Income from Renewables
- feasibility studies
- planning permission
- negotiation of option agreements & lease terms
- land sales for renewable energy installations
- negotiation of access agreements
- negotiation of compensation claims, wayleave agreements & easements for neighbouring land owners
- capitalisation of renewables income (FIT & rental)
There are three principle arrangements for benefiting financially from renewables: landowner owned, leasing to a developer or share capital combination.
Owning and running a renewables project yourself enables you to be the sole beneficiary from the FIT, which can be considerable. However, this option means that you have to finance the capital outlay for the project; this can be sizable depending upon the scale you choose.
leasing to a developer
Leasing your land to a developer solves the issue of funding, but inherently means that they benefit from the FIT and in return they pay you a proportionate rent for the land. Choosing the leasing option creates a number of ways in which the landowner can be remunerated, the most common being rent. All of these are negotiable and our involvement can ensure that you are getting a competitive payment.
share capital combination
Share capital combination involves an investment from both the landowner and the developer. We can advise on the negotiation of terms including the split of FIT between both parties, which will depend on the levels of capital invested by each.
Issues relating to maintenance, insurance, security and replacement equipment should also be carefully looked into before signing any agreements. We can also advise on sale and lease agreements both from a practical and legal point of view.
Some farmers and landowners are benefiting from the requirement for biomass feedstock for AD by agreeing long-term contracts for producing the crops required, usually maize. Due to the long-term requirement for a consistent feedstock, higher payments for the crop produced and higher rents to the landowner can make being located close to an AD plant a boon for contractors and landowners.
Feed in Tariff
The Feed In Tariff (FIT) is a government subsidy paid per unit of renewable electricity generated. It provides an index-linked return for between 20 and 25 years, although rates vary depending on the type of energy generator (e.g. wind turbines, anaerobic digester, solar PV).
FITs are constantly being reviewed by the government in response to the amount of electricity being generated by each technology; those considering investing in renewable generation should be sure to check the current rates and any imminent changes. The FIT rates are updated by OFGEM and are available here . It is no longer open for applications since 2019.
Power Purchase Agreements (PPAs)
Power purchase agreements (PPAs) are made between the owner(s) of technology used to generate electricity and the power company that buys the electricity for distribution through the national grid. It is only paid for the number of units actually exported into the grid (unlike the FiT, which is paid per unit of electricity generated, whether exported to the grid or whether used on-site), and is set for a much shorter period, typically less than 12 months. It is usually the case that while PPAs were once a “bonus” on top of the FiT payment for generating, it is now crucial to the feasibility of an electricity-generating project to have good PPAs, and can make the difference between making a return or not.
PPAs can usually be changed frequently, and management of a renewable project is likely to involve regularly checking competitive rates.
Renewable Heat Incentives (RHI)
The Renewable Heat Incentive (RHI) is a subsidy paid for domestic and non-domestic scale schemes that generate heat from non-fossil-fuel sources. This is typically generated by using solar energy or by burning sustainable biomass, but the full range of technologies includes:
• air & ground source heat pumps
• biomass boilers
• renewable combined heat & power
• solar thermal
• use of biogas & bio-liquids and the injection of bio-methane into the natural gas grid (anaerobic digesters).
To receive the RHI you will first need to apply for accreditation from OFGEM, and then complete a calculation based on the technology you are using and its size. This will indicate your “tariff level”, and then the payments will be based on the actual heat and/or gas output of your system. The rates for domestic RHI are available here , and the non-domestic RHI rates are available here.
tax planning for renewables
It is vital that you consider the wider tax implications prior to installing a renewable energy generator as, when the time comes, there may be implications for Inheritance or Capital Gains Tax. We can advise on such implications and provide independent advice specific to the size of your generator and tailored to your business and/or family structure.