On October 1st 2024, the UK entered the era of coal-free power with the closure of the last coal power station at Ratcliffe-on-Soar. The site will be redeveloped into a “carbon-free technology and energy hub”, exemplifying the country’s drive for greener energy. However, as natural gas remains the largest single source of electricity entering the grid, the Government still has some way to go to achieve its target of a decarbonised grid by 2030.
A new energy strategy
Part of Labour’s strategy to decarbonise the grid involves doubling onshore wind by 2030 and, it would seem, the Department for Energy Security and Net Zero is wasting no time to accomplish this goal. Within the first 72 hours of the election result, the de facto ban on onshore wind (caused by a planning requirement for full community support) was lifted. Additionally, a bill to establish Great British Energy, a publicly owned company which will be allocated £8.3 billion to invest in, own and manage renewable energy projects, including onshore wind, is currently going through Parliament.
The wind of change
Farmers and landowners naturally hold the asset required to unlock onshore wind projects: land. However, the right environmental conditions are also required. Favourable wind speeds are typically found in Scotland, Northern Ireland and Wales, but, according to University of Exeter's Environmental Intelligence Centre and Friends of the Earth, there are 2,198 square kilometres of land in England that is suitable for onshore wind development (an area 1.5 times the size of London).
A reliable income for farmers?
Landowners may be able to capitalise from the UK’s push for onshore wind by leasing a small proportion of their land to renewable energy companies to develop and operate wind farms in return for an annual rent. The rent may be calculated per acre, per turbine and/or the energy generated from the site for terms ranging from 25 to 40 years. Therefore, wind farms can offer a reliable and long-term income stream.
The footprint of a wind farm is generally low in contrast to other energy developments. Although a larger area of land may be required during the construction phase, when operational, wind farms may allow landowners greater scope to integrate their existing farming operations, such as grazing livestock and growing crops around the turbines.
Successful windfarms
There are various geographical factors that are required for a viable onshore wind project. Energy companies typically require a site to have an annual average wind speed of at least 6m/s. Energy companies are also likely to favour sites that have good access routes for large vehicles (particularly during the construction phase), are situated near to the electricity grid and are not too close to residential areas.
A wind farm project may be a lengthy and complex process. The energy company may require exclusivity for 6 – 12 months over the land to assess the feasibility of the project, prohibiting the landowner from negotiating with other energy companies during this period. If viable, the energy company may seek an option agreement with the landowner, apply for planning consent and, if successful, enter into a lease with the landowner followed by the construction stage (which will include connecting the turbines into the grid). Consequently, it is possible it may take over a decade from negotiating the exclusivity agreement until the site becomes operational.
Financial considerations
Additionally, there may be tax implications for landowners which need to be considered. Leasing a wind farm could affect a landowner’s ability to claim agricultural property relief or business property relief, increasing their inheritance tax liability. There could also be income tax and capital gains tax consequences.
Although wind farm projects do have the potential to be complex and protracted, with a government that is keen to facilitate growth in the onshore wind market, landowners may be able to seize opportunities and secure a stable alternative income stream from energy companies and integrate wind farm projects into existing farming operations. Trowers & Hamlins has a dedicated team of agriculture and renewable energy specialists who can advise at all stages of a wind farm project and farm diversification. For further information, please contact Tom Craig or Alex McNie.
