International solar fund weathers Australia’s storms, oscillations and grid constraints


Foresight Solar Fund, a UK-based renewable-energy fund with international assets that include Australia’s Longreach, Bannerton, and Oakey 1 and Oakey 2 solar farms, last week released its annual results for 2020, providing insights into performance of solar investments and energy-market impacts not readily available from unlisted asset holders.

With 723 MW of ground-mounted solar installed in the UK, 124.6 MW in Spain, and 146 MW installed in Australia, Foresight named the Covid-19 pandemic and the company’s efforts to keep its workforces safe as the greatest challenge to its operations in 2020.

Despite underperformance of its Australian assets, which were acquired during 2017 and 2018 and make up about 15% of the fund’s portfolio, Foresight saw continued growth in 2020, paid a dividend of 6.91 pence (almost 12 cents) per share, diversified its portfolio by acquiring four subsidy-free greenfield assets in Spain, and secured overwhelming approval from shareholders to introduce battery storage systems (BSS) into the portfolio.

“The recent vote by shareholders to allow an allocation to BSS of up to 10% of GAV [gross asset valley] provides an additional and exciting area of potential growth for the Company,” wrote Chairman Alex Ohlsson in his opening statement.

Which country makes the most of irradiance resources?

Counter to the stereotypes, Ohlsson also commented that, “Foresight Solar’s UK portfolio delivered another 12 months of positive performance, with UK electricity generation for the year 8.4% above base case expectations due to good irradiation levels and asset availability. 

In Australia, however, Bannerton Solar Park, near Robinvale in Victoria was 11.4% under Foresight’s irradiance performance expectations for 2020, and Oakey 2 Solar Farm, west of Toowoomba in Queensland, was 9.1% in the shade.

Overall, Foresight’s Australian assets were down on revenue by about 20% compared to budget, with three solar farms posting losses in projected production due to various factors.

Wrestling the three sun bears

Queensland’s 17.5 MW Longreach Solar Farm, one of 12 large-scale PV projects supported in 2016  by ARENA to boost Australia’s experience of planning and building large-scale solar assets, and originally developed by Canadian Solar, was curtailed in 2020 due to the low capacity of a local transformer, resulting in energy production that was 14.3% less than budgeted.

The grid constraint was resolved in October last year, with an upgrade to the transformer negotiated by the asset manager with local grid operator Ergon Energy.

In addition, the Fund reports that, “The Asset Manager has also been working with the tracker manufacturer to implement a new tracker algorithm, to increase energy yield in diffuse light conditions and early/late winter sun hours.”

The 110 MW Bannerton Solar Park was of course one of five West Murray generators curtailed to 50% of their output from September 2019 to April 2020, due to oscillation problems in that area of the grid. 

Collaboration between the solar farms, the Australian Energy Market Operator (AEMO) and inverter supplier SMA, led to tuning of the affected solar farms’ inverter settings, which resolved the issue, but Bannerton was also affected by lower than expected irradiation levels in the second half of the year, which led to overall under performance of 31.3%.

Storms once again affected Oakey 2 Solar Farm in 2020, after significant damage was inflicted by hail and wind in 2018. Last year’s January storm took out some 15% of the site, which was subsequently rebuilt during the reporting period. 

The project received around $6.4 million in insurance paid out as compensation for revenue losses caused by construction delays due to the storms, and the latest annual report says that tracker structures have now been “reinforced and their control system redesigned to meet the design wind speed required for the site”.

Negotiations with the network provider enabled commissioning (originally planned for 2018) to be staged as reconstruction works progressed, which clawed back some of the expected production revenue.

LGCs and power prices

Foresight has also negotiated a new fixed-price contract with Origin Energy for purchase of large-scale generation certificates (LGC) from both Oakey and Bannerton that will return a higher price for its energy and reduce the portfolio’s exposure to price volatilities in the LGC market.

In 2020, Foresight Solar Fund assets were of course subject to fluctuations in power prices: an almost 3 GW increase in distributed rooftop solar PV, for example, “led to an overall 2.6% decrease in operational demand across the NEM, compared to 2019”.

The report cites a 47% drop in average wholesale electricity prices across the National Electricity Market in 2020, as “mainly driven by decreased operational demand and lower gas and coal prices due to the impact of Covid-19, coupled with the increased variable renewable energy output.”

Foresight anticipates a recovery in Australian electricity prices and stability in the 2020s, followed by a rise in the 2030s as coal-fired power stations retire and prices shadow the marginal cost of gas generation.

It says an increase in storage and pumped-hydro capacity in Australia will partially mitigate the gap between the price of producing solar energy and the price of baseload energy.

High points and future focus

For the time being, however, Foresight’s introduction of large-scale battery systems to its portfolio will be confined to a number of UK sites. It says, “addition of a limited number of batteries to the existing UK solar portfolio, along with greenfield co-location investments, will provide clear benefits to the Company’s investors” such as “an additional and diversified source of portfolio revenue”.

Among Foresight’s highlights of 2020, it says its international portfolio generated 969,564 MWh of clean electricity, or enough to power 334,000 UK homes, and that its collective investments avoided 749,00 tonnes of carbon emissions that would otherwise have been emitted by carbon-intensive energy sources.

“The nature of the Company’s business,” says the report, “means it is well positioned to serve the needs of those investors seeking to achieve positive environmental and social outcomes alongside attractive financial returns.

Foresight has set its FY 2021 target dividend slightly higher than its 2020 year-end dividend, at 6.98 pence per share.

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