A number of companies have been approaching farmers in select locations across southern Ireland with a view to securing long term contracts.
Already Amerenco Solar Kilcannon Limited, a subsidiary of Amarenco, a renewable energy company set up by former Bord Gais CEO John Mullins, has applied for planning permission for multiple locations in Cork and Waterford.
Typically, development involves installation of rows of photo-voltaic solar panels on ground-mounted frames, covering land areas in excess of 20 acres, to generate power output of 5 Megawatts.
Ancillary building works such as access roads, inverter and transformer stations, and security, accompany the installation of the panels.
By contrast, advances in scale and technology mean that one single offshore wind turbine (albeit a pretty large one) can produce over 6MW of electricity.
This brings us neatly to the topic of land use.
Environmentally speaking, the use of renewables rather than fossil fuels is of course to be commended, and given the pace at which our climate seems to be deteriorating, the case for renewables seems ever more urgent.
However, the use of land, which is itself being a finite resource, creates ethical questions.
Indeed, even in the realm of “conventional farming” the more productive use of farm land is set to become more relevant as the demand for food increases, and the capacity to produce from the land is constrained by disease, nitrates regulations, and other environmental restrictions.
Back to the solar panels, from a tax perspective, the proposition of sub-letting part of a farm for use as a solar farm presents some unusual tax questions.
In most cases, the income arising to the land owner will comprise of rents or a licence fee.
Such income is not amalgamated with other farming income for the purposes of calculating the profits from the trade of farming, but is instead taxed as rental or other income.
The inability to group such income together with farming income can result in a situation where farm losses cannot be offset against this income, nor can such income be sheltered by capital allowances from on-farm investment or by pension contributions.
Upfront payments can be considered a lease premium, and are generally liable to capital gains tax.
Generally speaking, a farmer can in certain circumstances sell their land, and where relevant criteria are satisfied, the sale can qualify for a total exemption from capital gains tax, known as retirement relief, which can cater for disposals of up to €750,000 where the farmer is aged over 55 and under 66 at the time of disposal.
In the case of farmers granting an easement (or right of way) to access land, it would seem incompatible to claim the capital gains tax retirement relief, as the underlying asset is retained by the farmer.
Some solar agreements do cater for the continued use of land in between and under the solar panels by small livestock (sheep etc), and farmers should be careful as regards how the use of the land will affect their future ability to transfer the land free of capital gains tax.
Generally a farmer can transfer their farm to their child and avail of retirement relief on the transfer (capped at €3m in the case of parents over 66).
However, where the farmer has not used the land for the purposes of their trade within the previous 25 years, then retirement relief is no longer available.
Other aspects worth exploring include the VAT treatment of the transaction and, in particular, whether the land will be considered developed, meaning the future sale could become liable for VAT.
In the UK, over the past decade or so, some energy companies had offered farmers schemes whereby farmers were offered new farm buildings in exchange for the energy company having access to the roof area for fit-out of 50kw solar panels.
To me, this seemed a rather sensible approach to solar development.