Current Trends in Wind Farm Extensions
 Topic: landowners |  Read Time: 7 mins |
 Landowner type:Independent landowners | Institutional landowners | Professional advisers | Site Operator |  Energy: Onshore wind |
7th August 2023Are you an independent or corporate landowner, project developer or landowner adviser? If so, you may be interested in the latest trends in wind farm extensions and how things may have changed over the years.
If your lease is coming to an end, you’re likely wondering what’s changed – whether it’s 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, I’ll cover everything you need to know before your current lease ends.
Understanding these trends will put you in a stronger position during renegotiations and help you assess your site with confidence.
Let’s get started.
Current Trends in Wind Farm Extensions That All Landowners Should Know
Extended lease durations
One of the biggest trends in wind farm extensions in recent years has been the rise of extended lease durations.
While 25 to 30-year leases were previously the norm, I’m now seeing 40 or even 50-year leases being signed.
This shift is largely driven by wind farm developers looking to secure their long-term investments by increasing the term in which their contracts are in place.
Extended leases can be beneficial as they essentially secure income over an extended period – especially when favourable payment arrangements are in place.
However, long leases also come with greater planning requirements for landowners and site operators.
If you’re wondering how extended lease durations could impact you, keep reading.
Tax implications
With longer leases, new agreements may technically outlast the original landowner.
That’s why landowners should consider any tax implications before signing.
Depending on your current income level, setting up a limited company could help reduce your tax burden and provide greater financial flexibility.
Inheritance planning is another key factor. Transferring ownership to children or grandchildren could allow you to minimise Capital Gains Tax (CGT) by claiming holdover relief.
Similarly, claiming Business Property Relief on a long lease can significantly reduce any inheritance tax burdens your family may face . 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. Learn more about the tax implications of wind farm extensions right here!
Unanticipated changes
Any long lease will inevitably face changes over time, so landowners must work flexible terms into their agreements from the outset.
While deciding which rent payment arrangement works best for your extension is important, you should also consider future opportunities – such as bringing 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.
One key consideration is including a mid-lease review to review current market rents and avoid losing valuable income. By building this into your contract from the start, you ensure your lease remains competitive and aligned with industry shifts.
Furthermore, negotiating the option to take over the grid connection at a later stage can provide long-term benefits.
The right lease terms will allow for the smooth 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™ contract review service can help ensure that you secure the ideal lease when renegotiating your project terms. It could be your saving grace.
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 term.
For example, your project developer may decide to sell the project, transferring the rights to a third party you don’t know.
For this reason, contractual arrangements must be put in place to prevent this from having negative consequences.
Step-in clauses allow another party to assume the ‘rights and obligations of a contract’.
This allows the project to continue even if a key party is replaced. The aim is to minimise disruption to the wind farm’s operation.
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 carefully, the maintenance and ongoing operation of a wind farm can continue – regardless of ownership changes.
One thing is for certain: landowners who plan ahead and allow sufficient time for negotiations will be well protected.
A prudent landowner would also insert a clause that requires a new site operator to provide a guarantor. This ensures that if developers fail to meet their contractual obligations, someone else can step in—giving the landowner peace of mind and maintaining lease compliance.
Understanding the current market
Are you considering a lease extension in line with current wind farm trends? If so, it’s crucial to understand the market landscape.
If your lease is coming to an end, it may have been almost 30 years since you last negotiated a contract. The industry has changed significantly, and the terms you agreed to back then may not reflect today’s market.
As well as consulting a team of experts who can talk you through your options in detail, you can take things one step further.
Many of my clients have had great success with Lumify SiteScan™, which provides an unmatched overview of available market data.
Not only will this tool help you benchmark your site’s value, but it’ll also help you understand current market rents and gain the insights you’ll need to negotiate a new lease.
By comparing your site to similar sites across the country, you can confidently shape your contract negotiations.
And set up the next 40 years with certainty.
Compare your rent with hundreds of wind farms across the UK
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The resurrection of option agreements
Even before Labour relaxed wind planning laws in July 2024, I noticed a lot of landowners signing option agreements. These agreements allow developers to reserve land in anticipation of building future projects.
Initially, these agreements were a way to reserve land in the hope that planning rules would loosen over time. However, with Labour’s removal of the de facto ban on onshore wind, these option agreements are set to come in very useful in the near future. Talk about forward planning.
Reducing the number of turbines in an area
Another trend that I’m noticing is the reduction in the number of turbines per wind farm.
This is because there have been massive improvements to wind turbine efficiency over the years, allowing a single turbine to generate more energy than two.
As a result, wind farm projects have become far more efficient to run.
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, longer blades with curved tips, which can more effectively harness wind energy. Given this, it’s certainly a wise move to reduce the number of turbines on a single site.
What Are the Future Plans for Wind Farms In the UK?
Under the Conservative government, there were several restrictions placed on building new wind farms in the UK.
The government was slowly moving towards loosening planning regulations, which could be seen in the Levelling Up and Regeneration Act of 2023. However, progress towards removing bureaucracy was slow, and new wind farms simply weren’t being approved.
Luckily, July 8, 2024, marked a hugely positive step forward for onshore wind in the UK. Labour announced that decisions on large-scale wind would move back into national hands.
This means that Energy Secretary Ed Miliband would now have the final say on whether large wind farm proposals are approved. Just so you’re aware, this represents a huge step forward if you’re looking to commission a project or rent your land to a developer.
FAQs
Is the UK building more wind farms?
Around three-quarters of the UK is currently in support of more wind farms being built near them. However, progress significantly halted after 2015. This was entirely down to planning permission roadblocks that prevented new wind farms from being built on UK land.
However, with Labour’s new announcement removing the de facto ban on new wind farms in the UK, the future looks far brighter than expected.
Energy prices are continuing to rise around the country. So, more Britons are supporting onshore wind if it will lead to lower household energy prices.
So, with looser planning coming into play, it’s hoped that there will be significant progress in relatively little 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!
Do you have any further questions about your wind farm extension? Are you trying to figure out the true value of your site? Simply get in touch with the team at Lumify.
