How storage and sophistication can limit financial risk in European solar PV

“Specialisms have developed,” he explains. “Ten years ago, you probably didn’t see grid manager positions, power purchase agreement (PPA) offtake positions [and] procurement positions within independent power producers (IPPs), developers and investors.

“A lot of investors have invested in their own development teams—as well as procurement teams, grid teams and PPA origination teams—and what that tells you is that these are all specialist areas in their own right and developers and investors have had to become more sophisticated in how they manage those risks, partly in terms of understanding them in the first place, which is a full-time job, and then having people with the right skills and experience who are dedicated to managing that aspect of the project.”

Project complexity amplifies project risk

This breadth of expertise needed to manage risks in Europe’s financial landscape comes as, according to Lavarack, there is a great range of risks that are affecting investors, project developers and asset owners in the continent at present.

“The UK market has matured, technologies have matured and one of the biggest risks at the moment is around execution and just the capacity in the market to build,” Lavarack says. Luminous Energy has been active in the UK solar space, in particular, for over a decade, developing and selling the 9.2MW Paddock Wood solar farm in 2015, and Lavarack notes that the maturation of the UK market and resulting increase in average project size, amplify existing types of risk, such as interface and grid risk.

“Within execution, it has always been there but, managing interface risk [and] managing the grid are key risks in project delivery that, as projects have gotten bigger, and the scales and numbers have climbed accordingly, there’s more of an imperative to manage accordingly, particularly around grid, and capacity of distribution network operators (DNOs) to execute,” he explains.

Lavarack goes on to note that these risks are not unique to the UK, pointing to a loss of “talent that is not easily replaced” across Europe among DNOs following the Covid-19 pandemic.

Many of these risks are furthered by the increasing appetite for the co-location of BESS and renewable energy generation projects in Europe; figures from Wood Mackenzie suggest that European battery storage deployment is expected to grow 45% year-on-year by the end of 2025. While battery installations are an effective means of limiting the variance in renewable power generation, and helping renewable projects provide electricity in a manner closer to baseload generation, the addition of a separate technology increases complexity and capex for project developers.

“Ten years ago, people were signing turnkey full-wrap engineering, procurement and construction (EPC) contracts, now they’re either signing an EPCM—an EPC without the module—or they’re literally breaking out the modules, inverters and transformers and are signing balance of plant contracts,” explains Laverack, who suggests that developers are looking to contract separate parts of these increasingly multi-faceted projects with different companies.

Sophisticated operations and co-located projects

One solution to increasing project complexity and managing these risks is to take a similarly sophisticated approach to operating and financing projects. For Lavarack, this often takes the form of a more complex variety of offtake structures, which he describes as “an example of the market becoming more sophisticated.”

“Hybrid PPAs combine more than one technology and so typically include technologies of different generation profiles—such as solar and wind, which are quite complementary—and you [can] add storage into that mix,” he explains. “You can move to a position where, as a developer or generator, you can start to offer an offtaker a baseload-type product, versus if you just had a single technology in that mix.”

Lavarack also points to an unnamed offtaker, with which the company has worked, which operates its own virtual power plant (VPP) to monitor one of Luminous’ solar projects. When the electricity price goes negative, the offtaker curtails production automatically, which Lavarack describes as the “best defence” against negative prices.

“There are now ways of doing that,” he says. “The most sophisticated IPPs probably run their own desks and their own technologies that enable them to manage that in-house.”

One well-established defence against negative prices is, of course, storage, and Lavarack adds that storage is now “mainstream as an asset class” in Europe. He argues that the addition of batteries is not a cure-all for any renewable energy generation project in need of financing, but is the sort of investment that is best suited for larger-scale projects, where the economies of scale means the project can deliver returns that make the initial investment in batteries worthwhile.

“There are project-specific and market-specific reasons for co-locating, but even though batteries are considered to be a mature asset class now, there are additional challenges to co-locating,” he explains. “I think scale is an important thing; if I had a solar farm that was 30MW and there was an option to put a 5-10MW battery on it, would I do it? Probably not. A 5-10MW battery isn’t giving me enough scale to justify the risks associated with that.

“But I’ve got a solar farm in development at the moment that’s 70MW with a 50MW battery co-located; that is good scale and that project will be a better project for having co-location on it, but there are additional interface risks that will have to be managed.”

Shifting towards storage

When asked about his company’s portfolio, Lavarack notes that both the geographic distribution, and technologies used, at its projects have changed over time. He says that the company started in the UK in 2013 as a utility-scale solar developer, but now batteries are the primary focus of the company.

“We did the Minety project in Wiltshire, which was 100MW, back in 2018, when a 100MW battery project was Europe’s largest at the time,” he says. “We went on to complete Hams Hall, which was a 400MW battery near Birmingham, in a JV with Penso Power, and now if you look at Luminous Energy, as a business and at its development pipeline, we’re actually more of a battery developer, doing some solar, as opposed to a solar developer doing some batteries.”

“That tells you something about what’s happened to this market more generally over the last ten years, and most of our development pipeline now—all of it in Australia, Germany and the US—is all storage, and the legacy part of the business is the solar part, which is in the UK. The UK is primarily solar, and everything else is storage.”

Circling back to the original thrust of the conversation on risk, he explains that this shift was motivated by a desire to “follow the market”, but also to offset political risk by being involved in several jurisdictions. Much has been made of the challenging conditions for US solar project developers this year, as the Trump administration looks to tighten imports of components and materials critical to the solar industry, and Luminous’ involvement in several countries helps insulate the company from dramatic policy shifts in a single market.

Lavarack also notes that the relative maturity of the UK market from a storage perspective means that lessons learned in the UK can be applied to work in other countries, where the relative lack of maturity means there is considerable potential.

“The UK is the most mature of those markets, particularly in a battery context, compared to Germany and the US, [and] we can take a lot of the learnings and experience from the UK market and apply that in those less mature markets,” he says.

“There are more opportunities, because those markets are less mature, so as well as balancing out the political risk, there’s a scale of opportunity that we perceive to be bigger, just by virtue of the fact that we’re there earlier and those markets are still developing in a way that the UK market is quite mature, from a battery perspective.”

Ultimately, sustained investment in batteries, and the increasing involvement of storage in the renewable energy sector in Europe will only help to establish the technology, and the combination of these technologies, as more mainstream. Lavarack is optimistic that the adoption of more co-located storage projects across Europe could create a virtuous cycle where there is less risk associated with these projects, and even more such facilities are built.

“I think the sophistication that you need to understand batteries and their offtake structures—as governments in those less mature markets see what the UK has done in terms of its offtake arrangements and the revenue stack for batteries more generally, and start to copy that—assists us in those markets, because that helps us with the business case for those projects.”

Lavarack will be speaking on the first day of the 13th edition of the Solar Finance & Investment Europe event in London on 3 – 4 February 2026, hosted by PV Tech publisher Solar Media. This event annually attracts infrastructure funds, institutional investors, asset managers, banks and development platforms at the forefront of European renewables. For more details, visit the website.