Just keep spinning: can we increase the lifespan of renewable energy assets?

Over the last week or so, news headlines around the world have revolved around climate change and meeting net zero targets, as world leaders and delegates descended on Glasgow for COP26.  

The UK itself is made up of a diverse range of power sources with renewable technologies now accounting for over 40% of total electricity produced as of December 2020. With the increase in renewable sites coming online in 2021, this number will only rise as we look to do our part in tackling these issues.  

However, one of the potential limitations of renewable technologies as a reliable long term power source is that most installations are only temporary and operate for around 25 years so, eventually, they will need to be decommissioned and the site restored to its original state as per the planning permission. Therefore, while the 40% is added to at the top end, the numbers at the bottom end will need to be taken off. Given we are now getting to the point of year 25 with some of the first wave of installed renewable technologies we need to ensure that it isn’t just one step forward, one step back.  

Operators have known that this point would come, given that Planning Permission is only ever for a set period of time, and they have now started to look at ways in which they can maximise their output and squeeze as much energy out of a development as they can. 

For example, some of the older wind farm technology which came into operation in the mid-90s has now started to be decommissioned and taken down, with the operators of those sites looking to build on the relationships they have with the landowner to potentially build a new bigger wind farm in its place at the same location. This is known in the industry as “re-powering.” While this is a sensible thing to do, given the relationship with the landowner and the likelihood that the site is deemed suitable under planning policy given the original planning approval, it does come at a cost, as a new planning application will be required as well as the costs for the construction itself.  

So, is there a simpler solution? 

One of the benefits of renewable technologies is that parts can be maintained and now even swapped out for newer, more robust parts to keep them operating at their maximum efficiency for longer periods of time. We are seeing this with newer technology as requests for planning permission come with 40–45-year terms, or even, in some cases, in perpetuity. With older turbines, for example, it is possible to keep them going in a way you can an old car, and the better you look after it the longer it will run. This does however mean that something needs to be done about the duration of the planning permission and subsequently the duration of the lease with the landowner, as one usually reflects the other.  

We have started to see a number of wind and solar farm owners in the market approaching planners to look into extending the duration of their planning permission, but that can’t be done without the provisions in the lease with the landowner. If achieved, this is far easier and cheaper for the operator than decommissioning the existing scheme and putting up a new one. The majority of the old draft leases do not give the tenant the rights to extend in such a way, so it puts the landowner in strong position to be able to re-negotiate the terms of the lease.  

There are several benefits to this, including the ability to re-negotiate the rents which the landowner receives. At this point in the operation of the system, the operator will have paid off any of the funding secured to develop the scheme and, in theory, operating well into the black and there is no additional capital expenditure for operators when extending operational sites, so why shouldn’t the landowner receive more of a chunk of their profits? We have recently seen a number of sites where re-negotiating the base rents and revenues to today’s figures have far outstripped the index linked rates set when the lease was first signed – this could mean much higher rents paid to the landowner over the remaining years than by just accepting the original terms. Similarly, some developers are willing to pay large premiums to the landowner as part of this process and for extending the lease. 

If you have an existing operational turbine, wind farm or solar farm and have recently been approached by the operator looking to extend the life, then do not hesitate to get in touch to see what additional value you can receive. Similarly, if you have a development on your land but have not yet been approached but wish to know what your position would be if you are we are well placed to advise. Please contact Martin Williams, Associate in the Energy Team at Carter Jonas via martin.williams@carterjonas.co.uk. 

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