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With the reduction in subsidies for large solar pv and onshore wind generation due to take effect from April 2014, the need for flexibility in legal arrangements has become of paramount importance as the profit margins of renewable energy developers are squeezed, and rents payable to prospective landlords decrease.
Onshore wind turbines and solar farms often require an “easement” to provide the legal rights over the route to connect to the national grid; sometimes this will involve a third party landowner. It is commonplace to enter into an option to take a lease of the proposed array or turbine site, but similar arrangements for easements have been less usual.
The benefits of having an easement under option for a developer are significant. For a nominal sum, the developer can secure the passage from the prospective site to the grid. If an option is not exercised (perhaps because planning consent is refused), the cost of securing that option will have been far less than paying in full for an easement. Of course, effective title and site due diligence should be carried out before entering into the option, to avoid any surprises.
Landowners should welcome the prospect of granting an option. For the reasons outlined above, the option may not be exercised. The last thing a landowner will want is to sterilise land that could otherwise be used for agricultural or development purposes. It is important, therefore, to ensure that the option period is not too lengthy so a developer will not ‘sit’ on the option. Positive obligations on the developer to seek planning permission and obtain the appropriate grid connection should be included.
Then, once the developer has the necessary planning and other consents, the need for further negotiations should be minimised.
For further information, please contact Ian Holyoak, Head of Energy & Renewables at Michelmores, by telephone on 01392 688 688 or by email ian.holyoak@michelmores.com, or your usual Michelmores contact.
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