Managing and Monitoring Wind Farms for a Smooth Project
|Topic: New wind farm projects||Read Time: 11 mins|
| Landowner type:
Independent landowners | Institutional landowners
|Energy: Onshore wind|
Are you looking for a detailed rundown on managing and monitoring wind farms? From contract considerations and payment arrangements to those physical checks, we’ll cover them all here.
Now that you’ve decided to host a wind project on your land, you may be wondering what your site operator is responsible for. Or perhaps you’re not sure what you can do as a landowner to monitor the project from your end? Maybe you’re not sure of your responsibilities and want to get ahead of the game. Or it could be that you want to know whether wind farm maintenance will impact your daily activities.
Whatever questions you have, we’re here to set the record straight.
To start with, we’ll cover what you should think about before getting turbines on your land. Then, we’ll run through how wind farms are monitored and managed (and what this means for landowners). To finish, we’ll round up a few top tips for landowners who want to take more of an active role in monitoring their project. After all, preparing yourself for what’s to come is always a wise idea.
Things to Think About Before You Manage and Monitor a Wind Farm
1: Everything starts with a good contract
We’re always the first to say that every successful project starts with a good contract. Even small differences in legal phrasing can make a world of difference in what you’ll receive. Plus, it’s wise to have responsibilities outlined in writing before a project gets off the ground. From monitoring responsibilities to decommissioning steps, having a plan of action will keep both you and your site operator satisfied.
To let you know what to look for before signing a wind farm lease agreement, we’ll run through 3 of our top considerations. Realistically, managing and monitoring a wind farm becomes far easier when you’re working from a solid lease.
Payment arrangements and royalties
Before you sign any contract, you’ll need to consider which payment arrangement you’re being offered. Some payment arrangements are naturally more volatile than others as they go up and down with energy prices. For example, fixed payment arrangements require very little management from the landowner’s side. You’ll simply receive a pre-agreed fixed fee that allows a site operator to run the project on your land. It tends to require minimal time, resources, or cost to check the accuracy of these payments (as they’re usually quite straightforward).
The main downside to the lack of management required is that you may not receive as much overall income. After all, less risk often means less reward.
If you opt for something like turnover rent, which involves you sharing in some of the project’s revenue? Well, you’ll need to track your payments far more carefully, as they’re dependent on a lot of different payment streams.
A note on dispute resolution
If you’re not being paid in line with your payment arrangement, you’ll be within your rights to question your site operator. But disputes can get extremely expensive, ranging from £1,500 on the low end to £300,000 on the high end. Now, that’s a lot of cash to splash on a disagreement. The determining factor of how much a dispute will cost depends on the type of dispute resolution clause you have within your lease agreement. After all, avoiding a dispute in the first place (or having the evidence to solve it) is the best way to go.
A quick case study from Travis:
I always advise landowners to be aware of their payments and all arising income streams. In fact, I once worked on a project that had been up and running for many years. And when a member of staff left the project, someone on the finance team noticed that something didn’t look quite right. I carefully looked at the site and noticed there was a 0.01% error in the stated royalty in the contract. It was minuscule but enough to make a marked difference to the landowner’s income.
As I’ve spent years assessing sites across the UK, I quite quickly recognised that this section of the contract wasn’t as we’d usually expect to see. By working closely with the site operator, I managed to secure a 7 year back-payment of income for the client.
When a project reaches the end of its usable life, it’s time to decommission it (or repower as part of a wind farm extension). As a project is technically on your land, the eventual decommissioning work may fall to you. Now, we wouldn’t say that’s overly typical or fair. But if your developer doesn’t step up or abandons the project at any point, the legal onus is on you to return the land to its previous state.
For that reason, we always recommend having clear and actionable wording in your lease that deals with decommissioning. Expert solicitors will be able to work this into your lease and take you through the process at the project’s end.
2: The Project Is Up and Running – What Happens Then?
Once your wind turbines are successfully up and running, you might be wondering how a project is maintained. The first thing that may happen here is that a project may change hands as the original developer may hand over the management of the project to another site operator. Throughout the lifetime of a project, it’s also quite common for them to be bought and sold to other site operators. After all, you can’t always expect a site operator to stick with a project for upwards of 20 years.
