Karen Walsh: Making sense of choices on offer to develop solar system on farm

Over the last year many farmers have found themselves being actively canvassed by solar farm developers looking to secure locations for solar farm installations on their lands.
Karen Walsh: Making sense of choices on offer to develop solar system on farm

Farmers considering getting involved with large-scale solar-power schemes should think carefully about what is in store.

The prospect of additional income will always be welcomed by farmers and landowners but many are signing contracts with installers without taking legal advice or talking through the issues with their Teagasc advisor and other professionals.

There are plenty of contractual aspects to consider before anyone should sign on the dotted line.

Essentially, a solar contract is an agreement between a developer and landowner which involves the developer arranging for the design, planning, financing and installation of the solar energy system on a farmer or landowner’s property at little or no financial cost to the landowner.

The developer remains responsible for the operation and maintenance of the system for the duration of the agreement. At the end of the term a landowner may be able to extend the term or have the developer remove the system or choose to buy the solar energy system from the developer.

There are two common types of deals being offered by developers namely exclusivity deals and option agreements.

Exclusivity deals effectively tie the landowner in to one developer for a certain period while that company investigates whether it is worth progressing the project. The developer carries out initial investigations about the viability of a site safe in the knowledge that the landowner cannot deal with a competitor.

Option agreements allow the developer to lease the land once planning permission has been obtained.

Generally the developer will look for a one-year to a five-year option period. If the term is longer it should be accompanied with milestone payments. You should also consider inserting a clause that planning permission should be applied for by a certain time.

Exclusivity deals and option agreements are some of the most onerous legal documents you can sign.

You could effectively be restricting your land for 25 years and upwards.

Exclusivity deals and option agreements also prevent you from discussing the agreement with anyone. You should not sign anything until you and your advisors have examined the agreement thoroughly.

If the developer is granted planning permission and requires the land, the developer is entitled to insist that you execute the lease and you will have solar installations on your land for normally 25 years.

The landowner receives an annual rent for allowing the equipment to be installed. When the option agreement is signed, you have also agreed the terms of the lease. The lease cannot be renegotiated.

If the development cannot go ahead, the option is not exercised and the lease does not become operative.

Consequently, the option payment may be all that is received by a landowner. It is up to you to negotiate terms that suit you and ensure that you are fairly compensated for the risk and onerous terms.

Even though high rents are attractive, farmers need to be happy as they are entering into a long-term arrangement. 25 years is a long period to rent out part of your land. The farmer should bear in mind any issues that may evolve.

RENT

Rent varies considerably depending on the individual site circumstances (light intensity, grid connection.)

In some cases there may be scope to obtain a share of the revenues from the electricity generated on the site alongside a rental income especially where there are high solar radiation levels.

Most rental agreements are adjusted for inflation but it is important to clarify exactly how the rent is structured, how often it is reviewed, and what basis it is agreed on.

Be sure to check who you are dealing with before you sign anything.

It may be possible to negotiate a supply of electricity to your own property at a reduced rate or even free as part of the rental agreement.

PLANNING

The cost of a planning application is normally borne by the developer.

Initial feedback from local planners suggest that solar parks may be viewed more favourably than windfarms.

That is largely because the panels stand no more than 2.5 metres off the ground making them less intrusive and they also make no noise.

Very few solar parks have been given the go ahead so far in Ireland. It is unclear how planning authorities will react to any surge of applications at this stage.

If planning is refused generally the developer will pay to resubmit an application but landowners should be aware that some developers may walk away from a project if the problems cannot be overcome.

* See part two of this article in next week’s edition.

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