Wind Energy Developers: Choosing the Right One to Work With
|Topic: New wind farm projects||Read Time: 10 mins|
| Landowner type:
Independent landowners | Institutional landowners
|Energy: Onshore wind|
Have you been trying to figure out which prospective wind energy developers are worth working with and how to decide? Join us as we run through the things you need to think about before signing an option agreement with a wind farm developer.
If you’re interested in placing wind turbines on your land, then you might be on the lookout for wind energy developers. Unless you want to go it alone as a landowner-developer, of course. Whether you’ve already been approached or are scouting for viable options, we’ve got you covered.
In this detailed rundown of wind energy developers, we’ll cover everything you need to consider before jumping in. From understanding a developer’s role to things to look out for when you’re choosing one, this go-to guide has got you. Now, let’s uncover the ins and outs of wind energy developers.
Why Do I Need a Wind Energy Developer?
Okay, so you don’t strictly need to work with a wind energy developer. Some landowners choose to self-develop wind power projects using their own funds, external investment, or bank financing. This would include initial startup costs, maintenance, upkeep, and any losses that the project incurs in its early years. But if you don’t want to take on the risk that comes with financing the project yourself, a developer is your best option.
After all, many landowners simply want to earn an additional income from having turbines on their land. If you opt to work with a wind energy developer, you’ll receive a pre-agreed payment arrangement and be largely hands-off.
Not entirely sure what approach you’d like to take? Well, let us quickly compare the pros and cons of being a landowner-developers vs. using site developers.
All potential profit from the site is retained by the landowner-developer.
You have full control over decision-making and don’t need to maintain a relationship with a site developer.
The income that you can make from the site will supersede anything you could make from rental income working with a site developer.
You don’t need to shoulder any of the risks of a project, and most of the logistics of starting a wind farm will be solved for you.
As most site developers are very experienced, they will know how to approach the construction process for maximum efficiency.
You can usually sit back and carry on with your typical daily tasks without carefully monitoring the wind farm.
You will shoulder all costs for the project, including startup fees, maintenance, upkeep, Grid connection, and eventual decommissioning. This can very quickly add up to millions of pounds.
You won’t be able to bounce ideas off a more experienced developer. You will be relying on land agents, solicitors, and other experts for decision-making.
You’ll need to keep a close eye on equipment to ensure that it’s in good working order (and repair it when necessary).
You won’t have as much control over your site and will be relying on accurate records from your developer.
Some developers can be somewhat secretive over the financial side of the project. This won’t apply to all developers, but choosing the wrong one can have long-term consequences.
Not all developers (especially large ones) will be trying to get the best financial deal possible for selling the site’s energy. They may value stability more than maximising the income from the project.
What Does a Wind Farm Developer Do?
A wind farm developer is someone responsible for building and sometimes running a wind energy project. They are also in charge of designing the project, seeking planning permission, construction, and any appropriate marketing.
And in addition to those basics, they’ll:
- Carry out feasibility studies
- Deal with option agreements
- Secure transmission to the Grid
- Purchase or lease land
- Install all wind turbines and monitoring equipment
- Secure financing
- Consider the transmission infrastructure carefully to keep the project running smoothly
In some cases, they will hand over the actual running of the project to a site operator, who will be responsible for maintaining the site and keeping it functional.
What Should Landowners Look for in a Wind Farm Developer?
We always recommend that landowners very carefully investigate wind farm developers before diving into an option or lease agreement. So, let’s run through a few crucial points you should weigh up before signing option agreements and leasing your land.
Who you’re dealing with
The first thing you’ll want to be thinking about is WHO you’re dealing with. In our experience, we’ve found that avoiding ‘middlemen’ is one of the most important decisions you can make. There’s not necessarily anything wrong with them, per se. But middlemen tend to secure the land before selling it on to an unknown developer. We’ve seen this time and again; a local-sounding company is set up, talks a good game, and then sells off the contract. As a result, landowners are left dealing with a developer that they’ve never met. It’s also worth mentioning that middlemen will always take their cut, leaving you with less potential income on the table.
