Solar Power and Feed-In Tariffs
Making Money From Land and Rooftops
On 1 April 2010 the Government introduced financial incentives for the generation of renewable electricity on a small scale. These financial incentives are called Feed-In Tariffs (FIT’s).
The FIT’s Scheme obliges all electricity suppliers in Britain with at least 50,000 domestic customers to offer FIT’s to all accredited small scale generators of electricity using a low-carbon energy source permitted under the scheme.
The FIT’s Scheme applies to installations with a generating capacity of 5 megawatts or less. Consequently it is anticipated that sites will be considered by solar developers with a view to achieving the maximum 5 megawatt output. (This is approximately sufficient to power up to 1500 average homes). The scheme provides a fixed payment for electricity generated for the use of the site (the Generating Tariff) and for unused electricity exported to the national grid (the Export Tariff).
FIT’s are available to all landowners whether individuals or businesses, public or private sector. The “solar developers” are looking for blocks of flats and open, south facing land.
The feed-in tariff rate of 29.3p per KWh is expected to drop after 31 March 2012, so there is an impetus on the part of developers to get sites up and running before then.
However, the opportunities for solar generation are optimised in the South West which, regionally, has the highest solar generation potential.
For those who own land in the right location, solar projects can offer an income stream for up to 25 years.
To negotiate from a position of strength, landowners should first assess the true electricity generation potential of their land. Some factors to consider here are:
Is it realistic to obtain planning permission for this use (where required)
Is the location likely to be adequate?
Will the solar panels prevent further development of the land in the vicinity?
The option agreements and leases may prohibit any further development that might interfere with solar photovoltaic rays.
Are any neighbouring land owners planning to develop in a way that will hinder solar photovoltaic rays?
Is it realistic to continue farming around the solar panels? Birds leaving droppings on the panels will interfere with performance.
Who will fund the cost of removal of the solar panels after the lease has ended?
Before planning consent is obtained, landowners need to be aware that developers may only be prepared to purchase an option over the site. An option would leave the developer free to walk away whether or not planning consent is obtained.
Landowners may wish to consider trying to negotiate a binding agreement to purchase albeit conditional upon planning consent being obtained. If negotiating an option landowners should be wary of developers offering a low option fee.
If the sale proceeds then this is likely to be on the basis of a 25-50 year lease or even an outright sale. In the context of leases, landowners may wish to hold out for a rent that is based on the level of electricity generated (on top of a basic rent) and to negotiate a free of charge energy supply to their own property.
A developer’s intent and capability to deliver is of paramount importance. It is vital to check that the developer has a funding stream along with a track record or a realistic delivery plan. Indeed, it would be wise to check whether the intended funders have invested in any completed solar projects.
In terms of rooftop leases on blocks of flats, landowners should also consider:
The need to obtain the consent of mortgage lenders to the grant of the proposed lease.
Whether any of their lessees have rights/easements over the roof and/or whether the roof area already provides a vital plant storage area.
How to pacify lessees during the “construction process” (and thereafter) and to allay health and safety concerns.
The impact of the solar panels on the buildings insurance/public liability policy premiums and on the terms of the insurance policy.
Taking tax advice at an early stage is also critical, and not just in the context of the income generated from the FIT’s Scheme. Agricultural land owners should consider the potential loss of agricultural property relief (from an Inheritance Tax planning angle) if farm land is switched to non-agricultural use.
The Planning considerations for micro-generation schemes can be quite complicated and early advice should be sought. In the context of solar PV panels on commercial buildings, planning consent will almost certainly be required. There have been consultations on extending the permitted development rights for micro generation in residential property to commercial buildings, but so far no charges have been announced.
For residential buildings, the Town and Country Planning (General Permitted Development) (Amendment) (England) Order 2008 came into force on 6 April 2008. This applies only to England but there are similar provisions for Wales.
The Order grants automatic planning permission for the installation of specified types of micro generation equipment on (or within the curtilage) of dwelling houses or flats subject to certain criteria and conditions.
The criteria and conditions generally relate to the visibility of the equipment. The following installations are examples permitted:
Solar PV or solar thermal equipment that protrudes less than 200mm from the line of the roof/wall. There are conditions imposed so that the installation is sited so as to minimise its effect on the external appearance of the building and the amenity of the area and so that it will be removed when no longer needed.
Stand-alone solar that is no higher than 4 metres above the ground and where the solar panels do not exceed nine square metres. There are conditions imposed so that the installation is sited so as to minimise its effect on the amenity of the area and so that it will be removed when no longer needed.
Solar PV or solar thermal equipment or stand alone solar in a conservation area or world heritage site as long as it cannot be seen from a highway. There are conditions imposed so that the installation is sited so as to minimise its effect on the amenity of the area and so that it will be removed when no longer needed.
Local authorities have the power to carve out certain categories of development or areas of land so that the Order does not apply, and an application for planning consent must be made instead.
Domestic properties which are listed will also need consent under the listed building consent regimes.
The recent consultations in England and Wales also examined whether to extend the classes of permitted development, but so far no charges have been announced.
Please look out for our follow up article which will deal with points to consider when making a planning application for a solar farm and what will be required in order to make a planning application.
We would be delighted to provide legal advice and guidance to any landowners considering the advantages of the FIT’s Scheme, and to put clients in touch with surveyors and tax accountants with specialist knowledge in this area.
For further information, please contact:
James Menzies Exeter: 01392 666889
jamesmenzies@stones-solicitors.co.uk