Subsidy-free solar farms co-located with battery storage systems are on the cusp of taking off in the UK, as falling technology costs, lower risks, and strong annual returns make so-called 'hybrid' power plants an increasingly attractive bet for investors.

That is the conclusion of new research released today by Aurora Energy Research, which forecasts a major surge in UK solar development over the next decade after years in the doldrums for the sector. The study predicts that falling technology costs will result in around 5GW of solar capacity potentially being deployed by 2030 without subsidy, much of which is likely to be bolstered by on-site battery storage systems.

Hybrid power systems which team up solar farms with battery storage are "coming of age" without any subsidy, as they quickly become investable opportunities in the UK for equity investors and asset finance lenders, the analysis argues.

Following the controversial phasing out of subsidies, uncertainty over wholesale prices and future returns have made it difficult for solar and battery operators to raise debt finance for new facilities, according to Aurora.

But today's research, which was commissioned by Wyelands Bank and solar developer Anesco, argues hybrid systems can help mitigate the risks associated with subsidy-free solar projects, such as 'price cannibalisation', which could occur when high renewables output leads to plummeting wholesale power prices.

As a result, hybrid solar-battery systems could now start to become more widely deployed from as early as next year, when the research estimates annual rates of return for projects could reach 6.6-7.6 per cent, compared to just four per cent for standalone battery or solar sites.

Moreover, the report suggests the rate of return could increase by a further two or three per cent under a slightly more optimistic scenario, with higher returns making it easier for hybrid projects to attract funding.

Report author Benjamin Collie, principal at Aurora Energy Research, said subsidy-free solar had an important role to play in the decarbonisation of the UK energy system, adding that a surge of investment in solar coupled with battery storage could well be on the cards.

"If rapid innovation and supportive policy lead to fast deployment of solar, then that will tend to increase revenues for storage assets, but decrease revenues for existing solar assets. Conversely, slower deployment of solar would lead to lower revenues for storage but higher revenues for existing solar," he explained. "Investing in a portfolio with both solar and storage can help mitigate these risks, and co-locating the assets allows for cost savings and more efficient use of grid connections."