In the know: How rural renewable energy projects are changing

Britain’s last coal-fired power station ceased operation this year marking a significant milestone in efforts to decarbonise electricity production.

Our specialist renewable energy team gives an insight into its work and explores what developments in the sector mean for landowners

Q: How does the renewable energy team help clients?

A: Our expertise lies in supporting clients who are approached by third parties looking to lease land and property for large-scale renewable energy projects. For the past few years this has largely been for solar farms and battery energy storage systems – or a combination of the two. However, our work also involves wind turbines, anaerobic digestion (AD) plants, electric vehicle rapid-charging stations and cables serving third-party renewable energy schemes.

In recent months, in response to England’s nine-year moratorium on onshore wind developments coming to an end, we have also seen a rising number of instructions from landowners seeking our expertise in negotiating commercial terms for the increasing number of onshore wind farm development proposals.

We have specialists located across the country who are experienced in negotiating best commercial terms for options and leases for renewable energy projects, which put our clients’ interests first, reduce their exposure to the commercial risks and help them capture the full value of these schemes.

Q: How have the sector and the projects coming forward changed over the past couple of years?

A: The scale of projects, particularly solar schemes, has changed massively in the past few years. Prior to 2020, developers tended to be looking at field-scale solar projects of up to

49.9MW which were dealt with by local planning authorities (LPAs) under the Town and Country Planning Act. Developers also tended to approach the landowner before they applied for their connection to the distribution network.

Now a significant number of the projects we are advising on are much larger transmission network projects where developers already hold a large grid connection (sometime as large as 1GW) before approaching landowners. These projects are classed as Nationally Significant Infrastructure Projects (NSIPs), which means the planning application is overseen by the Planning Inspectorate rather than LPAs. This brings different dynamics to the advice clients are seeking. Often schemes comprise several different landowners within the same project.

Q: What’s driving this trend towards bigger projects?

A: It’s down to a combination of factors. It is government policy for Britain to become a ‘clean energy superpower’ as part of the race to net zero. The impact of the conflict in Ukraine and other geopolitical risks have also brought greater attention to the need to improve our energy security and lower bills to consumers.

The Government’s targets are to double onshore wind power, triple solar power, and quadruple the amount of energy generated by offshore wind by 2030. Energy secretary Ed Miliband has already signalled he is willing to take difficult decisions to achieve that by giving the go-ahead to three major solar projects in the first few weeks of his tenure.

There is recognition that our national infrastructure for the production and distribution of electricity has not had sufficient investment over the past 50 years and that is now changing. With the last of our coal-fired power stations closing in September 2024, the race is on to fill that generation gap in line with the ambition of having a green electricity grid (wind and solar now make up over 32% of the UK’s electricity generation).

We all consume much more electricity than we probably did 15-20 years ago. So society and the Government have choices to make. We either consume less electricity, rely more on imported energy or agree we need to produce more and accept that solar is a relatively cheap and quick solution to the energy security problem. It is a challenging issue.

Q: How big are we talking?

A: The scale of projects has increased significantly – a 1GW scheme will cover over 2,000 acres. Of course, this does have massive implications for what the countryside looks like and there are different views on whether that is good or bad. There is concern about the loss of agricultural land, but it can be argued that solar schemes can bring benefits in terms of increasing biodiversity, compared with conventional combinable crop rotations.

Q: Solar farm hotspots are developing in areas like Lincolnshire, Essex and Nottinghamshire – what’s behind that?

A: Over the past 24-36 months we have seen lots of interest in large-scale solar projects

predominantly down the eastern side of England. While developments are being built elsewhere, a key driver to this is the availability of existing grid capacity and infrastructure, following the closure of the coal-fired power stations. As they have closed, this has freed up significant grid capacity.

It means places like the Trent Valley – which in the mid-1980s was home to 13 coal-fired power stations – is similar to Texas in the US – a state synonymous with the extraction of oil – and is being transformed into a solar power giant.

