Q&A: Are solar panels still a good option for farmers?

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The growing trend of leasing farmland to renewables companies for the installation of solar panels shows no signs of abating, despite the planned drop in subsidies from next year.

Julie Liddle, a director of Robson & Liddle Chartered Surveyors, looks at whether solar panels will continue to provide a good return for farmers once the new changes come in.

Why are solar panels proving to be such an attractive option for farm diversification, especially over other options such as wind and anaerobic digestion?

As we know technology improves over time (just look how our mobile phones have changed in just a few years) and with this improvement comes a better return. Solar is in vogue because the technology is now so efficient it works in more northerly climates. Another factor for its growing popularity over wind turbines is that solar is not so visibly intrusive and can be pretty well hidden from the view of most people if design is carefully considered. This means that it should be more acceptable to local planning authorities. Solar also has the jump on anaerobic digestion purely because of cost. AD plants can be expensive to install and take constant attention and management to produce energy.

Will measures announced in the recent summer budget to remove the Climate Change Levy exemption for renewables projects make solar panels less attractive?

We’re not seeing companies back off because of the changes announced by government. This is primarily because the technology creates a fairly good standalone return. So the loss of the subsidy is a blow, but not enough of a blow to prevent sites going ahead. We’re acting for a good number of farming clients with operators who have schemes in planning currently and expect to beat the March 2016 deadline, and others who won’t make the deadline but are proceeding anyway. In general it is the larger sites that will be favoured by developers.

What kind of rental can farmers and landowners command for land suitable for solar panels?

When solar was first being mooted the rent per acre was wide ranging but as the market has grown, it’s tightened, and operators seem to have got their heads together with prices now ranging from £700 per acre up to £900, perhaps more if there is a particularly good grid connection. Getting grid is costly so affects the amount paid. In terms of percentage return from gross annual output, we are seeing figures in the region of 4.5%. This is paid as an either/or situation with the fixed rate per acre.

What’s your advice for farmers considering renting land to solar energy companies?

Take advice from people who’ve been involved in a lot of negotiations. With a tenant on your land for the next 25-30 years, you need to have a particularly robust option and lease in place. Otherwise, it could be a long but unhappy relationship. Also, remember that letting the land is likely to have adverse inheritance tax implications.

More generally, what’s your top advice to farmers looking to unlock value in land assets?

What you are really looking at here is a strategic review. A review of a landowner’s assets is always a good thing to do. Don’t wait till someone trying to sell a product walks onto your farm before you consider new ventures. Take the bull by the horns and be proactive in asking what your assets could be doing. Yet again, take advice from people with experience in considering such matters. I cannot overstate how necessary this is. Sometimes a landowner cannot see the wood for the trees, a fresh pair of eyes is a good thing.

Robson & Liddle advises farmers on a wide range of land and property matters, including agricultural valuations, property management, and the sale and purchase of land and property assets. To discuss this topic in more detail, contact Julie on 01768 254354.