quicker connection to the grid. With some storage assets facing a wait for a grid connection beyond 2030, co-location will speed up getting these online, which in a global energy supply crisis has never been more important.

Dr Matthew Chadwick, Lead Research Analyst at Cornwall Insight said:

“As the UK transitions to net zero, the energy generation mix will become increasingly dominated by intermittent renewable generators, thus promoting a need for greater flexibility within the energy system. In order to secure energy supply, more renewable generation and importantly increased energy storage will be essential, but planning permission, grid connectivity and leasing expenses are all putting up barriers. By utilising land that is already being used for renewables and storage, and using untapped grid capacity, we can save time and money, speeding up the expansion of renewables generation - something desperately needed if we are to wean ourselves off uncertain foreign energy imports.

“Nothing is without its challenges and as with all energy solutions there are no perfect options. With multiple assets on one site, one is likely to be constrained, and price uncertainty may be an issue. Other barriers including the complexity of optimising the energy output and concerns over insurance for battery storage could also be of concern. It is important the benefits are carefully weighed against any costs.

“As co-location expands and more sites are established, there will be an increasing amount of case studies for renewable generators and developers to look at for best practice, and most importantly the pitfalls to avoid. This could see the ironing out of some challenges that may, in the past, have put people off co-locating. Ultimately, if the UK wants to stay on track with its net zero transition, and secure energy supply for decades to come, co-location will need to be an essential tool in the process.”

Nick Fothergill, Partner at Weightmans said:

“Co-location has been a trending topic within the industry for some time, but interest is accelerating as we see more sites come online, offering blueprints of best practice for the future. Combining different technologies through co-location can help grid efficiencies and unlock additional revenue streams, but also comes with added risks and complexities.

“It is time to think differently about how we approach co-location projects in order to maximise investment and make such schemes viable. There is no one size fits all approach, and flexibility is essential in order to generate the best outcome for all. Good legal advice can ensure that projects are de-risked and structured in a way that allows for developers to future-proof their projects and crucially, make funders more comfortable with their investment.

“As the focus on green and sustainable investment continues, co-location is expected to have a significant role to play, and we hope this report provides a useful analysis of the opportunities and challenges that lie ahead.”