Are Wind Farms Worth It? Costs and Benefits.
 Topic: are wind farms worth it |  Read Time: 8 mins |
 Landowner type:Independent landowners | Institutional landowners |  Energy: Onshore wind |
5th August 2024Are you a landowner? Have you been asking yourself “Are wind farms worth it?”. Let me guide you through everything you need to know about the costs and benefits of having wind turbines on your land!
If you’re a landowner in rural parts of the UK, you may have seen a few of your neighbours placing wind turbines on their land. But have you thought about whether it could work for you?
This guide covers the pros and cons of wind turbines, from potential rental income to their impact on your land. By the end, you’ll have the key facts to help you decide if wind turbines are right for you.
The Benefits of Wind Turbines
1. They provide a domestic source of energy that enables economic growth
Wind power is a clean, reliable source of domestic energy, reducing the UK’s reliance on external energy supplies.
While it’s not always cheaper than other sources (because electricity in the UK is typically fixed to the price of gas), it’s certainly cleaner.
Turbines work by using mechanical power from the wind to spin a generator, which produces renewable electricity without fossil fuels. In 2022, approximately 26.8 per cent of the UK’s electricity generation came from wind – a number set to rise as the government focuses on achieving net-zero targets.
For landowners, wind energy offers significant economic opportunities. In 2019, wind energy generated over £6 billion in revenue.
2. They allow landowners to lease their land and earn additional income (diversification)
If you’re asking yourself the question “Are wind farms worth it?” as a landowner, you’re probably thinking about income.
And that’s completely justified.
Luckily, one of the main advantages of harnessing wind energy on your land is the opportunity to sell the wind energy generated to the Grid.
Most landowners choose to rent their land to wind farm developers, who handle the costs and responsibilities of setting up and running the wind farm. So, unless you’re a landowner-developer, you won’t need to manage the construction or operation yourself.
Renting your land also generates income in the form of a pre-agreed payment arrangement.
There are several different types of payment arrangements available to landowners, and it’s important to consider them carefully before making a decision.
You could receive a percentage of the wind farm’s profits or a fixed sum, regardless of the site’s performance over its lifetime.
Leasing your land for a renewable energy project offers a straightforward way to diversify your income. In my view, it’s one of the smartest moves a landowner can make.
3. Once the initial investment is paid off, wind farms can generate significant profits
What does this mean for you as a landowner-developer?
Building your own wind farm is neither quick nor cheap.
As a landowner-developer, you will be expected to secure funding and build the project yourself.
The upfront investment can be substantial—a single 3.5 MW commercial turbine costs over £3.13 million to build. However, those turbines can generate between £2.79 million and £7.1 million per year in revenue.
You’ll need to consider how much it costs to run a wind farm (including maintenance costs) when calculating your potential returns.
If you’re willing and able to take on these challenges and secure the necessary financing, the profits can be significant.
For landowner-developers, the answer to “Are wind farms worth it?” is often a resounding YES – over time.
What if you’re a landowner who’s working with a site operator or developer?
If you prefer to work with a developer, they will handle the funding, construction and management of the wind farm. You’ll earn regular rental income without having to finance the project yourself.
To maximize your returns, it’s worth negotiating a mid-lease review clause in your agreement. This allows you to adjust the rent closer to market rates partway through the lease.
Once the developer has recouped their investment, they may be open to offering higher rent to keep using your land.
While this isn’t guaranteed, developers often prefer to maintain a successful site rather than relocate after the lease ends (typically around 25 years). This could mean increased rental income for you as the project continues to generate reliable revenue.
4. Most of the liability for a wind farm lies with a developer for site-developer projects
To hammer home the point I just made, landowners working with site developers have virtually no liability for the success of a project on their land.
If they’re working with a developer and not going it alone, of course!
The onus for building, maintaining and eventually decommissioning a project typically falls entirely on the developer.
This arrangement takes a significant burden off your shoulders and minimises your financial risk.
While no venture is completely risk-free, hosting a wind farm is about as close as it gets for landowners.
For example, The Guardian reports that landowners can earn substantial income ‘risk-free’ for each turbine placed on their land.
High-profile examples include the Earl of Moray, who earns £2 million per year from a 49-turbine farm in Perthshire, and the Earl of Seafield, who makes £120,000 a year from his Banffshire estate.
Of course, these are large-scale operations, but even a fraction of that income can make a wind farm lease a highly attractive opportunity. With many agreements including inflation-linked income increases, leasing your land to a developer becomes an easy and rewarding decision.
The Disadvantages of Wind Turbines
1. They won’t be the right fit for every site
Not all plots of land are suitable for a wind farm, and this is a crucial factor to consider when asking, “Are wind farms worth it?”. Some locations simply don’t have the conditions needed to make such a project viable.
For example, Scotland’s higher altitudes make it a naturally excellent spot for wind farms due to higher wind speeds. Similarly, sites in the rural landscapes of northern England are well-suited for wind farms.
This isn’t to say that southern sites are out of the question, but you’re less likely to have a suitable land mass for your wind farm! This is largely because huge buildings and denser populations create buffers for wind, reducing the potential for harnessing wind energy.
If your land is in an Area of Outstanding Natural Beauty, obtaining planning permission can also be extremely difficult.
