As Land Agents involved in many farm businesses in the Gloucestershire and Worcestershire area, we are frequently asked about diversification and alternative income opportunities and also the opportunities for renewable technology on farm. The answer is that there are a number of changes afoot in the funding of the renewables industry and options going forward. Mike Cluley briefly looks at the current situation and what opportunities might be around the corner for landowners and farmers.
As you may be aware there has been a consultation on the future of the Feed in Tariffs (FiTs) and Renewables Obligation (RO) mechanisms for subsidising renewable energy installations. The consultation closed on the 23rd October and we now await the findings which are likely to be implemented at the first available opportunity in January 2016.
The general consensus is that the FiT for solar, wind and hydro installations will be reduced significantly and in some cases by up to 87%. For example, a typical barn solar PV installation of between 10 – 50kW which, if commissioned today, would receive 11.30p per kW generated would receive only 3.69p per kW in January.
Future “field scale” solar farms up to 5MW (25 – 30 acres) also face the prospect of uncertain funding following the FiT review and early closure of the Renewables Obligations. They will now have to “bid” under the “Contracts for Differences (CfD)” procedures for funding whereby the “winning” bids are those that bid the lowest for their subsidy contribution.
Clearly the effects of these scheme changes are likely to profound and the financial attractiveness and viability of schemes will need to be very closely looked at going forward to make sure that they stack up. Historically the FiTs scheme made a very attractive return on investment but this is unlikely to be the case as a result of the review. Those in the industry have quoted that the solar industry will be “pretty much dead” under the new changes and the growth in the industry we have seen in recent years will be severely limited.
Taking all this into account what other options are there out there for on-farm energy projects?
There may well still be an opportunity for a renewables project whether it be solar, wind or hydro but the figures will need to be carefully scrutinised. With wind and hydro especially you will need to ensure that the project is in the best location possible to maximise output. There may be an opportunity for a renewable heat project although there are rumours that the Renewable Heat Incentive (RHI) is likely to be heavily cut soon.
Another growing opportunity for renewables is the concept of Battery Storage Barns. A battery storage barn is effectively an agricultural building which houses rows of batteries allowing electricity to be stored. As battery technology gets cheaper and more efficient, it is envisaged that in 2 – 3 years time it will be commercially viable to install large batteries to back up the grid as old power plants are taken offline and as a result of wind and solar not necessarily producing electricity at the time it is needed. Battery storage barns work by charging batteries during the off peak low demand hours and release it back to the grid in high demand periods.
Suitable sites need to be near 33kV electricity lines with spare grid capacity and adjoining or within an existing farmyard for planning reasons. The typical offer is for the landowner and developer to enter into a 2 year option to allow for planning and grid applications to be completed followed by entering into a 25 year lease of the site should the option get exercised. Assuming the project goes ahead the developer will erect a new steel portal framed building and install the battery system. The land owner will also get paid an attractive annual inflation linked payment to rent the site based on the installation’s capacity. At the end of the 25 year lease the landowner becomes the owner of the building and all the batteries and equipment are removed by the tenant.
If you think that you have a site suitable for such an installation and would like to investigate the potential to secure annual rent and ultimately an additional building please contact us so that we can look into the feasibility of your site and to introduce you to trusted developers.