Making Hay Whilst the Sun Shines

Ambitious net zero targets and increasing demand for clean power means the renewable energy sector is moving at pace. Grid reforms have shifted the grid connection model from “first come, first served” to “first ready, first served” and developers are racing to secure viable sites.

More landowners than ever are being approached by companies exploring the possibility of renewable development on their land. To secure sites, developers try to grab attention with headline rental figures but, the devil is in the detail as this rent is not guaranteed and it could be years before a spade is anywhere near the ground.

For landowners, the Heads of Terms stage is critical. It sets the commercial and legal framework for what may be a 30–40 year agreement. Engaging a land agent familiar with this process can materially affect the long-term outcome and ensure your interests are properly protected.

Our top 5 considerations are:

1. Special Purpose Vehicle (SPV)

The letter which landed on your doorstep may have come from a household name energy supplier but this is unlikely to be who your agreement will be with. Instead, it will probably be with an SPV which, during the option period, has no assets or capital. If the political landscape changes, funding is removed or the developer wishes to sell/assign their interest, they can do so easily. We can help you negotiate sufficient guarantees or securities to adequately protect your reversionary interests should the worst happen.

2. Land Take and Unused Land

Developers often seek control of more land than they ultimately use. We can scrutinise red line boundaries, proposed cable routes and site layouts to minimise unnecessary land take. We can also include provisions for the release or taking of unused land once the final layout is confirmed, ensuring you are not encumbered longer than necessary or; prevent you from being left with unusable and unfarmable areas.

3. Decommissioning Security

The Tenant will have the obligation to decommission and reinstate the premises at the end of the Term or if the lease is broken. Clear, funded decommissioning provisions are therefore essential. Its imperative to negotiate security mechanisms, timings, and robust reinstatement standards, ensuring the land is properly restored and any damage fairly remedied.

4. Planning Obligations

The tenant may obtain planning permission before their grid connection date, yet any planning obligations are between the Landlord and the Local Planning Authority; not the tenant. So what happens if they need to implement their permission to ‘bank’ it and therefore trigger any Section 106 obligations? Without proper security, the Landlord is potentially exposed to these costs. We can help navigate these scenarios.

5. Various Agreements

Renewable energy projects involve several agreements:

• Option to Lease
• Lease with the SPV
• Lease to UKPN or other District Network Operator
• Easements or Wayleaves
• Direct Agreement between Landowner and Funder

How these agreements work in practice and interact with one another are important considerations, that if not managed correctly, could result in frustrating circumstances. These agreements need to align and knowing the limits to which the terms can be amended is of vital importance when it comes to current and future uses of the property.

In a fast-moving, competitive grid environment, the detail within Heads of Terms matters more than ever. We can navigate the technical and commercial aspects of the agreement and our fees are typically covered by the developer. We can help to protect value, reduce risk and ensure that when your project is ready, it is ready on the right terms.