The site operator is generally responsible for:
- Keeping the site running and generating electricity
- Planning maintenance checks
- Keeping the turbines in good condition
These maintenance checks typically take place when the turbines harness less wind energy (like in the summertime). It’s also important to mention that the site operator will schedule shutdowns throughout the year for regular maintenance. These checks will be few and far between, so they shouldn’t be much of an imposition on any day-to-day work.
What about when the turbines start supplying energy to the Grid?
Once the energy goes to the Grid, the resulting energy can be supplied to homes and businesses. Just so you’re aware, this is the point where the project is ‘commissioned’ and eligible to receive income. This is also when Power Purchase Agreements (PPAs) come into play.
It’s worth mentioning that you won’t be involved with the terms or negotiation of these contracts as a landowner. However, the resulting PPAs can impact the income you receive. These agreements provide a “route to market” for the electricity that a wind power project generates. These long-term contracts allow suppliers to buy renewable energy at agreed volumes and prices to meet consumer needs. They provide both parties with security and often ensure that landowners receive payments regularly.
And this is largely because it gives them more certainty when planning their revenue models. For them and their shareholders, guaranteed income is better than a shaky one. We wouldn’t say that this is the best situation for landowners to find themselves in as it can limit the payouts developers are willing to offer. So, when you’re choosing wind energy developers to work with, smaller (but reasonably established) ones are often better options. This is certainly the case with regard to income received.
Smaller developers are more likely to negotiate for higher-valued PPAs, resulting in higher overall payments. After all, smaller projects often have fewer stakeholders to satisfy. For this reason, we always recommend that landowners do plenty of research into a developer before signing an option agreement.
3: How Will the Wind Farm Be Monitored?
Don’t worry. You won’t be responsible for actually monitoring the turbines – this will be down to your site operator. But in case you’re interested, there are a few different things that site operators typically use to monitor and manage a wind farm.
The accelerometers measure physical accelerations experienced by an object (in this case, the turbine blades).
Temperature sensors can monitor current-carrying components in the turbine (like the generator and gearbox). This ensures that nothing is overheating and everything is working within an acceptable temperature range.
Pressure sensors are important for managing the hydraulic system inside the turbine. These help to optimise power outputs at any wind speed, so they must work properly.
Rotational speed sensors
As you might expect, monitoring the rotational speed of a wind turbine can help site operators measure the performance of a site. They measure how the turbine shaft rotates and can detect whether the turbines are performing sub-optimally. These sensors aren’t anything landowners will need to worry about fixing or maintaining. But it can be good to know what’s being worked on at those regular maintenance checks.
4: The Importance of Relationships – Site Operators and Landowners
We won’t dwell on this too much, but part of managing a wind farm is keeping your relationships stable. A solid relationship between the site operator and the landowner can help disputes be resolved far more quickly. We’d also say that it encourages an open dialogue about the site that benefits both parties. At the end of the day, it’s in both of your best interests to maintain a friendly and close relationship.
5: What Can Landowners Do to Monitor the Projects on Their Land?
Review all payments and carry out regular audits
We have seen an underpayment problem when carrying out our SiteView360 reviews. We’ve found that around 75% of landowners discover calculation errors during the life of their projects. It’s not that your site operator is deliberately missing payments, but the payments involved are quite complex and involved several different income streams.
Plus, it’s worth mentioning that energy is linked to the price of gas in the UK energy markets. So, currently, landowners should continue to receive more as these rates continue to rise. Just for reference, if the most expensive commodity on the market rises in value (in this case, gas), then renewables will also increase in price. These price increases will likely taper down as the energy crisis resolves. But it’s always important to keep an eye on current market rates to make sure you’re getting your rightful share. And remember, depending on what payment arrangement you have, the payments you receive should be tracked with these increases and decreases.
How exactly can landowners check for payment discrepancies?
If you’re trying to figure out how to keep track of your payments, let us fill you in. We completely understand that once a project is up and running, it’s tempting to let the passive income roll in. However, you could be leaving significant income on the table.
If your project has been going for some time, you should consider carrying out a SiteView360 comprehensive review, where you’ll be able to easily catch any payment discrepancies. Or you could decide on having regular ongoing management of your project with our Lumify SiteAdvisor solution.
For one, having a dedicated specialist accountant on your side can be extremely helpful. Plus, keeping your income as reliable as possible throughout the life of the project will only benefit you.