Q: Grid connections have typically been a big barrier to projects. What’s happening to improve that situation?

A: Responding to the growth in the transmissions connections queue – which grows at an average of 20GW per month – National Grid (or the National Energy System Operator (NESO) as it is now known), is currently implementing a connections reform programme.

Focused on cleansing the grid connections system of unviable ‘zombie’ projects which hold grid connections; it is trying to give far greater focus to ‘grid planning’ with the aim of bringing forward grid connection dates for ‘oven ready’ renewable energy projects.

Developers must pass through two ‘gates’ and there is currently a massive race for schemes which had already been offered a grid connection date to meet their Gate 2 hurdle by the end of December 2024. With the total connections queue likely to stand at 800GW at the end of 2024, the connections system is focusing on a ‘first ready, first connected’ approach, as a method of determining a project’s position in the queue.

Those projects with secured land rights and early planning application submission dates are likely to keep their grid connection offer and move up the queue.

Q: What are the implications for landowners of the grid connections reforms?

A: There will be projects in the system already that won’t meet the Gate 2 hurdle and so will lose their ‘place in the queue.’ But for projects which are ready to go and are viable, it should accelerate the process.

Q: What role do you see rooftop solar installations or wind turbines playing?

A: Rooftop solar panel installations have their place and we definitely need more of them.

But it would be very hard to achieve the scale of increase in capacity required from rooftop only – it is too piecemeal. We will continue to see an increase in onshore and offshore wind projects. Wind turbines are very ‘marmite.’ Whilst some people like them, others would far prefer to see solar panels. Wind turbines are certainly a more land efficient (less land hungry) way of producing renewable energy. Our view is that we need a mix of different energy technologies to ensure long-term energy security.

Q: What’s happening in the battery storage market?

A: There has been a huge number of options signed for battery storage over recent years, with rents ranging from between £1,500/MW to over £2,000/MW. The financial modelling of battery storage projects is more complex and uncertain, and their use in the electricity grid is still relatively juvenile and evolving, compared to more traditional gas peaker plants. Landowners need to bear this in mind when considering these projects.

Q: How do you think things might change in future?

A: If you look at the structure of land agreements for many renewable energy projects, developers tend to want leases for between 35 and 50 years, but will often want break clauses at 20 or 25 years. This suggests there is an expectation that the energy market could look different again in 20-25 years’ time and raises questions about the permanence of some renewable projects currently being envisaged.

The Government is investing in nuclear fusion for energy production and supporting the development of green hydrogen plants. Once these technologies come forward, in particular nuclear fusion, then we could see a completely different domestic energy mix, and the role our countryside has in facilitating delivery of that renewable energy mix.

Q: What general advice and tips would you offer landowners approached about a renewables development?

A: We are in a new era for renewables and landowners who want to lease land for large-scale renewable energy schemes can generate significant rental returns, compared with conventional farming. However, they should seek professional advice very early on in the process.

Large-scale renewable energy projects are capital intensive, complex with multiple stakeholders through the lifecycle of a project – from land assembly, obtaining planning permission to construction and operation. Having a detailed understanding of each stage of the lifecycle is fundamental when advising landowning clients on commercial terms. The rental income from these schemes can bring its own challenges from a tax perspective. It is therefore vital that landowners also seek advice from an experienced tax specialist before signing an option.

Q: What other opportunities is the expansion of the renewables market bringing?

A: We are seeing private renewable energy developers approaching landowners to install cables across land to connect projects to the electricity grid. Landowners should be aware that private developers do not always have the same compulsory purchase powers as the big utility companies. Renewable energy projects are valuable schemes and if landowners are the key to unlocking them, then they should share in the value of the project.

This article first appeared in our latest issue of Land Business. It forms part of our ‘In the Know’ series which sees Strutt & Parker experts share insight and advice on how farms and estates can improve their business resilience, both from an economic and environmental perspective. For more download the Autumn/Winter 24 edition of Land Business.