If you’re approached by the developer themselves, you’ll want to make sure that they have a proven track record. We’ll get to this in more detail later, but it’s all about researching the developer’s ability to finance and run the project. Everyone needs to start somewhere, but there’s far less risk in dealing with established developers than first-timers. It’s also important to check how much their sites typically earn and see if there are any past disputes on their record. This should help to fill you in on whether you’ll be in for a bumpy ride or relatively smooth sailing.
What about larger developers?
We find that larger corporations are sometimes trickier to contact than slightly smaller developers. There are major pros that come with larger names, as they have impressive funding and are unlikely to go bankrupt. For a landowner, this can provide security from the get-go.
The only major downside is that larger developers won’t need to ‘impress’ landowners unless it’s a flagship project. For this reason, they’re likely to accept poorer energy deals than smaller developers (to quickly pay back investors).
This isn’t to say that a large developer is a bad choice. But being so far removed from your developer can make for quite an impersonal experience.
How well they’ll operate the site
Now, you won’t be overly involved in the day-to-day operation of a wind power project unless you’re self-developing the site. But it’s important to research whether your developer is willing to invest in new turbines and maintenance over the project’s lifetime. As a landowner, you’ll have the long-term interest and health of the land as a central concern.
So, a developer wanting to maximise income and perform minimal maintenance may not be a good option. However, that doesn’t mean that you don’t want to increase your returns over the project’s life cycle. The key is finding wind energy developers willing to maximise performance and income – not prioritising one over the other.
How much they pay
Money makes the world go around. And how much you receive as a landowner should certainly come into the decision-making process. Many developers offer a generous upfront payment to secure your site (this is also known as an option agreement). These can range from a few thousand to £50,000 and up.
We’ll say that the generosity of this upfront payment to the landowner depends on how much capital the developer can spare. To secure that cash and create a viable option agreement, you’ll also need to invest in solicitors, land agents, and finance experts.
After all, you don’t want to sign over your land without understanding the full picture. But we will mention that these costs shouldn’t come out of your own pocket if at all possible. So, a developer willing to front these expenses is usually a positive sign.
Although ‘big names’ in the wind energy development world will come with some security, they can pay under the market rate for purchasing land. And between you and us, you’ll want to be wary of operators coming to the table with standard terms that can’t be negotiated. Inflexibility can often be a sign of things to come, and being in a position of weakness from the outset of your lease won’t bode well. Overall, if your developer is willing to pay fair market rates (always do your research) and is open to compromise – you’re on to a winner.
Their mindset and power dynamic
If you’re not on a profit-focused payment arrangement, you’ll want to ask yourself the following questions before working with a developer.
- Is your developer aggressive or are they willing to be flexible?
- Are they open and transparent? Are they willing to share running costs with you or are things strictly confidential?
- Are they willing to share the success of the project with you or are they cagey about the profits?
This list isn’t exhaustive, but it’s a good starting point to weed out developers who may not be as open to a full partnership.
Things to Look Out for Before Settling on Which Wind Energy Developers to Shortlist
Readily available information and references
We’ll be the first to say that an open developer with readily available financial information and secure references is invaluable. Wind farm developers can occasionally keep their cards close to their chest, and they may be unwilling to share financial details. So, if they’re willing to provide references and plans for the site – that’s a great sign.
Proof of ability to finance a project
Financing wind power projects can be extremely expensive and may be delayed multiple times before finally moving ahead. And for that reason, developers are rarely able to fully self-finance a wind farm. With this knowledge in hand, it’s important to check for a developer’s proof of ability to finance a project.
Many developers will have an established credit history that you can reference. If you want even more information, ask the developer for proof of previously successful projects and how they were financed. If a developer comes back with a solid breakdown of their finances (and is open to sharing this), you’re probably in safe hands.
