Battery storage schemes: what landowners need to know
Across the UK, a new proposition is landing on the doorsteps of farmers and landowners. Energy developers, spurred by the nation's ambitious net-zero targets and the escalating drive towards renewable energy, are increasingly seeking land for battery storage facilities. Guiding landowners through this intricate terrain is Kieron Crowther, partner and specialist commercial property solicitor at Nelsons. Here he shares his insight into the nuances of battery storage agreements.
While the prospect of leveraging underutilized land for battery energy storage systems (BESS) can be enticing, the agreements involved are far from straightforward. Landowners are navigating a complex web of legal, commercial, and technical considerations that demand careful scrutiny. Reliable support is therefore essential to help navigate the complexities of these agreements, empowering landowners to make informed decisions that safeguard their interests and unlock the potential of their assets.
Battery storage benefits;
BESS are essentially land-mounted installations designed to capture and store electricity, predominantly generated from renewable sources like wind and solar farms. They can then release stored energy back to the grid when it's most needed. This capability was previously limited, making battery technology a crucial advancement in energy management. Landowners with surplus land, perhaps areas unsuitable for crops or livestock, are increasingly being approached by developers keen to utilize these sites.
For landowners, the commercial benefits of leasing out surplus land can include generating a steady income from areas that aren’t currently productive. These leases are typically long-term, ranging from 25 to 40 years, with income often based on a formula linked to the amount of megawattage the scheme exports to the grid over a specific period – a figure around £2,000 per megawatt is sometimes used as a benchmark. Commercial surveyors play a crucial role in advising on appropriate rental figures. Specialist solicitors, such as Nelsons, often collaborate with these surveyors to provide comprehensive advice.
Regulations and planning changes;
The Infrastructure Planning (Electricity Storage Facilities) Order 2020 is a significant piece of legislation that streamlined the planning process for larger battery storage projects in England and Wales, classifying them as Nationally Significant Infrastructure Projects (NSIPs). This aims to expedite approvals and facilitate the deployment of large-scale energy storage.
These changes have made land suitable for battery storage more attractive to developers, leading to increased approaches to landowners. While previous renewable energy projects like wind farms faced significant planning hurdles, the current landscape is more favorable for battery storage.
However, the grid connection infrastructure remains a significant challenge, with upgrades often lagging behind the pace of renewable energy development, leading to unpredictable connection windows. Despite these challenges, the fundamental shift towards renewable energy and the necessity of storage solutions mean that this sector is likely to continue its growth. From an environmental perspective, battery storage is a key component in creating a more secure and sustainable energy future.
Locked land;
It's crucial for landowners to approach these opportunities with careful consideration and seek expert legal advice. Using land for BESS involves developers securing the land through an option agreement, obtaining planning permission, and securing a grid connection – a process that can have a significant timeframe. Grid infrastructure in the UK can be a bottleneck, potentially causing delays.
An option agreement gives the developer the right to lease the land from the owner within a set timeframe called the Option Period. This period is now often longer because the developer needs time to get planning permission and an offer to connect the battery storage to the electricity grid. Grid connection requires consent and a timeframe for the connection, and delays in upgrading the UK's grid infrastructure are contributing to these longer Option Periods.
A key downside for landowners is the potential for developers to "lock up" their land for an extended period, limiting their ability to use it for other purposes in the future. The initial option period can be lengthy, ranging from five to potentially 10 years, during which the landowner is restricted from alternative development. Commercial agents and lawyers can help negotiate the terms of this option period. Furthermore, these agreements can impose wider restrictions on the farm, such as preventing competing schemes or residential development on adjacent land. Understanding the full scope of these restrictions is paramount.
Addressing access;
When negotiating the option site, it's important to try and reduce the "red line" boundary – which shows the development area – as well as understand the implications of any wider "blue line" areas - these may impose heavier restrictions. Landowners should consider the agreement as potentially "sterilizing" a portion of their land.
Access and services to the battery storage scheme, including cable routes potentially crossing adjacent land, need careful consideration to minimize disruption to farming activities. Lawyers play a vital role in finding a balance that works for both the developer and the landowner, including negotiating access tracks.
While developers often initiate contact, it's essential for landowners to seek independent specialist advice from lawyers and surveyors to fully understand the commercial and legal implications, including the appropriate price for "locking up" the land during the option period. The significant cost of the battery storage equipment also necessitates robust clauses regarding its eventual removal and site restoration, often secured through insurance bonds.
Leasing land;
If the developer successfully obtains planning permission and a grid connection offer within the option period, they will typically exercise the option and enter into a long-term lease agreement for the land. Rent can be structured in various ways, including a fixed annual payment or a model linked to the amount of energy exported to the grid. Each model has its advantages and disadvantages depending on energy prices and the scheme's performance.
A land lease for development should be negotiated upfront and clearly define the reinstatement obligations, requiring the developer to return the land to its original state at the lease's end, which necessitates a detailed initial condition report. The lease should also consider termination clauses (break clauses) for potential early termination by either party under specific conditions. Finally, securing a viable grid connection is a critical prerequisite for the project's progression, as delays can significantly affect timelines and overall feasibility.
Final thoughts;
From negotiating option agreements and leases to ensuring compliance with planning and regulatory requirements, comprehensive legal support is imperative to help landowners achieve their renewable energy goals. Specialist firms will also have links to expert surveyors that can provide valuable input in relation to the commercial terms of a transaction. While BESS is a positive step into greener energy, it is a complex landscape that requires specialist insight to ensure agreements are robust and reliable, and will provide the necessary returns for farmers and landowners.
For more information regarding the laws around renewable energy projects,
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