As the efficiency of solar panels has increased, the interest and economic viability of solar farms is on the rise once again.
This blog is designed to give a very broad overview of the main opportunities available at the moment but each option is wholly reliant upon securing the appropriate permissions.
Option 1 -
Land Lease
For this option the developer usually takes on all of the development risk in exchange for a lengthy period of exclusivity.
Whilst this option may seem the most attractive because it removes the risk to the landowner, it is almost impossible to guarantee the land yields until after the grid permission and site surveys have been completed, and these won’t have been completed until long after the exclusivity agreement is signed.
Option 2 -
Self-Development
If the idea of someone else paying to construct and manage a solar farm on your land is attractive, but the idea of signing an exclusivity agreement early on is not, then you might like to consider taking on some of the development work.
This might involve securing the grid permission yourself and/or the planning rights.
Choosing to go down this particular route, however, will involve speculative costs early on such as the initial design of the array, drafting and submission of the grid application before you turn your attention to the planning application.
Because the planning costs dwarf the grid costs, many land owners limit their involvement in the development process to the grid permission only.
By taking on a portion of the development risk, not only will it allow you to avoid signing exclusivity but it will also afford you the benefit of taking your project to the market in order to secure the best possible deal for your land.
Option 3 -
Land Owner Development, Construction and Management
Financially this option will provide the greatest return but also the highest risk profile.
Although interest in solar farms is on the rise again thanks to improvements in panel efficiency, they still require scale in order to stack up.
How does it stack up?
It depends on several factors –
Most solar farms export directly to the local grid for a relatively low price. The way developers make it stack up is either by building at scale (minimum of 10MW – c. 12 acres) or by adding battery storage in order to offer the grid ancillary services.
Assuming a relatively straightforward connection, planning approval process and construction, landowners can hope to make anything from £500 – £1,000 per acre per year.
Alternatively, a developer may wish to enhance the value of the solar energy generated by arranging a ‘private-wire PPA’. This would see the solar farm connected directly to a local ‘off-taker’ – such as a factory – who would buy the solar energy at a fractional discount compared to what they would otherwise have bought power from the grid at. This rate – known as a PPA-rate or Power Purchase Agreement rate – could be as much as twice the rate the energy would have otherwise been sold to the grid at.
To discuss developing a solar farm on your land, contact BeBa Energy today.