9 Wind Turbine Lease Considerations for Landowners

Are you looking to host (or extend) a renewable energy project on your land? If so, there are several key wind turbine lease considerations for landowners that you should keep in mind. From payment terms to decommissioning and land impacts, it’s important to understand the details before signing on the dotted line.

Most wind farm leases run for up to 30 years before you renegotiate terms. So, starting off on the right foot is crucial.

To help you navigate the process, I’ve rounded up the most important wind turbine lease considerations for landowners. These will help you approach lease agreements with confidence.

Plus, I’ve included a few top tips for success to help you secure the best terms possible.

Now, let’s dive in.

The Top 9 Wind Turbine Lease Considerations For Landowners

1. Payment terms

The payment arrangements for wind farm leases can vary. Generally, you’ll work with a developer to decide on these during the negotiation of lease terms.

Some landowners will want the reliability of fixed-term rent that’s paid regardless of how well a project performs. This is usually paid annually and often increases with inflation to prevent the erosion of earnings.

While it provides stability, it may not offer the highest returns.

Alternatively, you might want to think about turnover rent, generation rent or hybrid rent to capitalise on successful projects.

Each of these options exposes the landowner to more volatility. But it typically guarantees a minimum rent payment, plus a bonus percentage based on the project’s performance.

Before signing anything, make sure your payment terms are clearly outlined. A simple change in wording could mean a difference of thousands of pounds. 

You’ll also want to make sure that your contract accounts for construction costs.

It’s also important to research average market rents before accepting any offer from a developer.

Developers won’t want to spend more for your land than they need to. So, they may try to offer you less than market value, assuming you’re unaware of current rates.

It’s important that you use market data to make an informed decision.

With this insight, you’ll walk out of the negotiating room confident that you’re receiving a fair and competitive rate.

2. Length of term

Another key wind turbine lease consideration for landowners is the length of the term.

As you might expect, there are a few things to think about before diving in.

Option agreements

Before signing a lease, landowners and developers may have signed option agreements to reserve the land in question.

This grants the developer exclusive permission to hold the land while they seek planning permission. The option period allows them to capture the wind resources until a certain date.

However, this doesn’t guarantee the wind farm will be built.

During this period, the developer will pay to reserve the land for a set period, often on a per-acre basis.

At this stage, it may feel like the land is simply on hold. 

You might be told not to worry about the terms, as they will be negotiated later. 

But what many landowners don’t realise is that the most important parts of the lease are included in the option agreement. This leaves little scope to change them later on.

Therefore, I always advise landowners to treat their option agreements as a final negotiation.

At this stage, it is also important to make sure that you’ve not tied up your land without a guarantee of income. You should expect to receive a share of the income generated by the wider development.

Getting an estimated forecast of how much the project could earn is also a good idea.

Setting clear expectations from the start will help avoid disputes down the line.

Option agreements usually last around five years. But they can be extended if planning permission isn’t granted in time.

Before agreeing to lease your land, remember that a portion of it will essentially be tied up for several years.

Duration of the contract

Planning permission for wind farm projects typically runs for 25 years. However, most turbines often have a usable life that exceeds this.

For this reason, most wind farm leases have historically run for 20 to 25 years. You can then have the option to renegotiate or repower down the line.

More recently, however, I have seen an increase in the lease terms offered by site developers.

This is done to secure the land for as long as possible and enable developers to recoup their initial investment.

While this is understandable, landowners must ensure they receive a fair price for their land.

Recovering the initial costs of building a wind farm can take anywhere from 10 to 15 years. So, developers may try to save costs in the initial stages. This makes it all the more important for landowners to carefully review the terms of their leases.

You should ensure that you’re happy with the payment arrangement outlined in the lease. But it’s also important that you’re compensated during the development phase, not just once the project is up and running.

Before signing, consider adding an option to review the contract payment terms at a certain point (a mid-lease option).

Don’t worry, I’ll explain this in more detail later.

To avoid having to automatically keep the existing tenant on your land, you should opt out of the Landlord and Tenant Act 1954.

This should be explicit in your lease as remaining silent automatically provides the business tenant with security of tenure.

Trust me, opting out will give you the greatest control over your land when the initial lease expires!

3. Dispute resolution clause

It goes without saying that disputes are best avoided. But if they arise, having an explicit dispute resolution clause is key.

