To achieve its pledge of net-zero emissions by 2050, the UK will need to decarbonise its power system significantly. Research by the National Infrastructure Committee in June 2020 concluded that the UK must deploy between 86GW and 99GW of renewable generation by the end of 2030.
There will, therefore, be significant investment in renewable energy and energy storage solutions throughout this decade and beyond. This already brings excellent opportunities for rural landowners to secure long-term, reliable ground rent income – and for some to invest in what has become a relative safe-haven asset class.
For example, depending on the site, solar ground rents typically reach over £850 per acre for 30 to 50-year leases. A good 50MW solar site co-located with battery storage may attract £1,000 per acre for solar, as well as some £2,000 per megawatt of storage – over £250,000 annual rent, in aggregate.
Developers are currently targeting large-scale solar sites of 40-200 acres. In some areas, land acquisition activity is frenetic. However, landowners must avoid being dazzled by potentially lucrative returns and signing away their potential opportunity as soon as a developer knocks at their door.
Allowing a developer to apply for a grid connection is the most common mistake landowners make, significantly reducing their chances of getting a scheme. The site will be tied to a developer and, for a raft of reasons, only a fraction of developers’ grid applications succeed. Other schemes never get off the ground because their purported developers choose to progress alternative local sites, their appetite wanes, or they go bust.
To be in the strongest position to have a genuine opportunity and then negotiate the best rents and terms, landowners must apply for and secure grid rights independently. They can then use the grid offer to attract competing bids from several of the best developers.
The best approach is to be proactive and have a low-cost, independent, and expert assessment of the site and its grid prospects. But landowners must also act fast to get ahead of their neighbours, as there’s limited capacity on the grid.
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