Anesco engineer Tommy Good works on Clayhill Solar Power Farm, Britain's first to operate without a government subsidy in Westoning, Britain September 26, 2017. REUTERS/Darren Staples

LONDON (Reuters) - Britain’s first solar power farm to operate without a government subsidy is due to open in eastern England on Tuesday, as a sharp fall in costs has made renewable energy much more economical.

Britain needs to invest in new energy capacity to replace aging coal and nuclear plants that are due to close in the 2020s. But it is also trying to reduce subsidies on renewable power generation.

“The cost of solar panels and batteries has fallen dramatically over the past few years, and this first subsidy-free development at Clayhill is a significant moment for clean energy in the UK,” Claire Perry, minister for Climate Change and Industry said.

The 10 megawatt (MW) solar farm, in Clayhill, Bedfordshire, can generate enough electricity to power around 2,500 homes and also has a 6 MW battery storage facility on site.

In an effort to curb spiraling renewable subsidy costs the government has moved to scrap new subsidies for solar projects and onshore wind over the past few years.

The project “proves that the government’s decision to withdraw subsidies doesn’t have to signal the end of solar as a commercially viable technology,” Steve Shine, chairman of the Clayhill project’s developer, clean tech firm Anesco, said.

Falling costs have seen solar power capacity soar in Britain to around 12 gigawatts (GW), from around 2 GW five years ago, and on one sunny day in May this year solar hit a record, providing almost 25 percent of the country’s electricity.

Britain has a target to meet 15 percent of its energy needs from renewable sources by 2020, up from 8 percent in 2015.

The country's renewable subsidy auction for offshore wind hit a record low earlier this month, falling well below the cost of subsidies promised to French utility EDF EDF.PA to build the Hinkley Point C nuclear power plant.