Renewable energy sites: options for landowners

The South West has long led the way in the UK’s renewable energy initiatives and continues to offer opportunities for landowners.

Cornwall hosted the UK’s first commercial wind farm at Delabole in 1991 and the second has grown substantially since. Now, the South West region aims to become one of the leading providers of low carbon energy by 2035.

The region’s geography and topography – with its favourable sun and wind conditions and abundance of open spaces – makes it ideally suited to solar and wind projects. Technology is also evolving to enable large-scale integration with battery storage facilities. These allow energy to be stored and released to the grid when demand is highest, or weather conditions are poor.

Developers are constantly searching for sites with potential for renewable schemes. If you are a landowner, what do you need to know about diversifying into renewable energy? Melanie Henson, commercial property lawyer specialising in renewable energy sites, explains.

Is your land suitable for renewable energy?

Key features that make a site attractive for renewable energy initiatives include:

1. A convenient point of connection to the national grid
2. Unobstructed access to sunshine or wind
3. Suitable access arrangements
4. And in the case of battery storage facilities, either a water supply or the means to run a water supply to the facility from a nearby public supply

Working with a Developer

While some landowners take a proactive approach to diversification, in many cases the first indication of interest will come directly from a developer. This can be unexpected and you may be asked early on to sign an exclusivity agreement or consider draft heads of terms for an option agreement.

At this stage, obtaining professional advice is essential. Consult a property agent or solicitor with experience in renewable energy schemes before signing anything.  You can request your legal and professional costs are covered, although developers often only agree to this once an option agreement is signed.

If discussions progress, the developer will typically seek to enter into an option agreement. This gives them a set period during which they can serve notice requiring the landowner to grant a Lease.

Special Purpose Vehicle (SPV)

Developers often create a new company, or SPV, to enter into the option agreement. This SPV will manage the planning process and obtain necessary consents. Behind the scenes, the SPV is often sold to a renewable energy operator, so personnel changes during the process are not uncommon.

How long does it all take?

There is no fixed timeline. Developers usually seek as long an option period as possible – sometimes several years – to allow for planning, securing an operator and arranging funding. Delays are common and developers may request extensions. While frustrating, the good news is such requests often indicate ongoing activity and belief in the project’s viability. Developers typically cover the land owner’s legal and any surveying costs for agreeing to these extensions.

In the meantime

There may be a significant gap between initial contact and the lease being granted. In the meantime, you can usually continue existing land use, especially if it is agricultural. Speak with your land agent at the outset to include a compensation clause in the heads of terms if you might lose crops when the option is exercised.

Looking ahead

Once built, renewable energy sites generally require minimal day-to-day interaction. Tenants will need access for maintenance, but visits are typically infrequent unless issues arise.

If you’ve granted cable easements to link the site to the national grid, you will likely be asked to enter into formal deeds of easement or wayleave agreements directly with your Distribution Network Operator (DNO). This is necessary for the DNO to adopt the scheme and begin operations.

Usually, the option/lease documents will contain a clause requiring you to enter into these, however you should make sure your only obligation is to enter into easements or wayleaves in the same form as the original one with the developer.

Ensure your legal costs are covered and that you are not required to accept significantly different terms from the originals. While DNOs often use their own templates, it is important to negotiate terms and not simply accept standard wording.

While the construction of renewable energy schemes can be relatively straightforward, the legal and commercial arrangements can be complex. That is why it is crucial to seek advice from solicitors experienced in these transactions. The Coodes Commercial Property team can help ensure you make informed decisions and secure favourable terms throughout the process.