Plugging in to solar opportunities for your farm

Kris Johnson, renewable energy insurance expert at Lycetts, looks at the opportunities arising from energy sector diversification and outlines steps farmers can take to mitigate the risks.

Mounting pressure on UK agriculture – from subsidy withdrawals and tightening regulation to climate change impacts and volatile markets – has forced the hand of many farmers to widen their ambitions and tap into alternative revenue streams.

The need to take a more environmentally and sustainable approach to business is omnipresent, not least for farmers, and this commitment is undoubtedly influencing the diversification choices of the community.

Low-carbon initiatives are now front and centre of diversified activities, with renewable energy projects, including wind, solar, hydroelectric, battery storage, anaerobic digestion and biomass projects increasingly creating lucrative opportunities.

Solar energy has been a forerunner in terms of popularity, but the market suffered a blow when government subsidies for solar schemes were withdrawn.
With the cost of technologies falling, however, the business case has once again become a compelling one, offering new revenue streams as well as a route to reducing farm energy costs.

As green deadlines loom, the UK government is facing growing pressure to invest more energy into policy reforms to successfully meet its net zero objectives by its target deadline of 2050, which could further enhance solar opportunities for farmers.

According to a recently-published report from Solar Energy UK, a trade association working for and representing the nation’s solar and energy storage value chain, a higher level of policy ambition is needed from government to achieve the 40GW of solar deployment needed by 2030 to put UK on route for a net zero economy by 2050.
There has been enormous growth in solar energy deployment in the past year, with 663MW installed in the 12 months prior to March 2021 alone – more than double the deployment between April 2019 and March 2020.

But installed solar capacity must triple over the next decade, with an average annual installation rate of 2.6GW, to achieve the UK’s ambitious plans.
A bright future for farmers

According to the latest Farm Business Survey, 12,600 farms have diversified into solar energy, with the proportion of farms generating solar energy in 2019/20 standing at 22 per cent. The average income from these enterprises was £3,100 per farm per year.

Solar already makes up a significant percentage of the diversified space but if the government does increase support to entice further investment, more farmers will be keen to plug-in or expand.

Many large-scale projects are being developed and operated by renewable energy specialists, who will pay farmers rents of up to £1,000 per acre. Farmers, however, can also take on the responsibility and financial commitment for owning and operating schemes – but they should be wary of doing so without adequate planning, risk management and insurance protection.

Mind the gap

Before any business decision is made, farmers need to be fully armed and fully informed of the potential perks and pitfalls.
At the outset, the viability of any renewable venture should be carefully scrutinised, alongside the long-term objectives of the farm in question.
Entrepreneurial by nature, farmers may rely on their business acumen but would-be developers will inevitably experience gaps in knowledge.

Close communication with experts in the field, including insurers or brokers, prior and throughout any diversified development is imperative from an education perspective and to limit the exposure the farmers exposure to risks.

For example, insurers have recently increased security requirements at solar sites, such as CCTV and security fencing, which can impact on planning permissions and project costs.

Another particularly important time for prudent business advice on protection is during periods of project transition. Gaps in cover can inadvertently occur, for example, during the window between installation and the launch of operations.

The operational risks can then include everything from theft and damage caused by fire, hail or storms, to the repair or replacement of solar panels caused by electrical or mechanical breakdowns.

Forearmed is forewarned

Bolstering income to counter the ever-evolving and volatile environment is of paramount importance for farmers and the ability to flex and adapt to new markets should be commended.

However, farmers need to ensure they are protecting their investments in so far as is possible and a good starting point is to initiate a plan that involves meticulous industry research, robust risk management and comprehensive protection.

Taking such a diligent approach will not only help farmers survive but thrive in this new era of agriculture.

For more information, visit lycetts.co.uk.