Without one, you may be forced to go to court, which is undeniably expensive and drawn out (+ often unnecessary). A resolution clause can help preserve relationships between landowners and operators.

I suggest avoiding going through a court or arbitration process if you can avoid it.

An expert determination clause works well as it is more cost-effective than other alternatives. The resolution process is also simpler if something goes wrong.

And as they’re less formal, they’re much better for keeping tenant/landowner relationships solid.

4. Construction considerations

Access roads

Access roads are one of the main construction considerations for any wind project.

Developers typically handle this aspect of the construction process. Still, landowners should be aware that general maintenance and the construction of access roads can affect their day-to-day operations.

This impact could be considerable, depending on the construction period.

So, landowners should review the lease agreement to ensure the details are clear. It’s also wise to discuss access road requirements with developers to minimise disruption to your operations.

Many landowners receive additional payment for access roads, along with their minimum and generation rents.

In short, everybody wins!

5. Land Impact

On the whole, the impact of wind turbines on farmland is relatively minimal.

So, it’s not one of the wind turbine lease considerations for landowners that is a dealbreaker.

Although large, commercial turbines will rarely disrupt a landowner’s ability to continue their regular work.

The exact spacing you’ll need to consider depends on the size of the wind farm in question. But the rotor diameters of each turbine are usually around 300 feet. Your developer will need to place the turbines at a distance that’s at least 10 times the height of an obstacle (like buildings).

The general standard in the UK is to have turbines approximately five rotor diameters apart to prevent interference from turbulence.

It’s up to the individual landowner to decide whether a wind energy agreement will affect their crop and livestock production.

Farming will still be able to take place on the land between the turbines. However, the lease should address the potential for any damage/disruption to crops or livestock with reimbursement clauses.

If you’re even remotely concerned, it’s a great idea to consult a team of experts when drafting your lease.

This way, you can be sure that the proposed project or extension won’t impact your ability to use your land.

The aim is to create a mutually beneficial agreement where the wind farm generates income without interfering with your land’s usual productivity.

6. Mid-lease options

To protect your wind farm payments against market changes and inflation, it’s a good idea to think about a mid-lease option.

This is a clause that allows both tenant and landlord to renegotiate the rental terms for the land during the lease. This should help to align the lease with current market rates and reduce uncertainty.

Although it is called a mid-lease option, it doesn’t necessarily need to occur in the middle of a lease. It can take place at any agreed period throughout the lease’s duration.

To ensure you’re getting the best rates possible, use our Lumify SiteScan™. We’ll review how much a developer is paying for your land compared to similar sites in the country.

Compare your rent with hundreds of wind farms across the UK

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This will give you all the information you’ll need to conduct a thorough rent review.

Although you can negotiate inflationary considerations into your lease, a mid-lease option allows you to align rent more closely with market rates as they change over time.

So, it’s a surefire way to increase your wind farm payments without much additional effort.

Additionally, a mid-lease option is great for discussing a potential wind farm extension before the current lease lapses.

7. Tower removals and decommissioning

At some point, every wind farm will need to be decommissioned, either due to economic factors or obsolete turbines.

There’s also a chance that the turbine towers may no longer generate viable income for the landowner. The turbines could also interfere with their day-to-day operations. In such cases, it’s crucial that the lease clearly outlines the decommissioning process.

To make the process seamless, you should consider including the following in your lease:

• Who is responsible for removing tower structures (usually the developer)
• Who will pay the cost of decommissioning the site (usually the developer)
• How everything will be removed and returned to normal (developer)
• A promise to review the land and ensure that it’s restored correctly with no contamination
• A clause that insists that the developer put aside a decommissioning fund in case of insolvency

This is important because, legally, it is the landowner’s responsibility. 

Therefore, landowners must have a watertight contract to ensure developers take responsibility for certain aspects of decommissioning.

As removing turbines can be a drawn-out and expensive process, developers and landowners must be on the same page!

8. Putting contracts out to tender (for councils)

Tendering is one of the key wind farm lease considerations that you’ll want to think about. This is a formal process that allows businesses to bid for contracts from public or private sector organisations.

Councils will always try to optimise any contracts given out. In the UK, this often comes from onshore wind farms. Councils have excellent buying power that allows them to procure the best possible contracts.