2. They can be viewed by some as a relative eyesore
This isn’t necessarily a disadvantage you’ll be bothered by as it won’t affect your income, but some people find wind farms to be an eyesore.
Some even say that wind turbines decrease property values (though I’ve proven this to be untrue).
It’s worth noting that three-quarters of Britons support the construction of more onshore wind farms!
However, if you’re worried about upsetting your neighbours or don’t particularly like the look of turbines yourself, you’ll need to weigh up the pros of increased rental income with the sight of those turbines.
3. They can impact your percentage of arable land
While there are many advantages of wind power generation, another potential drawback for landowners is the loss of arable land.
And by that, I mean you might lose a percentage of viable farmland to your new wind turbines.
The average wind turbine requires about two to 40 acres per megawatt of capacity. So, if you’re working with several 3.5 MW commercial turbines a 20-acre wind farm will probably require about 240 acres of land (including safe distance measurements).
The good news is that, according to Renewables First, wind farms have a negligible impact on arable land.
This means you can still operate your day-to-day business without your turbines ruining soil or getting in the way, as long as you have the acreage to run both projects side by side.
What’s the Average ROI for a Wind Turbine?
Now that I’ve run through the main benefits and drawbacks of having turbines on your land, let’s discuss Return on Investment (ROI).
The ROI on a wind farm isn’t an exact science as it depends on the initial investment and number of turbines you have.
But according to Octopus Energy, the ROI can be around 7.5 to 8 per cent at the ready-to-build stage.
Once the turbines are fully operational and the investment is paid back from the initial cost, this can increase.
Turbine income is usually linked to inflation (if this clause is safely in your contract). This means that your fixed rent and ROI will increase with the CPI and give you a more reliable revenue stream over time.
For example, if you export 100 per cent of the electricity from your site to the Grid, the ROI can be around 37 per cent. That’s for wind speeds of around 5.00 m/s (? 11.18 mph).
If the site uses 100 per cent of the energy produced, this rises to 64 per cent (though this tends to be a less common situation).
For landowner-developed projects, the most important thing to remember is that projects will take time to produce a decent ROI. It’s not an instant thing!
But as the average wind farm has a life of 25 years (or more if you repower and extend), the potential ROI is excellent.
Is wind energy getting too cheap for me to benefit from?
This sounds like a strange problem to have, but there are some fears that the cost of wind energy is getting too low.
For example, Siemens expressed worries in 2023 that the cost of wind energy was sinking below what would be profitable.
But because the UK currently operates its energy market according to the price of gas, landowners and developers are reaping the rewards.
So, although wind energy is cheaper to produce than alternative methods, we pay the same price for all forms.
That means wind farms will receive the net price of gas for their units of electricity instead of what their energy costs to produce.
This may change over time, but now is certainly a good time to be getting into the UK renewable energy market.
To Summarise: What Are the Advantages of Harnessing Wind Energy?
I’ve covered the costs and benefits of wind energy, but let’s wrap up with a quick summary of why it’s worth considering turbines on your land.
For landowners, the main advantage is the potential income – you’ll earn rental payments with minimal effort.
Aside from that, though, I always think that a major benefit is contributing significantly to the country’s renewable energy landscape.
With net-zero limits looming, leasing your land can benefit both your pocketbook and the planet.
And as the process carries very little risk for landowners, it’s worth fielding a developer’s calls and hearing them out.
After all, you’ve got almost nothing to lose.
So how can Lumify Energy help?
If you’re unsure about how you’ll receive your rental payments, it’s important to explore the different payment options available. Landowners can choose from fixed rent or hybrid arrangements, which include a share of the project’s overall income.
The option you select will depend on your risk tolerance, and we’re here to help guide you through the process if you need assistance in choosing the right one.
FAQs
How much electricity does a wind turbine produce?
The average 2 to 3 MW turbine can produce around 6 million kilowatt hours (kWh) of electricity each year.
That’s enough to fully power around 1,500 households annually!
How efficient is wind energy?
Wind energy is incredibly efficient as it’s abundant, can’t be exhausted, and releases no pollutants.
Overall, wind turbines are around 35 to 45 per cent efficient throughout the year and this rises to around 50 per cent during peak wind periods.
It’s worth noting that landfill gas and hydroelectric power are generally more reliable and efficient sources of energy, as wind can be intermittent.
But wind is still an excellent source of clean energy!
Do I need permission for a wind turbine in the UK?
Yes, the installation of any wind turbine requires planning permission. That’s why it’s essential to apply for permission as early as possible; approval can take considerable time.
While approval under previous planning regulations was far more complex, it’s hoped that Labour’s July 2024 announcement will significantly speed up the process.
By removing the de-facto ban on wind that came into the picture under David Cameron in 2015, communities and local authorities will have less power to reject projects.
How long do wind turbines last?
The average wind turbine lasts around 20 to 25 years. It may need to be fixed or parts replaced during this period.
There You Have It: The Ultimate Guide That Answers the Question, “Are Wind Farms Worth It?”
If you have any other questions about starting a wind farm, just reach out to our friendly team of expert onshore wind farm consultants. We’ll talk you through your options and start you off on the right foot.
