RWE Builds Its Renewable Portfolio in the UK

German utility RWE is financing its first solar park in the UK in a bid to build its renewable portfolio.
Published: Tue 06 May 2014

RWE Supply and Trading, the German utility’s trading arm, has acquired its first 37MW solar park in the UK in an attempt to improve its renewable energy presence.

The utility is to provide financial and technical support for the construction of Kencot Hill Solar Farm which will be located on an abandoned airfield in Oxfordshire. The UK-based arm of Conergy will take care of the engineering, procurement and its construction.

Considered to be one of the UK’s largest solar farms, its 144,000 solar modules are predicted to generate around 36 million kWh of electricity in its first year of operation – this is enough to power 10,000 local homes. The park will also mitigate the emission of approximately 380,000 tonnes of carbon emissions over the site’s 24-year project lifetime.

Attracting investors

RWE expects the project to be connected to the grid towards the end of the summer. Once complete, RWE has agreed to sell the solar farm to Foresight Solar Fund, a London Stock Exchange listed fund manager dedicated to UK solar projects. RWE is planning to do this again in the future in order to attract investors in the UK and other European countries, explains Stefan Judisch, chief executive officer of RWE’s Supply & Trading unit.

RWE’s renewables unit intends to invest 1 billion Euros (US$1.4 billion) from 2014 to 2016, a similar amount to last year alone.

Utilities weren’t prepared

Solar has given a number of utilities in the European region a run for their money-it cut wholesale electricity prices which sliced into utility profits. In addition, solar power reduced the demand for electricity. Utilities simply weren’t prepared for solar’s disruptive effect on traditional utility business models. Perhaps utilities were a bit too complacent and overconfident in their belief in existing business strategies.

RWE is one such example. The company started burning more coal in response to the nuclear power closures and didn’t focus much attention on renewables development. The company only got 6.4% of its energy from renewables last year. Largely as a result, in 2013, RWE posted its first annual loss since World War II. Since 1998, it has dropped 30,000 employees (net). (Note: RWE wasn’t the only European utility to get hit by the move towards renewables. While the broader stock market has grown 60% in the past 5 years, European utility stocks have fallen 12%).

Chief Executive Peter Terium admits that the company should have entered the renewable energy market earlier. While this is something that the company’s investors probably don’t want to hear, awareness is usually a good start to reviving a business model.

Facing plunging profits, utilities including RWE and EON are now aiming to grow their renewable portfolios. This investment in renewable energy remains a mammoth task since wind and solar power still require subsidies to be competitive. The UK has already lowered the solar feed-in tariff- Consumers Rush to Install Solar PV to Avoid Imminent Lower Feed-In-Tariff.