This article by Jeremy Moody first appeared in the CAAV e-Briefing of 19th November 2020.
Only 10 years ago renewable energy exploded on the market as something that could be done on farms and estates, going beyond a few wind turbines to the rapid expansion of solar and, to a less obvious extent, AD and hydro, as part of the farm business or, often larger schemes, leased out. As this activity spread swiftly from an initial focus in Cornwall, members applied the core skills of the profession to appraisal of the issues for clients, negotiating agreements and finding values and the CAAV provided briefing and support with publications and discussion. A similar, if less visible, process started a year later with renewable heat.
Triggered by Feed-in Tariffs (FiTs), that step-change was a classic example of how public funds can be used to pump prime change and stimulate technical development. Perhaps set at overgenerous levels and coinciding with a fall in solar panel prices as Chinese supply exceeded an eased international demand, FiTs showed clearly how such a substantial intervention can change behaviour, when a lesser one might fail.
This economic activity generated technological development, improved efficiency and lower costs to the point where FiTs could be withdrawn, passing the baton to the marketplace. While the market did then check, it has returned with a larger scale for solar farms. That sees a move to longer leases with escalating turnover rents but also, as time passes, closer consideration of liabilities on termination and an awareness of the other income that can be earned from a site.
We have seen growth not just with batteries or, more broadly, storage but really in ways to hold power when it is “overproduced” for use when it is needed, smoothing supply and prices. This has been done on a large scale since the 1980s by Snowdonia’s pumped water storage plant at Dinorwig, using cheap power to pump water uphill to be released swiftly to generate power when supply is tight. Improved battery technology has made time-shifting more feasible but the world is moving on to flywheels, hydrogen and other means while the interrelationship with power production (as on a solar farm) becomes more complex.
Seeing the need for reappraisal, the CAAV is looking at the challenges this evolution poses in negotiating such projects with analogies seen with conventional development agreements, whether over approaches to options and promotion, land pooling between owners, definition of uses, and how rent can reflect income generation.