Landowners are being approached by solar farm developers looking to secure land
The Renewable Energy Directive (RED) 2009/28/EC sets out binding targets for each EU state, with the stated aim being that, in the EU as a whole, renewable energy will account for a minimum of 20% of the overall energy consumption by 2020.
Under EU 2020 renewable energy targets, the Irish Government must achieve 40% of electricity generation from renewable energy sources, or face significant penalties.
As of May 2016, Ireland was generating 22% of its electricity from renewable sources, primarily from wind farms.
In fact, most investment to date has been directed towards wind farms.
However, proposals for new wind farms are increasingly encountering challenges at planning permission stage, and solar photovoltaic (PV) is currently the only other proven renewable technology that can be rolled out in a timely manner so as to allow Ireland reach the 2020 targets.
Other forms of renewable technology include biomass and hydroelectric.
Ireland will be the last country in Europe to roll out utility-scale solar farms, with construction of the first of those farms unlikely to commence until 2018.
As a consequence, as many farmers will be aware of, landowners and farmers alike are being approached by developers looking to secure land for the development of a solar farm.
While there are many considerations and practicalities to take into account, payment and how much one is to get is naturally top of the list.
Payment for Solar Farms
The payment that is usually provided for in the option agreement is €1,000 per year.
The term of the option agreement usually is between two and five years.
The amount of land developers seek to take a lease of is a minimum of 25 acres.
In some cases, depending on where the land is located, developers are taking entire landholdings.
The lease rent will not normally be paid until electric current is flowing commercially from the solar farm, and will be paid three to six months in arrears.
Lease terms are usually for 25 to 30 years. In some cases, I have seen leases with terms of 35 years.
Rent varies from €800 to €1,500 per acre, depending on where the land is located.
Generally, the rent is agreed in advance, and landowners will have the option of either index-linked or turnover-based rental agreements.
With some solar leases, the rent payment is the larger figure of the two options.
In this scenario, the developer is required to provide the landowner with metre reading and independent turnover figures.
Many farmers are being offered or are negotiating lump sum payments to be paid when the grid connection has been successfully concluded.
As of May 2016, some developers are currently offering sums of in the region of €30,000 to €70,000.
In some cases, there may be scope to obtain a share of the revenues from the electricity generated on the site.
It is important that the revenue figures are based on the gross turnover, and are independently certified by an auditor.
In other cases, there may be an option to negotiate a supply of electricity to a landowner’s property at a reduced rate, or free, as part of the rental agreement.
It would be prudent to only deal directly with a strong and reputable company with a good track record in the business.
The largest offer might not be the best one in the long-term.
There is no guarantee that the energy company will be successful in developing a solar project.
Time may see less experienced companies leaving the marketplace.
Essentially, one is entering a commercial contract with a developer.
So it is very important to research the basic terms, which will provide a valuable starting point when one commences negotiations.
Obviously, the degree of saturation of the grid near your area and the location of your land are key factors affecting your ability to negotiate more favourable terms.
Make hay when the sun shines, but to avoid getting sunburnt, ensure you seek advice from professionals who are experienced in this niche area.
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