Farm wind turbine exclusivity agreements – what to watch out for
© Tim Scrivener Onshore wind turbine developments have been all but prohibited for almost a decade due to the restrictions imposed by the National Planning Policy Framework (NPPF).
A recent amendment to the NPPF slightly relaxed the planning constraint in terms of community opinion, but has so far made little impact in terms of applications.
However, shadow energy secretary Ed Miliband has said that a Labour government would double onshore wind, triple solar and quadruple offshore turbine developments.
Renewable energy developers are growing in confidence that suitable sites could soon be brought forward, says property consultant Carter Jonas.
This is leading to more landowners being offered exclusivity agreements as developers seek to identify potential sites, according to surveyor Alex Ireton.
See also: How changes to permitted development may benefit farmers
Alex sets out some key considerations for landowners.
If there is a change in policy, what will it mean for landowners?
Developers expect that a change in government would bring about a more favourable environment for onshore wind. The first stage is likely to be contact from a developer with the offer of an exclusivity agreement.
What is an exclusivity agreement, and what should it include?
It is essentially a restriction on the landowner at the beginning of the process while the developer puts their money down and makes a commitment to explore the grid.
For a set period, and in exchange for the developer investing their resources in exploring the grid, the landowner agrees not to enter discussions or negotiations on renewable energy with any other developer.
Agreements should be short, clear and concise. Its duration is key – usually six months to two years – but most commonly a year. It’s important to pay attention to detail.
The landowner should get something out of signing the agreement as there is an opportunity cost.
The developer is effectively cutting out the competition while they explore the possibility of a project being brought forward, so there’s a value to that.
Fees as low as £500 and as high as £10,000 have been paid to landowners. It depends on how speculative the opportunity is.
It could be that instead of money changing hands, the landowner is given the grid information as payment, which can be useful to them in the future. There should also be a description of the intention of the two parties.
How do I know the developer is reputable?
There are usually three types of developer: small, nimble promoters who work on a handful of projects at a time; larger established European and international utilities companies with many ongoing developments; and infrastructure investment funds somewhere in the middle.
The smaller teams will say they are more personal while the larger teams advertise as having more influence and expertise.
Promoters are more likely to sell their project on or bring in a funder, whereas the utility company is more likely to construct, own and operate themselves.
It’s up to the landowner to decide who they prefer to deal with but it’s a good idea to get advice from someone with experience of the different types of operator and how they work.
What are the common pitfalls?
The prospect of a development can be exciting, but pay attention to the detail. Landowners should be comfortable with the duration of the agreement and receive a fair payment in return for signing.
The scope of the agreement is also key. Some developers may want to include more than renewable energy alone or have the scope of exclusivity over all of your land.
This has the potential to sterilise any other developments you may want to consider, such as residential or commercial.
Before signing, remember that you are selecting a development partner. You need to be sure they are the right party for you.
Do your due diligence on them. Do they have the ability to deliver, do you have a high-level understanding of what their commercial offer is, and whether it’s in line with the market?
You should also insist on a commitment to investigating the grid and a termination provision if that doesn’t happen.
Be aware of what you’re prepared to sign off on.
How does an exclusivity agreement differ from an option agreement?
An option is a formal right to be able to call on entry into a lease once the developer has secured planning and grid. That will have all the details about what can and can’t be done on the land.
By comparison, exclusivity doesn’t give the developer any rights, it is just a restriction on the landowner.
Do you have a potential turbine site?
Unsurprisingly, a high average wind speed is a must, which is best achieved on an elevated site or a wide-open space free from obstructions.
Planning consent may well hinge on siting a wind turbine away from houses or other buildings to reduce the impact on residents – the exact distance you need to allow depends on the size of the turbine being installed.
The next generation of wind farms are likely to have much larger turbines, so we can expect the stand-off distance from residential to become 600-700 metres minimum.
Designated zones for wind turbines are outlined in the National Planning Policy Framework.
It’s wise to choose a site without special environmental or landscape designations. Peat bog is unsuitable and it’s sensible to avoid an area with specific bird designations.
Applications in Areas of Outstanding Natural Beauty will find it harder to secure planning consent.
A good grid connection is key; without this no payment can be received for the electricity the turbine generates.
Without subsidy, wind farms will have to increase in size to get the economy of scale to be viable – this will often have larger, transmission scale connections which means that we could start to see connections from farther away.
Turbines can be tall enough to appear on radar and affect air traffic control, so if the development requires the Ministry of Defence to upgrade its equipment the project may be financially unviable.
Finally, access to the site is a key practical consideration – bear in mind how large a turbine is and how it will be transported to your land.
A route that navigates small bridges, tight corners and narrow roads may not be the best choice.
Any landowner controlling access, either directly to an access point or through an easement or wayleave to the grid, can also benefit.
Landowners in such positions to facilitate these types of developments could potentially be equally in line to benefit from long term rental payments.