Business Clinic: How do we negotiate with a solar developer?

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Here, Mark Charter, head of estate management with Carter Jonas, Oxford, advises on negotiations when a solar developer needs to cross one farmer’s land in order to access their planned solar project on another landowner’s property.

See also: Business Clinic: will known issues derail the sale of our farm?

Q: We farm in Berkshire and have been approached by a solar developer about connecting a planned solar park to a nearby substation. They would need to go through two of our arable fields.

We have heard easement payments can be substantial but have no experience in these negotiations. Where do we stand in terms of a contract and payment for this?

A: There is a surge in enquiries directed at farmers and landowners about projects of this nature.

Large-scale ground-mounted solar schemes are on the rise, and there is rapid growth in investment for data centres, driven by the increasing demand for artificial intelligence.

Data centres have a huge power demand so, as with solar panels, developments need to be connected to the grid.

Underground cabling can follow the road to the substation, but digging a public highway is extremely expensive. It’s far cheaper for a developer to go across your land.

Assuming you are happy to explore the developer’s proposals, the appropriate course of action is an easement.

The first step is to get under the skin of the solar proposal to understand how much value a landowner can extract from the project in return for their co-operation.

The  impact on the property must also be considered, both in terms of the disruption during the work, but also the long-term impact on the land.

Without forethought, the cable could stymie another lucrative future development.

Option agreement

Initially, a landowner enters a conditional easement which is dependent on planning consent. On signing an option agreement, you would be paid for your co-operation. The amount is linked to the value of the project.

Depending on the scale, this is typically a five-figure sum. The full easement sum is paid later, when everything is completed.

We ensure the developer covers our client’s surveying and legal costs, so they’re not exposed financially if the scheme falls through.

The agreement can also specify how the cable is constructed, including the depth, materials used and appropriate restrictions.

For instance, the cable should only serve the solar park in question, and if they extend it then the landowner has a right to further uplift in value.

You could be the only landowner on the route to the substation, or one of a number. If you are the sole party who can grant access, you are essentially in a ransom situation.

It’s important to understand just how valuable your co-operation is. While an offer of £100,000 may sound substantial, the value of the project that’s being created is so much more.

Share in the savings

Landowners usually receive a share of the savings accruing to the solar park operator by cutting across their land.

So, if it was going to cost £1m to lay the cable along the road, or £100,000 to go across fields, you should receive at least 50% of that saving – not less than £450,000.

The amount you can expect to receive depends upon the size of the solar park and the nature of the saving.

If the developer has no alternative way of getting the power from the solar park to the grid, then the right approach might be to seek a share of the uplift in land value resulting from the change in use from agricultural to solar, which can be substantial depending on the project’s scale.

You need to approach the negotiations rationally, because at some point it would become unviable for the developer.

Striking the right balance can be tricky, especially if there are several landowners along the route, which is why seeking expert professional guidance is essential.

While a solar project can increase land value by tens of thousands per acre, a data centre consent can increase land values by millions of pounds per acre.

Developers will also need to access your land to conduct surveys; some of these will be non-intrusive, but others may require machinery access.

The agreement, therefore, should include compensation for crop loss.

It is vital to give a scheme proper consideration and diligence, because you would be selling the permanent right for that cable and the likelihood is that these solar parks will continue beyond their initial term.

Do you have a question for the panel? Outline your legal, tax, finance, insurance or farm management question in no more than 350 words and Farmers Weekly will put it to a member of the panel. Please give as much information as possible. Email your question to FW-Businessclinic@markallengroup.com using the subject line “Business Clinic”.