Monitor wind farm ownership
It’s always a good idea to maintain a good relationship with your site operator, as it keeps the project running smoothly. But it’s not uncommon to see projects changing hands during the average life of a wind farm. After all, leases can be signed for upwards of 30 years in the current market.
To keep yourself abreast of any changes, make sure you have an open dialogue with your current operator. Equally, it’s a great idea to get detailed information (including accurate contact details) for any new operators. You’re well within your rights to ask them any relevant questions before a changeover happens, too. Overall, keeping an eye on who your site operator is and what their responsibilities are will significantly improve your overall experience.
If we’re honest, being able to reach out with problems, breakages, and repair processes will only benefit you. Now, let’s look at that last part in slightly more detail, shall we?
If the site isn’t working for any reason, being able to report this to your site operator can seriously speed up repair times. Now, it’s usually only landowner-developers who would be expected to monitor the technical side.
And by that, we mean:
- Checking accelerometers
- Making sure the turbines are adequately lubricated
- Hiring teams to perform maintenance checks
But if you notice anything wrong with the turbines as a landowner, it’s always worth raising this to your site operator. This way, fixes can come in as quickly as possible, restoring the project to its fully functional state. And when the project is fully functional, it can produce as much energy as possible – AKA: you’ll reap the rewards.
Watch out for key lease dates
When you’re nearing the end of your wind farm lease agreement, you’ll want to look at your contract carefully. If you’ve had a mid-lease option applied to your agreement, you may be able to reassess a payment arrangement during your lease. For obvious reasons, you’ll want to make sure that you have this key date clearly marked to give you time to prepare.
If you’re not sure what a mid-lease option allows you to do, let us quickly fill you in. As we mentioned before, volatile energy prices and inflation can significantly impact what you should be receiving for your land. This applies whether you’re on a fixed payment arrangement or something more complicated like a hybrid rental agreement.
Either way, assessing your payment arrangement and terms at a set point in your lease gives you more flexibility as a landowner. Instead of accepting the existing terms of your lease, the mid-lease option gives you some much-needed wiggle room. We highly recommend working with a team of experts to get the best deal possible. Solicitors are always a great help, but even land agents and accountants can help fill you in on current market rates.
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
If you want to come armed with the latest figures on similar sites around the country, you might want to get in touch with the team. Whatever experts you consult, they should give you cold, hard facts to present to your site operator on current market rates. And in our eyes, that information is priceless.
What about repowering?
As an aside, we thought it was worth mentioning that repowering a wind farm can be an excellent option at the end of a lease. Not only does this let you take advantage of new technology, but it saves your developer from applying for planning permission again. Letting a lease end without a formal contract in place can be extremely problematic. So, we also advise that you start the renegotiation process at least 3 years in advance if your site operator hasn’t approached you.
In short, keep a close eye on the end date of your lease and take action well in advance. As you may already know, getting planning permission for a new project is currently nigh-on impossible in England. So, it might be more viable to repower and take advantage of the approval you already have.
The managing and monitoring of a wind farm are largely out of a landowner’s hands. But it’s always worth being “in the know” about what’s going on with the project on your land. It doesn’t matter whether that’s by keeping up with your payments or understanding a maintenance schedule.
The more you know about the wind farm, the better placed you’ll be to get fairly compensated. And as we always say, knowledge is power. If you have any further questions about managing and monitoring a wind farm, feel free to get in touch. We’ll happily run you through a typical process and even help you check if any payments that might have been missed.
We often get asked about maintenance costs and the overall life cycle of a wind farm when speaking with new clients. To help demystify these topics, we’ve answered a few of our most frequently asked questions below.
How much does it cost to maintain a wind farm?
Much of the maintenance cost of your average wind farm comes from taking care of the turbines themselves. According to Wind Measurement International, maintaining modern turbines costs 1.5-2% of their original investment per year. So, the cost of monitoring and managing wind farms depends largely on how expensive the turbines are.
Who pays for UK wind farms?
Developers usually finance wind farms with a mixture of bank financing and individual investment (think High Net Worth individuals). But often, landowner-developers who want to take full control of a project self-fund a project. This is less common as it requires a significant capital injection at the start of the project. It’s not unheard of, though.
How many years does a wind farm last?
Wind turbines generally last between 20 and 25 years before developers need to repower or replace them.