Current Trends in Wind Farm Extensions You Need to Know
|Topic: wind farm extension
|Read Time: 7 mins
| Landowner type:
Independent landowners | Institutional landowners
|Energy: Onshore wind
Are you an independent or corporate landowner, project developer, or landowner adviser? Well, you may be interested in the current trends in wind farm extensions! Read ahead for everything you need to know about wind energy trends in the UK and what you should consider before extending a project.
If your current lease is coming to an end, you may be wondering what the latest trends are in wind farm extensions. It doesn’t matter whether you’re curious about lease lengths, tax implications, option agreements, or the development of turbine technology. Being in the know is always a good plan.
In this deep dive into current trends, we’ll explore everything you need to know about before your current lease ends. This premium knowledge should put you in the driver’s seat during renegotiations. But it’ll also allow you to assess your site with confidence and understand how things may have changed over the years.
Now let’s get to it.
Current Trends in Wind Farm Extensions That All Landowners Should Know
Extended lease durations
In recent years, the most common trend we’ve seen has been the rise of extended lease durations. While 25-30-year leases were previously the norm, we’re now seeing 40 and sometimes 50-year leases being signed. This is largely because wind farm developers are trying to secure their long-term investments by increasing the term in which their contracts are in place.
Now, there are several positives to extended leases as it essentially secure income for a long period of time. This is even better when favourable payment arrangements have been negotiated. But with long leases come greater planning requirements for landowners and site operators.
If you’re wondering how extended lease durations can impact you, then just stick with us.
New leases may technically outlast landowners due to their length. And for this reason, landowners should consider any tax implications before signing.
Depending on your current income level, you may want to consider setting up a limited company to reduce your tax burden and improve your flexibility. Equally, you may need to think about inheritance planning that would involve putting the wind farm in the name of children or grandchildren. By doing this, you’ll be able to minimise Capital Gains Tax (CGT) by claiming holdover relief on the wind farm.
Plus, it’s always useful to claim Business Property Relief if you’re signing a long lease. And that’s because you can significantly reduce any inheritance tax burdens your family may face. The only thing to note is that this may require landowners to have a more active role in the project.
As wind farm taxes can be complicated, it’s always wise to keep yourself informed. So, we suggest learning all about the tax implications of wind farm extensions right here.
Any long lease will be subject to unanticipated changes over time, so landowners must work favourable terms into their agreements. Deciding which rent payment arrangement works best for your extension is one thing, but you should also ensure that you can bring the project in-house if you wish to. Although this usually occurs at the end of a lease, giving yourself the flexibility to benefit from any anticipated changes in the industry is never a bad move.
Landowners need to be savvy and have a lot of foresight.
In our books, thinking about a mid-lease option before signing a contract is an important consideration for landowners. By working a lease review into your contract from the get-go, you’ll be able to review current market rents and avoid losing valuable income. Furthermore, you can also give yourself options like the possibility of taking over the grid connection at a later date. The right terms will allow for the transfer of all agreements associated with the project.
P.S.: if you’re looking for a watertight lease with the best terms possible, our SiteScan(™) tool may help.
Funder step-in clauses
If you’re planning a wind farm extension, there’s every chance that the project may change hands during the lease duration. For example, your project developer may decide to sell the project in the timespan of the lease. this can transfer the rights to a thrid party that you don’t know. For this reason, contractual arrangements must be in place to prevent this from negatively impacting a landowner.
Step-ins essentially refer to a case when another party steps into the “rights and obligations of a contract.” This allows a project to continue with a party being replaced at some point. But the upside is that it should cause as little disruption to the wind farm as possible.
These clauses usually protect landowners if contractors become insolvent. However, they can also be useful if a landowner plans to remove themselves from the site or pass the responsibility to a family member. When solicitors, landowners, and developers draft these clauses well, the maintenance and ongoing operation of a wind farm can continue.
