WHY LANDOWNERS SHOULD BE CONSIDERING SUBSIDY-FREE SOLAR
The market for large scale solar has had its ups and downs but it is facing a resurgence. Martin Williams in the Carter Jonas Energy team gives us the background and explains why landowners should be reconsidering it.
What has changed in the last few years?
Up until 2015, there were government subsidies for solar development – when these came to end, it had a radical effect on the viability, and therefore the market, for new solar development.
However, since then the technology has both reduced in cost and become more efficient and reliable. They also last longer (35 to 40 years, up from around 25), they need less maintenance and fewer repairs, and new technology also means that they produce more energy. So, developers pay less up front, and get more back.
What this all means is that solar development can now be a viable project even without subsidy.
What makes land suitable for solar development?
If you are interested in diversifying into solar, the first thing you’ll need to do is establish whether your land is suitable.
There four key requirements:
- The land will need to be free of environmental designations which might affect your chance of getting planning permission.
- Ideally, the land will be agricultural land at grade 3 or lower – higher than this and it becomes a more difficult planning prospect.
- As a rule of thumb, developers are seeking around 80 acres or more, but the area required will depend on the developer, as well as other considerations such as the cost of the grid connection. This area can cross ownership boundaries if a neighbouring landowner is also interested in being involved.
- The land needs to be a maximum of 5km from the nearest substation or be crossed by overhead lines which would allow connection to the grid. This will help to reduce the cost of the grid connection, a key early consideration for developers.
To be confident about whether it is suitable, you should ask an expert to assess your land.
What are the pros and cons of solar development?
The main advantage, and the main reason that most landowners investigate solar, is the financial benefit. You will get an index-linked rent over the term of the lease and many agreements will also entitle the landowner to a share of the revenue. Rents vary, but you could be looking at up to about £1,000 per acre depending on location – with the vast majority of developers offering a minimum of £800 per acre.
You should also benefit from an increase in either the price achieved for the energy, or the amount of energy generated – it’s essential that you negotiate a good agreement and it’s always worthwhile seeking expert advice on this.
Typically, a developer would undertake to restore the land to the original condition after the agreed lease term, though this is something you should ensure is in the agreement.
Finally, you would normally also have the option to continue to graze sheep around the panels – some developers will even pay you for providing this service.
In terms of negatives – most are avoidable pitfalls. Remember that entering into such an agreement is a long term commitment so it’s really important that you assess the developer carefully, ensure that they have a robust business model, and you can trust that they are going to do what they promise.
You should also carefully consider, and seek advice on, any tax implications, insurance, indemnity, and reinstatement costs.
Interested in finding out more?
We strongly advise that you get advice on the suitability of your land, the credibility of developer and the terms of the agreement. To find out more, contact Martin Williams on 07768 542666 or firstname.lastname@example.org