Why Re-powering a Wind Farm Could Be Crucial For Getting a Decent Return on Investment
|Topic: lease extension
|Read Time: 3 mins
|Landowner type: All
Onshore wind | Wind | wind farm
When an onshore wind farm is built in the UK, it typically receives planning permission which allows the wind turbines to remain in operation for 20 or 25 years. After this time, the turbines must be decommissioned and the land restored to its original condition. This is usually acceptable to the wind farm developer and town planning officers, as onshore wind turbines have traditionally been regarded as having a useful economic life of 20-25 years. Therefore, the length of planning permission mirrored the expected operational life of the wind farm.
So, what’s changed?
Over time the quality of wind turbines has improved due to significant advances in technology. As a result, it isn’t uncommon for today’s turbines to remain operational for up to 35 years subject to adequate maintenance. This has created the situation whereby many wind farms reach the end of their planning permission lifecycle with the wind farm’s developer wishing to extend the wind farm’s life instead of having to decommission the turbines in accordance with the conditions of its planning permission.
Alternatively, a wind farm may have performed significantly worse than expected due to the premature failure of parts. This may have happened well before the expiry of the wind farm’s planning permission. Therefore, the developer may wish to replace the original wind turbines and continue operating the wind farm beyond the period of the original planning permission to ensure a satisfactory financial return on their investment.
What Does Repowering a Wind Farm Actually Mean?
In cases like these, the “repowering” of a wind farm encompasses extending the life of existing turbines or the replacement and/or repositioning of wind turbines. This was confirmed in a landmark case in 2019 involving Kirkby Moor Windfarm in the Lake District. The case stated that planning applications for the “repowering” of wind farms would be less strict than planning applications for new onshore wind farms.
Essentially, this case confirmed that existing wind farms seeking to extend the period of their existing planning permission (or to reposition and/or replace current turbines with larger wind turbines) would not be required to obtain the backing of their local community. Equally, existing wind farms wouldn’t require their local authority to formally recognise their site as being located in an area suitable for wind energy development.
These are the two major hurdles that have blocked the development of many new onshore wind farms since 2015. However, wind farm developers will still need to demonstrate that the net visual impact following repowering will be acceptable to the landscape.
What Might This Mean For Onshore Wind Farms?
We are likely to see a large number of onshore wind farms being repowered over the coming years. This is due to our increasing need for clean and sustainable energy and to fulfil the UK government’s commitment of achieving net zero by 2050. Furthermore, we have obtained data from the energy regulator, Ofgem, which shows the largest increase in onshore wind farms occurred between 2004 and 2005. This followed the introduction of the most generous government subsidies.
So, Should Planning Authorities Extend Planning Permission Beyond 25 Years?
To answer this question, we’ve reviewed the financial accounts of the onshore wind farms that were commissioned in 2004/5. From this information, we noted it took developers an average time of 2 years and 6 months from the receipt of planning permission until the wind farm in question became fully operational. To further support this, we found that it took most developers an additional15 years to fully recover their initial investment after their wind farm became operational. Therefore, it took the developers of these onshore wind farms a total of 17.5 years from the date of receiving planning permission to start making a profit from the sale of electricity. As a result, most of these wind farms are now approaching the end of their original planning permissions and will have only been profitable for 2.5 – 7.5 years (i.e. between 12.5% to 30%) of their 20-25 year life span.
Unsurprisingly, most developers will be desperate to extend the planning permission and repower their wind farms with this data in hand. These extensions enable them to achieve a satisfactory return on their original investment by operating beyond the few years of profitability available under the limited planning permission period. Despite the falling cost of wind turbines, we believe that developers will continue to have a narrow window of opportunity available to realise a satisfactory return on their investment following the removal of government subsidies. This could all change if the guaranteed period of planning permission is extended beyond 25 years. Therefore, landowners who have made their land available for the construction of wind farms should actively support extending the life of existing wind turbines. Alternatively, they should encourage their developer to replace unreliable wind turbines with more durable models as early as possible. If these steps are authorised, wind turbines will provide landowners with a stable and diversified source of income, which is especially needed in these challenging economic times.