Now, we’ll say one thing for certain. If landowners plan ahead and leave sufficient time for negotiations, it shouldn’t matter who comes into the mix. These clauses will protect them! A prudent landowner would insert a clause that requires a new site operator to provide a guarantor. Not only will this give a landowner peace of mind, but someone else can then step in if developers don’t meet contractual obligations. This way, landowners and developers will always comply with the lease.
Understanding the current market
Are you planning to follow current trends in wind farm extensions by signing an extended lease? Well, it’s crucial to understand the market you’re working with.
If your lease is coming to an end, it may have been almost 30 years since you last needed to negotiate a new contract.
So, it’s highly likely that you’ll be on a significantly different playing field than you were previously. As well as consulting a team of experts that can talk you through your options in detail, you can take things one step further.
Our clients have had great success with the Lumify SiteScan™, which provides an unmatched overview of available market data. Not only will this help you benchmark your site’s value, but it’ll help you understand current market rents and give you all the tools you’ll need for negotiating a new lease.
Compare the rents at hundreds of wind farms across the UK.
Access the best contractual terms written by the UK’s top solicitors to attain your ideal lease
100% of the landowners that we work with increase their rent negotiation offers
By comparing your site to similar sites around the country, you can easily shape your contract negotiations. And set up the next 40 years with confidence.
The resurrection of option agreements
In anticipation of the relaxation of planning laws, we are seeing a lot of landowners signing option agreements. This means that developers can then go on to build a wind farm project if planning permission and government policies change down the line.
These agreements can remain in place for several years. So, landowners and developers will have the chance to build a wind farm project if planning permission policies eventually relax.
Planning permission for onshore wind farms has become increasingly difficult to attain. But it’s hoped that the relaxation of planning laws will lead to a significant increase in onshore projects. In time, this will directly aid the government’s net-zero limits.
Reducing the number of turbines in an area
Another trend that we’re seeing is the reduction of wind turbines per wind farm. This is because there have been massive improvements to wind turbine technology over the years. In turn, this makes it possible for a single turbine to generate more energy than two. On the whole, this makes it far more efficient to run a project. And that’s because a wind farm can generate the same (if not more!) energy than previously.
While early turbines were relatively simple structures with two or three blades and a rotor, modern turbines can generate electricity on a much larger scale.
It’s no secret that new turbines have lighter and longer blades with curved tips. As these can more effectively harness wind energy, it’s certainly wise to reduce the number of turbines on a single site.
What Are the Future Plans for Wind Farms In the UK?
As there are currently several restrictions on new wind farms in the UK, it’s uncertain what the future will hold. However, we can say that the government is looking to remove its de facto ban on new onshore wind projects. This was first hinted at by then-Chancellor Kwasi Kwarteng in late 2022. But it’s thought that government policies for new wind farms are set to change.
By making planning permission easier to get for new projects, the onshore wind landscape should change significantly. Only time will tell, of course. But there’s good reason to be hopeful if you’re looking to commission a project or rent your land to a developer.
Is the UK building more wind farms?
Around three-quarters of the UK are currently in support of more wind farms being built near them. But progress has significantly halted since 2015. This is entirely down to planning permission roadblocks that have prevented new wind farms from being built on UK land.
There are approximately 11,500 wind turbines currently on UK soil. But we need significantly more to reach net-zero limits and halt climate change. Plus, with energy prices continuing to rise around the country, more Britons are supporting onshore wind if it will lead to lower household energy prices. So, developers simply aren’t building many new wind farms at the moment as there are simply too many planning restrictions. But it’s hoped that there will be progress in time.
What are the upcoming UK wind farms?
The UK is currently commissioning three major offshore projects. These are the Hornsea Two, The Moray East, and the Triton Knoll. These projects should add approximately 3.2 GW of capacity, which is seriously impressive.
There you have it: The ultimate guide to current trends in wind farm extensions that you should be aware of!
If you have any further questions about your wind farm extension or want to find out more about the value of your site, simply get in touch with the team at Lumify.