Preparing the ground for solar – early considerations for landowners

Head north out of King’s Cross and it seems that the countryside is being smothered with solar panels. The country’s ambitious net zero goals are driving the inexorable push for more green energy: the Climate Change Committee has reported that the UK will need at least 40GW of new solar capacity by 2030 if the government’s goal of net zero by 2050 is to be achieved. Given that there is currently only 14GW of installed solar capacity, the scale of the challenge is plain to see.

Combine environmental drivers with the potential for landowners to obtain long-term income streams and you can understand the appeal of solar development for rural estates. There are many factors landowners must consider, but here are some starters for ten.

Self-build or lease?

Many landowners will install and run their own small-scale developments, with solar panels on grain stores or small plots to satisfy the farm’s power demands and give the bonus of a little export to the grid. For larger sites, the initial development cost is huge and landowners typically grant an option to a developer who will take a lease of the site once they have obtained grid connection consent and planning permission. This strategy is much less risky for landowners as the cost (and risk) of getting planning is borne by the developer, who will have the expertise and ability to ensure the development is financed and constructed. Developers come in different shapes, sizes and characters and it is essential to understand their track record. Bear in mind also that they are most likely to assign any lease of the site as soon as they have built it (most are not operators).

Do you have a suitable site?

If you do, the chances are a developer is already sniffing about. Solar developments are predominantly on flatter southern ground where there is less visual impact and the sun tends to shine more brightly. Locations near large roads, rail or infrastructure can be attractive because the additional visual impact is less. Alternatively, fields away from the public gaze, which can perhaps be screened further by planting, can also appeal from a planning point of view.

Solar developers have a long list of technical requirements as to what makes a site viable – the size of the site, its proximity to the grid, grid capacity and the likelihood of grid connection consent are all essential factors. However, landowners (as with any development) need to be thinking about their own title to the land as early as possible. Are there any restrictive covenants or overage arrangements on the land? Third party mineral ownership (especially if there are rights of entry) can impede solar development. Can you provide an access route to the nearest suitable public highway? Or the route for the main cable to the site? Is the site crossed by a public footpath?

Tenancies

If the land is in hand, fine; but if it is tenanted, there is much to consider. First, the solar developer will need to carry out various surveys and tests. Do you have sufficient reservations in the tenancy agreement to permit the operator to do them or will you need the consent of the tenant, who may be resistant to the idea of part of the farm being given over to solar panels.

Secondly, if the development is to be built out, how quickly can you get the land back? Farm business tenancy tenants will usually need at least 12 months’ notice. Agricultural Holdings Act tenants may have short notice provisions in their tenancies (and Case B may theoretically apply) but we all know the difficulties involved if tenants are reluctant to give up possession. The reality is that many tenants in this situation will need to be bought out. Every situation will be different, but early attention to this issue is key. Most developers can be persuaded to pay the money required to secure vacant possession, but this requires careful negotiation and expectation management

The impact on your land

How will the development affect your retained land? A solar development will sit within a red line of a lease boundary, but remember the developers require a much wider 'cordon sanitaire' around the site in which development and planting are prohibited. The easement corridor for the main cable will be subject to similar restrictions. Landowners need to negotiate hard to limit these impacts on the surrounding estate. Solar farms may require modification of rights of way, screening, environmental offset or the location of a substation on your land – the extent to which you will have control over this (and be rewarded for this use of your land) is a very important negotiation point.

You must also think of the future. The economic life of a solar development will end one day. It is essential therefore that the lease contains restoration obligations and provision for a restoration bond or other security. This is fundamental to ensuring that a landowner is not left with the restoration (and potentially environmental) liability when the site stops operating. This is particularly important as it would be very unusual for the final operator of the development to be the same party who signed the option agreement. Good relationships at the outset will be irrelevant when you seek to enforce the restoration obligations against the party ultimately obliged to decommission the site 25 years later.

Get specialist advice

Solar farm leases are granted typically for 25-35 years and so for most landowners, these developments are a once in a generation undertaking, with huge potential impact on an estate. They are not to be undertaken lightly and require specialist advice to secure market rents and ensure the landowner’s interests are safeguarded.

We deal with a number of specialist renewables agents and we cannot emphasise enough the importance of quality advice - they will weed out the bad operators who might offer a larger financial incentive but do not have the capacity to progress the development. They will also ensure that robust heads of terms are agreed, which reflect the market trends and which will make negotiating the documents immeasurably easier. Solar developers should ultimately foot the bill for an estate’s professional costs, but they push hard for low costs contributions, and thus fetter the ability of landowners properly to protect their interests. With so much at stake for an estate you should insist they pay for the quality advice you need.

Read the Rural Estates Newsletter Spring 2022 in full here.

If you require further information about anything covered in this briefing, please contact Patrick Hammond or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2022