Grid connection agreements
As connecting to the Grid can be a long, arduous, and expensive process, a developer who already has a head-start on the process can be appealing. Under Britain’s new two-step application process, developers can kick-start the Grid application process after a landowner has agreed to work with them. So, selecting a developer with prior experience running a wind farm (especially recently) can be beneficial. This will often shorten the time between the turbines getting up and running and the time required to make money from the site.
Whether they have a Power Purchase Agreement in place
If your developer is planning to sell energy to the Grid (which is extremely likely), they’ll want to get a Power Purchase Agreement (PPA) in place. Should they already have one in place to sell the energy, this can be hugely positive for landowners. It can be difficult to get a PPA in place before land is secured, so it’s relatively unusual. But it can only be positive for a landowner, as it shows a strong commitment from the developer to fully develop the site.
If they already have a PPA, the developer has all of its ducks in a row to hit the ground running. As a landowner, you’ll also be more accurately able to forecast your income over time. And that’s because a PPA will outline how much a developer will receive for the energy sold. So, you’ll be able to simply apply your percentage of rental income to figure out your accurate share of that.
You’ll need to estimate the amount of energy produced, but the estimate you reach will be relatively accurate.
Steps to Take Before Choosing a Wind Farm Developer
Before we leave you, we thought we’d run through the steps to take before choosing a developer. Now, we’ve already run through warning signs and experiences that you should look out for. But in terms of what to do on your end as a landowner, these are the 6 steps you’ll want to think about taking:
- Negotiate any rental payments, reimbursements for land, and how you’ll be impacted.
- Discuss any plans for the land. This should include whether your developer has plans to extend past the 25-year average lifespan of a wind farm.
- Check your developer’s credentials and whether any planning for new dwellings or sheds you may build could impact your lease agreement with the developer.
- Choose your developer based on their approachability, credentials, and financial viability.
- Seek legal advice to make sure both your option agreement and final wind farm lease are legally sound.
- Go ahead with the project and sign a 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
How to Maintain a Successful Relationship with Your Developer
Maintaining a successful relationship with your developer and site operator is key to keeping your project running smoothly. Every landowner-developer pairing will be different, but there are a few major factors to consider that apply to all relationships.
The first thing is that communication and regular feedback are crucial to keeping your relationship healthy. From reporting issues on the landowner side to informing of major industry changes on the developer side, communication is KEY. This regular feedback loop will make sure all parties are in the know, reducing the need for a dispute at any point.
Aside from communication, a strong and watertight lease that allows for discussion is invaluable. Dispute clauses can be an excellent way to quickly resolve issues, but we’ll also say that clear wording is incredibly important. The less room you leave for error in your wind farm lease agreement, the better.
And finally, it’s always important to address legitimate concerns early and without aggression from either side. If the project is encroaching on your land or maintenance checks are overwhelming, being calm and collected can go a long way. That goes for both parties. Letting conversations derail could permanently damage your relationship, so stick to the facts.
Sifting through wind energy developers is probably the most challenging part of starting a new wind farm. It can honestly feel like looking for something in the dark, as it’s likely the first time you’ll have faced this scenario. Not only will you be working with them for years to come, but a sour relationship can seriously impact your day-to-day experience.
By fully doing your research and coming to the table armed with fair rental rates, you’ll be setting yourself up for success. If you’re a landowner looking for personalised advice about choosing wind energy developers, just get in touch. The Lumify team is ready and waiting to help you maximise a new project’s potential.
Who is the largest wind farm developer in the UK?
The largest wind farm developer in the UK is SSE. But it’s worth mentioning that they’re more focused on offshore wind than onshore wind.
Is the owner and developer the same thing for a wind farm?
Not always. The owner of a wind farm project is often the developer who builds the site. But occasionally, ownership will be shared between developers, site operators, and investors.