Is the future bright for on-farm renewables?

How is the renewables sector shaping up for the next 12 months?

Making an investment in renewables is a good option for farmers and landowners this year as the outlook for the sector remains positive, says Cath Anthony, rural surveyor at consultant Bidwells.

“There is lots of opportunity for farmers and landowners because they have the land that most renewable energy projects require – whether they develop the project themselves or rent out the land and get a rental income,” she says.

“Renewables technologies are becoming more established so clients are more confident in investing or getting someone else to invest, which reduces the risk even further.”

Rob Meadley, Brown & Co head of renewable energy, says improved structure to the Feed-in Tariffs over the next two years will help development in the sector.

“There’s greater scope for anaerobic digestion in particular and the outlook is good. However, the capacity trigger points [which would prompt the government to bring forward a reduction of the FiTs] are potential concerns, as is the availability of feedstock, particularly maize.”

Mr Meadley says interest in biomass heating is likely to continue at a slow pace due to capital costs and concerns over the availability of feed, although the short-term outlook for biomass heating crops looks good.

“Applications for Natural England’s Energy Crop Scheme grant – which funds 50% of the cost of planting – close at the end of September so if farmers wanted to plant energy crops they need to be thinking about putting in an application as soon as possible,” he adds.

“Whether or not DEFRA and the DECC will include a third round of the energy crop scheme applications for October remains to be seen.”

What will the key issues be for renewables over the coming year?

Planning, government support and access to the National Grid will be the three major factors affecting development of renewable energy projects in 2013, says Mr Meadley.

“If the government starts to change its support it will have a serious impact on the viability of existing projects and the scope for new ones.

“Another key limiting factor is grid connection and the move by many network operators to pass the cost on to farmers,” he adds.

“It can be anything from tens to hundreds of thousands of pounds to get connected and in some cases we have had quotes for millions.”

Jim Campbell, renewable energy team leader for SAC Consulting, says large parts of Scotland are waiting for grid connection, which is limiting the development of renewable energy projects.

“Planning is also hampering projects, particularly where wind turbines are involved,” he says. “Large solar farms could also start to face more issues.”

Aside from these three major issues, Miss Anthony says taking advice and being fully aware of the potential value of renewables projects is also key for farmers thinking about making a move into the sector this year.

“We are seeing farmers and landowners being made good offers from developers but we are also seeing bad ones where they have agreed a poor rent or the terms of the agreement are unfair,” she says.

Rents being offered may be higher than those available if land was rented out for agricultural purposes, but land going into renewables should be able to command higher sums.

“Getting professional advice is important before you sign any agreements,” she adds.

Will 2013 see retailers and buyers start to place more pressure on farmers to become ‘green’?

Undoubtedly, says Miss Anthony, but don’t expect supermarkets to fund efforts towards becoming more environmentally friendly.

“Supermarkets want to look greener for their consumers but expect growers and suppliers to do the work,” she says.

“I’m not sure they will include a massive financial incentive but if there are two growers providing the same product and one is greener than the other they will be more attractive.”

Milk producers and niche vegetable growers in particular are increasingly being told they need to have good green energy credentials.

“An easy solution is adding photovoltaics [PV], or you can pay extra for your electricity from some providers to guarantee it comes from green sources,” says Mr Meadley.

It’s not just energy usage on-farm that is important – carbon counting and efficiencies across the supply chain are becoming increasingly desirable, says Mr Campbell.

“A lot of supermarkets and buyers are looking to supply chain efficiencies and certainly some of the milk buyers are looking to farmers to install renewables. That will become more of a way to go.

“It does make clients’ products more marketable, though, because they are trying to be greener.”

What is the outlook for government support during the next year?

Without a crystal ball, no one can be entirely sure what will happen with renewables subsidies, especially as some of the government’s previous moves have been completely unexpected, says Miss Anthony.

But the government’s obligations to meet renewable energy targets mean incentives will remain in some form.

“The FiTs for solar were too high initially but most of the tariffs are sensible now and will hopefully carry on like that for the foreseeable future,” she says.

The FiTs for most technologies have been set until April 2014, while the tariff for PV is due for a three-month review in May.

This should give the market and investors the confidence to go forward with investments, particularly as the cost of PV technology has reduced so dramatically.

In Scotland, Mr Campbell says the Scottish government is supportive of renewable energy systems, but it is under pressure with finances.

“There has been outcry from some people over the amount of money going towards renewables so it might be cut back.

“The FiTs will perhaps face further cuts, but hopefully the technology will become cheaper, which is the way the tariffs were meant to work,” he says.

“The thing to remember in respect of financial support for renewables is while the UK is dependent on importing energy from other countries, the money is going elsewhere,” Miss Anthony adds.

“With renewables systems, the money is going back into the local economy and is providing direct and indirect employment.

“We have been through a recession and there is a lot of opportunity for renewable energy to contribute to the economy, so the government has to focus on that.”

Will we see any renewables technologies really take off this year?

Solar technology has seen its biggest boom, but the PV projects are likely to remain popular over the next year, says Mr Campbell, even if the FiTs are reduced in April.

“It’s the easiest system for most people to install,” he says. “We have seen the return drop off, but the technology has become so much cheaper that we are still seeing a lot of interest.

“Connection to the grid will continue to limit any real further development in hydroelectricity systems, particularly as most potential sites are remote, while wind farms will continue to struggle to get off the ground thanks to objections to planning applications,” he adds.

Mr Meadley agrees that the public is yet to be convinced by wind, while objections by the Ministry of Defence are an even bigger constraint.

“There’s often no explanation or logic in the objections in some cases, so we really need more consistency from the MoD,” he says.

“But there’s a lot of talk of radar upgrades which, if they became wind-turbine friendly, could see lots of projects coming through.”

But the biggest development in renewables systems in 2013 will be AD, Mr Meadley says. “AD will be the front-runner by far, based on using agricultural waste and supplemented by agricultural crops.

“What will be important is finding that balance, without the government and public becoming concerned about the food and fuel debate and the number of schemes being limited.”

Miss Anthony says after a slow start in the UK, interest in AD will also start to increase in the coming months.

“We have seen over 80 commercial plants now commissioned and many are expanding,” she says.

“The Renewable Heat Incentive is a big influence and we are looking at a large amount of biomethane direct injection where before it was combined heat and power systems for electricity.

“Biomethane has become viable because of the RHI – there is a higher capital outlay but returns are better, although access to the grid is important.”