A New Dawn for Renewable Energy
Renewable energy – keeping on trend
Renewable energy schemes have become an increasingly “on trend” subject for landowners and the agricultural community since the start of the Ukrainian crisis, with media reporting that it could herald a “new dawn” for renewable energy in Western Europe.
We are seeing a substantial increase in schemes across the parts of the UK where our clients operate, and an increase in market entrants seeking to capitalise on a massively growing sector.
10 golden rules
Below, we set out 10 points for landowners to consider when negotiating renewable schemes on their land.
- Carry out due diligence on any developer seeking to negotiate with you. You should ask for case studies of schemes they have done before and references from other landowners they have worked with. Your legal and agent’s costs should be covered by any developer, meaning the process of negotiation should be “cost neutral” for you.
- Instruct a land agent as soon as you can, preferably before the developer seeks to make a “connection application” for the scheme. When instructing a land agent, use one with specific experience of renewable schemes.
- Use lawyers that understand the structure of renewable schemes and the impositions this makes on the documentation to be negotiated. Again, you should ask for examples of other schemes that have been worked on and, potentially, references from other clients who have been represented.
- Ensure that any existing or proposed land uses cannot be fettered by the proposed deal. We have seen some interesting instances of this, but two stand out:
A large solar scheme on a ring-fenced dairy farm that required extensive on-farm wildlife mitigation. That mitigation would have prevented slurry being spread on the wider farm at key times of the year, which would have made the dairy unit unworkable. In this instance, third-party land was found on which the wildlife mitigation could be located.
A scheme on an upland farm that ran a herd of rare-breed cattle. The concern was that diminishment of the size of the farm might have impacted the sustainability of the herd / its bloodline. Strict provisions regarding land uptake were therefore imposed.
- Ensure that the reach of any option or lease is clearly defined. If only part of a landholding is required, then only that part should be subject to the option. An option will contain covenants on the part of the landowner that will need to be complied with. These often restrict land use. If there is no need for these to bind all the land owned, they should not. Any option should also exclude areas that are particularly valuable or sensitive. The farmhouse and its surrounds is one example. Land that might be subject to development in the future is another. In the latter case it is important to ensure that the developer acquires no rights that might impact future development.
- As well as instructing lawyers that understand the way renewable schemes are structured you should also use lawyers that understand farming / rural land use. That will enable them to be proactive in advising on the relationship between any renewable scheme and your intentions for your land / its use.
- Where any rental payment is linked to performance of the scheme, include covenants on the part of the developer to keep the equipment operational. This is a small point, but one that is often overlooked until equipment breaks down and delays arise in repairing/replacing it.
- Ensure that any remediation bond is put in place as soon as practicable, is regularly reviewed during the lifetime of the scheme and, crucially, is also reviewed prior to any break clause being exercised or where the landowner takes steps to terminate its agreement with the developer on the latter’s breach.
- Ensure that any restrictions that bind the title to the land can be released by your lawyer. We have seen instances where restrictions benefit companies that have become insolvent. This prevents dealing with the land until the restriction is removed, which can be a long and costly process.
- On solar schemes, give serious thought to whether you want to retain rights to graze sheep within the area let. This is an automatic assumption for many farmers, but bear in mind that the cost of damage caused by livestock to equipment will be recovered from you. It may be more sensible to agree a separate “maintenance contract” with the developer by which you will clear the area around the panels annually. Give thought, also, to what subsidies might be claimed over the area, notwithstanding the solar use. Reserving rights to participate in soil sequestration schemes is something we are currently looking to incorporate into projects we are working on.
Renewable energy schemes are a lifeline for many farmers in a fast-changing landscape that will see a diminishment of their role as food producers and an enlargement of their role as protectors and conservators of the countryside.
In navigating such schemes, familiar rules are good guides.
Know the people you are doing business with, be advised by people who are familiar with both the nature of the transaction and your own business, and try to achieve a scheme that works within and complements your existing and proposed land uses.
Written by James Davies, RDP Director and Head of the Real Estate and Renewable Energy teams.