Apollo bets £300m on new UK solar business

Private equity firm Apollo Investment Corporation is funding AMP Solar UK, a joint venture with a special focus on the rooftop solar social housing market.

Despite the recent changes to UK solar regulation, private equity firm Apollo Investment Corporation is committing £300 million for the launch of a new UK solar company, AMP Solar UK, targeting ground and roof-mounted solar.

AMP Solar UK aims to buy, build and manage a portfolio of over 300 megawatts (MW) of ground and roof-mounted solar over the next two years. It will especially focus on rooftop solar installations for social housing projects, with the aim of lifting at least 75,000 tenants out of fuel poverty, the company says.

The new venture brings together three companies with long-standing expertise in the solar sector: MAP Environmental, which will take on origination, lead-generation and marketing; AMP Solar Group, focusing on asset financing, development and management; and Sustain Energy Solutions, an EPC and O&M contracts specialist.

AMP Solar UK’s business model will see it offer free and paid-for solar energy options to its customers. The firm will offer a full services suite including planning, design, installation and maintenance of assets. It will target both commercial and residential installations.

From 1 April 2015, the UK Renewable Obligation (RO) scheme will no longer apply to new solar photo-voltaic stations above 5MW and to additional capacity added to existing stations from that date. Instead, new projects will be regulated by the Contracts for Difference (CfD) regime. A CfD is a private law contract between a low-carbon electricity producer, such as a solar plant, and the government-backed Low Carbon Contracts Company.

Under the new regime, the producer is paid the difference between the ‘strike price’, a price for electricity reflecting the cost of investing in a particular low-carbon technology, and the ‘reference price’, a measure of the average market price for electricity in the UK market.

But while the new CfD scheme might put a damper on large-scale solar, Zouk Capital partner Erich Becker also believes it will open a window of opportunity in residential solar. Becker, which has brokered the sale of two residential solar portfolios to UK insurer Aviva, previously told Infrastructure Investor’s sister publication Clean Energy Investor:

“There are lots of opportunities in residential solar and they lie outside the RO scheme altogether. From a fundamental perspective, residential solar would be competing with residential electricity prices, which are higher than the wholesale prices, the relevant benchmark for industrial-scale solar. So we prefer the opportunity in the residential space.”

This article was first published on Clean Energy Investor, Infrastructure Investor’s sister publication to low-carbon investing.