Councils will usually prefer to put all projects out to tender as they want to seek the best value. After all, they are more likely to get a competitive deal if developers have to compete for bids.

But this is not legally required for smaller or existing projects where there won’t be a huge new footprint.

If a developer renews the project, the main goal is to keep it commercially viable and flexible enough to work for both parties.

IF contracts are put out to tender, councils should take the following steps:

1. Research the market to find developers who are already successfully developing similar projects. There should be a focus on size as developers will need to demonstrate that they can handle the scope of the project.
2. Shortlist and contact approximately three developers to see if they’re interested in partnering on the project.
3. Issue a formal tender notice. Note that most developers may not see the notice in time, leading to limited responses. For this reason, the project often goes to the developers who were initially contacted.
4. From the applications, the council should shortlist the responses. They should look for developers who can provide transparent financial forecasts (including profitability and income potential). They should also be able to provide a standardised income.
5. Councils should ask developers for quotes. While the cheapest developer might seem attractive, councils should prioritise developers who can run the project successfully.

Before settling on a developer, councils should think about:

• The price the developer will pay the council: The more income shared, the better!
• Who can construct the project quickly?
• When can a developer construct a project?
• How favourable the lease terms will be for the council – developers that are more willing to negotiate will be viewed well.
• Whether a developer has a good track record and has no disputes with other councils.

9. Grid connection takeover

If landowners eventually want to take over the grid connection of a project, it’s a great idea to include this option in the lease.

If a lease is worded well, the terms can allow for the transfer of all agreements associated with the project, making the process smoother and reducing future complications.

Tips For Negotiating the Best Contract Possible

Although I’ve created an in-depth list of power tools that you can use during the renegotiation process, first-timers may need a bit of extra help.

Here are a few tips that will help you negotiate the best contract possible.

Think about how you’ll handle issues that arise

A significant amount of negotiations stall because parties can’t decide how to resolve disputes.

By coming to the table with an action plan and a way to resolve any disputes that arise during the process, you’ll be in a good position to reach a favourable outcome – and quickly.

Use your knowledge of the current market

Most parties negotiating a contract will want to secure the best possible deal.

This doesn’t mean developers will attempt to short-change you, but walking into the negotiation process armed with information about current market rents will always be beneficial.

Before starting negotiations, research sites in the UK that use the same technology as your site will have.

This way, you can come to the table with solid, indisputable facts.

It’s also important that you try to work an inflationary factor into rental agreements, as this is bound to increase during the life of an average wind farm.

Come to the table with a plan

It’s important to have a step-by-step plan in place when it comes to negotiating any contract.

You can draw this up with a team of experts for peace of mind and make a note of factors that are important to you.

Whether this is turbine size, payment terms or the use of your land and the effect of access roads, keep this at the forefront of your mind.

FAQs

I’m often asked questions about how feasible setting up a wind farm would be. Here, I’ve covered a few of my most frequently asked questions that should help you consider how suitable your site is.

What are the main considerations for selecting a site for a wind farm?

The key things a piece of land needs are adequate wind speeds, suitable terrain and accessibility for construction.

Is my land suitable for a wind turbine?

The first thing you’d need to place a wind turbine on your land would be appropriate planning permission.

Past that point, you’d need to meet the set requirements for running a wind farm (as I’ve just noted above).

How much land do you need for a wind turbine in the UK?

The amount of land required for the average wind turbine is somewhere between 25 and 40 acres.

Can you hear a wind turbine one mile away?

Wind turbines generally operate while producing a sound that’s around 30 decibels. Even in quiet rural areas, this wouldn’t be heard a mile away!

A Final Word on Wind Turbine Lease Considerations for Landowners

Although signing a new wind farm lease can feel overwhelming, the most important things to consider are payment arrangements and the length of the term.

But you’ll also want to think carefully about the impact that a full-scale wind farm could have on your land.

Whether that’s impacting access, your ability to grow crops or farm livestock, the potential loss of income is worth weighing up with the benefits of wind turbines.

With a sprinkling of expert advice and accurate data about your site’s potential, you can approach contract negotiations without any worries.

If you need a hand getting an ideal outcome for your wind farm lease, just get in touch.

The Lumify Energy team will be more than happy to talk through your concerns and offer actionable steps for success.