FARMERS and landowners across the UK are currently being inundated with letters from wind turbine developers offering lucrative rentals for 20 years or more. It’s tempting to sign up straight away, but what are the pitfalls of such schemes, what are the merits of working with turbine developers and wouldn’t farmers be better off self-funding?
Many turbine developers are currently seeking sites for wind turbines because of the great returns available from the Feed In Tariff. Most employ a “scattergun” approach by sending out letters to hundreds of landowners in the hope of finding a few feasible sites and paying the site owner an annual rental.
With the sums on offer, it can be tempting to sign up to Heads of Terms straight away on the promise of a guaranteed income for 20 or 25 years. However, be careful as you may be at the bottom of a long list of potential site owners.
By the time the developer researches the feasibility of your site, you could have been tied in for many months, unable to talk to other developers or consider other options. It is well worth doing some homework first.
When talking to a developer, you are in a strong position to negotiate. If you find one developer difficult to deal with, there are others in the market place, so it is sensible to shop around before signing anything. You need to be considering the following options:
1. Would you prefer a straightforward flat fee arrangement which is payable annually? Will it be index-linked? The payment will be taxable. What impact will it have on your existing tax arrangements?
2. It may be worth negotiating an annual rental fee plus a percentage of the Feed In Tariff and/or use on farm of the electricity being generated – either free, or at a set cost per kWh.
3. Joint ownership is another option. If you would like to invest in the project yourself alongside the developer, you will receive considerably more income from tariff payments, while taking on less risk than by going along the self-funded route.
A word of caution
If you’re considering going ahead, before meeting with the developer it may be worth getting independent advice and guidance from a specialist land agency or renewable energy consultant who has an overview of the wind turbine marketplace in your area and may be able to offer an alternative, more beneficial option.
They should be able to advise you of local issues such as grid capacity, radar and airport problems, or tell you about agricultural loans, better offers being made to others or shared risk options. They should be able to help you think more strategically about what kind of renewable technologies would suit you best.
Remember, before signing any legally binding contract, it is vital to get your own unbiased legal advice so do consult a reputable lawyer.
And if you are already tied in to a developer but are unhappy with what is being offered, take legal advice. There may be a “cooling off period” in the contract, during which you can change your mind.
The self-funding option
Self-funding can bring financial risk but can also lead to very good financial returns for 20 to 25 years.
Lenders are keen to lend and interest rates are attractive, but high street banks are not keen to lend against the Feed In Tariff , nor will they take Power Purchase income from the turbine into account. Security will need to be provided, normally in the form of land and/or property.
There are many potential constraints – wind speed, grid connection, local opposition, aviation objections and many more.
Self-funding means you’re tackling these issues on your own unless you take specialist advice from a renewables consultant at different phases of the project.
If you’re looking at a smaller scheme, your turbine installer may also be able to help you with some of these issues, although expert, impartial advice and local knowledge is still the best option.
If you’ve had one letter through the door from a turbine developer, chances are there will be lots more from other developers to follow, so whatever you do, don’t accept the first offer that drops on the mat, even if it does seem to promise untold wealth.
Do some research online, get recommendations from people you know who have already installed a turbine and talk to your land agent at an early stage. That way you can rest assured that you’re not setting yourself up for problems years down the line and that whatever renewable option you take, it is exactly the right one for you and your land.
Victoria Lancaster, renewables project manager, is based at the Northumberland office of gfw-Renewables. The company advises on renewables projects from Lincolnshire to Scotland. Visit www.gfwrenewables.com