* UK installed record 1.5 GW of solar capacity last year
* Growth could be even bigger this year
* Pause in growth likely in 2015 as subsidies end
By Nina Chestney
LONDON, June 3 (Reuters) - Britain’s growth in solar capacity could be greater this year than last as firms snap up government subsidies for new large plants before they come to an end, said Foresight Group, a major British asset manager investing in the solar sector.
Last year, Britain installed a record of 1.5 gigawatts of new solar photovotaic (PV) capacity and overtook Italy to become the second-biggest European market after Germany, according to a major industry association.
The rapidly falling cost of solar PV technology has fuelled the installation of more capacity in Europe, and UK solar developers have also benefited from generous government subsidies in recent years.
Faster-than-expected deployment has led to a higher subsidy bill, however, prompting Britain to end support for new large-scale solar plants two years earlier than expected.
Last month, the government said it would end subsidies under its Renewable Obligation (RO) scheme for new solar projects over 5 megawatts (MW) from April 2015, instead of in 2017.
“The UK solar market experienced the fastest growth in Europe last year,” Jamie Richards, partner and head of infrastructure at the Foresight Group, said in an interview.
“This year will be even bigger for UK solar growth due to a cut-off deadline for subsidies. After that, growth will likely take a pause as new capacity is rolled out,” he added.
Foresight Group is an infrastructure and private equity investment firm with more than 1.1 billion pounds ($1.8 billion)of assets under management. It holds more than 650 million pounds of solar plant assets in Britain, Italy, Spain and the United States.
Accountants Ernst & Young said this week that investor interest in UK renewables has cooled since the solar subsidy announcement in May, with Britain falling by one notch to rank six out of 40 countries based on its attractiveness for renewable investment.
Investors who fund projects that are in the development or construction phases are most at risk from an end to RO subsidies, Richards said.
The Foresight Solar Fund Limited invests in operating utility-scale UK solar plants that each have a capacity of more than 5 MW.
The fund’s portfolio includes a total of 100 MW of UK solar assets, and it has binding contracts in place to acquire another 85 MW.
By focusing on the acquisition of solar assets already in operation, Foresight sees no impact on its strategy.
“We have deliberately structured ourselves in this way, so we are not taking any risks on projects which do not qualify for subsidies,” Richards said.
UK solar projects also will still be able to apply for a new incentive scheme that guarantees renewable power generators a minimum electricity price over 15 years.
As it becomes cheaper every year to install solar projects, within a few years UK solar power should be cheaper than onshore wind, which should also help keep investors interested in the sector, Richards added.
Last year, the fund raised 150 million pounds through an initial public offering (IPO) on the London Stock Exchange. This April it closed a 100 million pound debt acquisition facility.
The fund’s size should increase to around 750 million pounds over the next few years, Richards said.
Foresight could consider more initial public offerings or solar bonds as a way to raise more money, also in other countries where it has solar assets such as Italy, Spain and the United States, he said.
$1 = 0.5968 British Pounds editing by Jane Baird