Returns From Renewables On The Rise For Landowners
Landowners' returns from large scale wind farms have been increasing since their inception in Scotland, according to a recent report compiled by CKD Galbraith's dedicated renewable energy department.
Advisory and consultancy work has seen CKD Galbraith acting on behalf of landowners, developers, community groups and statutory national bodies on over 850MW of wind farms, with over 100 different assignments being completed in the last ten years.
The report found that between 2002 and 2008, rents under new leases increased on average by 200%. In addition, from 2009 to 2010, rents rose by more than 10% and early indications in 2011 show that they are continuing to rise as demand for available sites increases.
Landlords of pioneering wind farm sites throughout Scotland will soon be undertaking rent reviews on the earliest leases and evidence suggests that landowners can expect significantly higher rental returns for their projects from review dates.
CKD Galbraith’s research also shows that Option Agreement payments for wind farms can vary by thousands of pounds. Often initial terms proposed by a developer do not reflect up to date figures so it is more important than ever to seek advice to secure optimum payments.
Scotland currently has 110 operational wind farms, the largest proportion of which are in Aberdeenshire and Highlands & Islands (see diagram 1 below) and with arguably the ‘best’ sites already developed, a trend is emerging to suggest that the average size and number of turbines per new site is decreasing.
Currently the Scottish Borders, Ayrshire and Perth and Kinross have the highest average MW output per county (see diagram 2 below). Although Renfrewshire has the most, this is skewed by the 322MW Whitelee Wind Farm, which is soon to extend into an even larger site, with a further 75 turbines.
In Scotland CKD Galbraith have already seen existing sites extended to add more turbines to individual locations which can be more acceptable to the public than developing new, green field sites. The firm has just negotiated the option and lease for a 35 turbine extension to an existing wind farm in the South of Scotland, and are also due to undertake negotiations to provide access to the second extension of the same original wind farm.
Mike Reid, who heads up CKD Galbraith’s utilities department said: “With the introduction of the Feed in Tariff (FiT), medium-scale (250kW-1MW) wind developments are becoming more prevalent, meaning more electricity can be produced from fewer turbines. Wind power to smaller producers, not just the international developers who dominated this market just a few years ago.
“If property owners are considering any renewable projects, it is important to ensure that time scales for planning and grid connection are accounted for, since these can cause delays. Also, time is of the essence since FiT rates are due for review from 2013 and the viability of a project may well be affected should payments reduce.
“The Government has already announced its intention to refocus on the most cost effective technologies with a view to cutting the FiT budget by £40m, or 10%, in 2014 and 2015. The recently announced Comprehensive Spending Review could have a detrimental impact on funding for FiTs as it tried to introduce a balance between the various energy options. In particular, uptake on large scale solar schemes (over 50kW) has had a more enthusiastic uptake than anticipated.
“The review will also examine the uptake of Anaerobic Digestion (AD) plants, which has been very poor to date. All aspects of the current schemes will be reviewed, but importantly, changes will not act retrospectively and will only affect new entrants to the scheme. It will be completed by the end of 2011, with a caveat that if it reveals a need for greater urgency, tariffs may suffer earlier or more stringent cuts may occur. This uncertainty for the rates will leave some schemes in limbo until the new rates are announced and accurate costings calculated.”
As well as likely reductions in FiTs, The industry is braced for a longer turn-around for planning applications due to cuts in Government spending combined with an influx of renewable planning applications in certain counties, particularly Aberdeenshire and Lanarkshire. Delays can have a detrimental impact on a project, especially if the local grid capacity is already near its limit.
Scotland is often regarded as offering Europe’s richest renewable resources, and with offices across the country, CKD Galbraith is well placed to combine local knowledge with national experience. Find out more about our renewables service or get in touch with Mike Reid who heads up the renewables team.