Q&A - Bluefield: The journey from solar to diverse energy investments

In the dynamic renewable energy landscape, Bluefield Partners LLP (Bluefield), a UK-based investment manager, has evolved from a solar-focused company to a diversified player since its inception in 2009. Including its London-listed vehicle, the Bluefield Solar Income Fund (BSIF), which launched in 2013, Bluefield now advises on €2.3 billion (£1.2bn $2.5bn) in assets, generating 1.2GW in the UK and Europe across solar, wind, and battery storage.

inspiratia speaks to Baiju Devani, Investment Director at Bluefield, to take a closer look at the company's approach to solar, onshore wind, and repowering. We discuss the financing models that drive their investments and the appeal of current market opportunities.

What led to the decision to expand your strategy to include onshore wind?

Solar and onshore wind are relatively complementary technologies, particularly in terms of their generation profiles. Wind tends to generate power when solar isn't as effective, such as during periods of lower sunlight. Additionally, both technologies have similar risk profiles.

We believe that solar has the lowest risk profile among renewable technologies, but closely behind that, we see onshore wind as the next best option. A key factor in this is solar's predictability. So, these two technologies align well in terms of managing risk while diversifying our portfolio.

As a business, we are active across the entire value chain, from development to construction, operations, optimisation, and end-of-life considerations, including repowering, which is an emerging trend in the renewables market. The three technologies that we focus on as a business are solar, onshore wind and battery energy storage.

What is Bluefield's geographical focus?

Bluefield has, since its inception in 2009, concentrated on the UK, with over 200 projects in distributed generation, typically ranging from 5 to 50MW.

However, our focus extends beyond the UK. We have a strong presence in the Italian market, where our private strategy, Revive I, operates exclusively. We have engaged in various projects throughout Europe and are looking to expand our footprint across the continent.

In Italy, our current focus is on solar and battery storage. For our broader European expansion, we aim to concentrate on solar, wind, and battery storage.

What is Bluefield's approach to ground-mounted versus rooftop solar, and how do these options differ in terms of viability and market opportunities?

Our primary focus today is on ground-mounted solar, particularly in the UK and wider Europe. This is largely due to the economies of scale we can achieve with larger projects, which also leads to cost efficiencies. We have been active in markets with favourable subsidy regimes, which have positively impacted ground-mounted solar.

That said, we remain open to rooftop opportunities. In Europe, approximately 66% of the 209GW of cumulative solar capacity comes from rooftop installations. This market is significant, especially in countries like France, where we have seen substantial activity driven by supportive feed-in tariffs. While we haven't been active in the rooftop space yet, we are keen to explore markets where rooftop solar is well-subsidised and supported.

How does the repowering strategy work for solar and wind projects?

Repowering differs between solar and onshore wind, but it generally involves upgrading assets that are nearing the end of their economic life, typically around 15 to 20 years.

In both cases, the goal is to maximise the use of a site after its original subsidy period ends. This means evaluating whether there's an opportunity to enhance and improve the technology on that same site. You can often use the existing land and grid connection, though you may need to upgrade the grid connection to facilitate significant capacity upgrades.

A repowered site can generate more electricity than the original installation, making it a valuable strategy for extending the life and efficiency of renewable energy projects.

The repowering process for onshore wind and solar differs. For wind, the focus is typically on installing larger turbines. In the case of solar, the process can be more nuanced, as the goal is to optimise the technology. While both sectors have seen significant technological advancements, the changes in wind turbines are often more visible due to their increased size.

Do solar projects need to repeat the planning and grid connection processes after their initial operational lifespan of 30 to 40 years, particularly in the context of repowering?

That's right, a typical project has planning permission for a specific duration. Historically, projects in the UK and Europe had planning for around 20 years, but newer projects often secure permits for 30 to 40 years. For repowering, some development work is indeed required, including resubmission to planning authorities.

The interesting aspect is that communities are supportive of existing renewable projects, which makes the repowering planning process more straightforward. While there is development work involved, it's generally expedited.

One of the advantages of repowering is that the grid connection is typically already in place, which can save a significant portion of the CapEx compared to a new build project.

What does Bluefield's repowering strategy entail, and how does it differ between the UK and Italian markets?

Our revamping and repowering strategy has primarily focused on both the UK and Italian markets. For example, we have been repowering a portfolio of single turbines in Northern Ireland, where we acquired ageing turbines and identified the opportunity to replace them with larger ones.

In the Italian market, it has involved acquiring underperforming sites and enhancing their components rather than undertaking a complete rebuild. This approach requires careful monitoring to identify performance issues. We have implemented this strategy through our solar-focused strategy, Revive I, which focuses on revitalising existing assets to improve their overall performance.

When acquiring projects, does Bluefield prefer ready-to-build (RTB) or operational assets?

Bluefield is open to acquiring both RTB and operational assets.

In terms of preference, our strategy is divided into two main approaches: a core income-generating strategy and a value-add strategy aimed at creating capital gains for investors. For core income generation, acquiring operational assets is logical, as they are typically less risky, having already completed development and construction.

Conversely, for our value-add strategies, we find significant value in acquiring RTB projects. This approach allows us to internally manage the construction process, control quality, and optimise the supply chain, resulting in high-quality assets that can be sold at a premium after a couple of years of operation.

Regarding the financing models for the acquisition, we use a combination of debt and equity but prefer to remain low-leveraged—usually below 50%. This approach allows us to optimise our assets without constraints from lenders, ensuring greater flexibility in management.

Are you open to acquiring merchant-based projects? Or do you prefer projects with PPAs in place?

We have a dedicated PPA team that assesses projects to ensure we maintain a high degree of visibility over cash flows. Our strategy often prioritises projects that can secure renewable energy tariffs or subsidies. We prefer PPA agreements that provide revenue visibility for at least 12 to 36 months. While we generally avoid high merchant exposure, we recognise that a balanced portfolio may include a small percentage of merchant projects, particularly in areas like battery storage.

Are you exploring opportunities in other parts of Europe beyond the UK and Italy?

Yes, we have already been active in markets like the Netherlands and France through a European pilot fund. We have a presence across various regions, including Iberia, Germany, and the Nordics. Our strategy focuses on leveraging our long-term experience in the UK and Italy while identifying new build and repowering opportunities across Europe.

Can you elaborate on the colocation trend and its implications in the renewable sector?

Colocation is emerging as a way to optimise existing grid infrastructure. This helps address grid capacity challenges, though retrofitting existing sites can be complex due to regulatory hurdles. In Poland, for example, developers are pooling grid connections for wind and solar, maximising usage.

The retrofitting challenge arises from regulatory complexities when attempting to add components to established projects. It's generally easier to implement colocation strategies in new builds, where site space and infrastructure can be planned accordingly.

How do you foresee shifts in solar technology and onshore wind in Europe over the coming years?

Solar has undergone a remarkable transformation, with costs dropping 82% since 2010. It's now the lowest-cost and most scalable technology, as evidenced by its success in recent UK CfD auctions. We see solar remaining crucial, but achieving net-zero targets will require a multi-technology approach, including onshore wind, to complement solar's generation profile. Addressing intermittency through solutions like lithium-ion battery storage is also essential. More broadly, we believe that the renewables sector has evolved in recent years into a more complex landscape whereby wind, solar and storage form part of a holistic solution to the growing demand for renewable energy. Over the course of the next ten years, factors such as co-location and ensuring that renewable projects have a clear nature and biodiversity strategy will become fundamental, and we will need to take all the experience of the last decade to meet these demands efficiently.