Is an investment in solar energy as electrifying an option as it once was?

Friday, 26 June 2020

Is an investment in solar energy as electrifying an option as it once was?

The removal of government subsidies for solar energy in 2015 drove a significant reduction in the number of installations due to the dramatic change in viability of any new developments. Eighteen months of nosediving statistics, installations and subsidies followed the grant end date. However, new options are reopening solar as a potential income stream for landowners.

Technological developments in photovoltaic panel technology and reliability, increased length of schemes and the combination of rent and revenue share has brought the possibility of solar back to the table when landowners are considering diversification and alternative income streams.

Is the power of the sun the basis of all energy?

Most energy produced and consumed across the globe originally gains its power from the sun. Fossil fuels such as coal, oil or gas formed when the sun’s energy created organic matter through photosynthesis, which was trapped under ground and the energy provided by the sun is more than the human species on earth could ever need. Surely, then, with eyes focused on the long-term damage that global warming is creating, turning our attention to harnessing this natural resource, makes financial and philanthropic sense.

Photovoltic panels for solar energy

Photovoltic (PV) panels are made up of cells that generate electric current, linked together. Two or more thin layers of semi-conducting material – often silicon, are used to create the cells. When exposed to direct sunlight, electrical charges are generated, conducted away by metals, and stored on the grid until needed, or used to power appliances.

There are many advantages of PV. Flexibility in terms of design and easy installation mean they can be a quick solution. However, large installations may require planning permission and to be economically viable as a business enterprise, require in excess of 80 acres of land which is of a lower grade than would be used for other farming. The removal of government grants does mean that the prospect is less attractive than it was before 2015, however, Feed in Tarifs (FiTs), where income is generated in actual output of electricity generated, do support the financial decision. In addition, reduction in electricity consumption, being less reliant upon fossil fuels, improving the green image of the landowner or farming brand and creating an additional index-linked, guaranteed income from FiT and export tariff payments are all attractive considerations.

What requirements are there for Solar Farms?

As long as you own the land and you have more than 5 acres of land available, you are within 5 km of a power sub-station, or have significant overhead cables on the land, the land is fairly flat and largely rock free, it is worth considering as a business investment.

Developers entering into a revenue share deal on significant areas of land (upwards of 80 acres) for commercial solar farms, would typically look for a lease term of at least 35 years, paying an annual index-linked rent plus a revenue-share top up rent. Rents typically reach between £800 and £1000 per acre per annum. Grazing rights can often be maintained – with some developers even paying for this in order to maintain the ground and thus the efficacy of the panels.

Other considerations include tax implications, insurance and indemnity requirements, costs of decommissioning and of returning the land to its original state at the end of the lease term. If you are interested in finding out more about the opportunities that solar offers, for diversification or in terms of option and promotion agreements, contact our renewables experts: James Collier by emailing james.collier@howkinsandharrison.co.uk or Jeremy Watson via Jeremy.watson@howkinsandharrison.co.uk or by calling 01788 564680.

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