Andy Drane of Davidson Chalmers Stewart talks about some of the legal issues around renewables.

After some years of reduced activity, the tide has changed and renewables are now back. What are the opportunities and potential pitfalls for farmers?

Planning is everything

Planning doesn’t just mean securing planning permission. It includes getting technology on site and getting energy onto the grid or to the end user. It involves planning what to do with the revenues generated, establishing your exit strategy, and tackling inheritance issues arising. Successful renewable installations can produce life-changing amounts of money.

Receiving rent becomes rather less appealing after the deduction of Scottish income tax at the top rate and less appealing again if Agricultural Property Relief or Business Property Relief on succession are compromised. Experienced advisers help farming families structure matters so that as much of the money generated as possible is retained both now and in the future.

Fundamentals of development

Control of land is essential for any development.

Control includes both the land on which the development is to be constructed and also land required to get infrastructure to the development as well as access to the grid. At every point where a turbine blade or grid connection passes over someone else’s land, legal rights are required.

Before committing to spend money on the development itself do you have control of the land on which the development is going to be built?

For farmscale projects, the land you require to control is likely to be within the farm boundaries. However, don’t assume that will always be the case.

Larger schemes, in particular wind installations, may have complex off-site needs. That affects not just new schemes but repowered or redeveloped sites.

What’s the best deal for you?

There is a range of possibilities to choose from. You can go it alone, investing your own capital, or you can work with a developer to whom you could lease the land or joint venture. There is no one size fits all.

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It is important to share your aspirations for the project at an early stage so your professional team can provide clear advice about what will work best for you. An experienced renewables team will have a strong idea of the investment and development landscape and will help you partner with someone you can trust.

Dealing with developers

New development remains a risky, capital-intensive business. It often makes sense to team up with a developer who will promote your site through the consenting process either as a straight land deal or as a joint venture. Onshore wind, solar, and battery storage are very much in the ascendancy.

If you team up with a developer, who are you dealing with? Developers routinely form a special purpose vehicle (SPV) for each scheme. Even if the ultimate owner of the SPV is a well-established household name, the party you are in contract with is that SPV, and ownership of the SPV can also change over time.

When you contract with a developer or its SPV you need to clearly understand the potential impact on your wider business. Protections need to be expressly written into the legal contracts and cover both the option phase and the operational phase.

The developer will need your input as part of the consenting process. If this involves giving legal commitments (e.g. signing a Section 75 Planning Agreement), you only want those to take effect if the scheme goes ahead.

One particular fault line involves decommissioning. The planning consent is likely to require removal at the scheme’s end and a decommissioning bond you can call on is an important protection.