Drone shot showing a 20MW gas genset scheme © Roadnight Taylor
The opportunities for developing an energy scheme on land are greater now than ever. Schemes from 2MW to 50MW are potentially viable, whether it's a 0.1ha site housing a gas genset scheme – comprising reciprocating engines that burn gas to generate electricity – connecting to the grid at 11kV, or solar panels on 15ha connecting at 132kV. Wind and battery storage can provide good opportunities for landowners as well. When considering energy schemes, landlords can fall into one of three categories.
When considering energy schemes landowners can fall into one of three categories.
in the most common arrangement the landowner serves as the landlord for an energy scheme, and receives rent for hosting it. This presents a reliable source of long-term revenue for minimal financial outlay and risk. Landowners should be mindful of any tax implications, though, and ensure they are adequately protected from legal and professional fees connected to the scheme.
an entrepreneurial landowner can secure the holy trinity of project rights – grid, planning and land rights – with the latter already in their gift. Selling this bundle can attract high financial rewards, but requires a significant outlay in grid, planning and professional fees. Compared to merely seeking a long-term energy tenant, this is a high-risk approach.
the landowner secures the project rights, funds the construction and then owns and operates the scheme for the long term. This option requires the biggest financial commitment, and the relatively skinny returns on investment are not for everyone. The greater exposure to energy market risk inherent in subsidy-free solar schemes can be mitigated by securing long-term revenues from power purchase agreements (PPAs). PPA terms can be as long as 15 years, which is equivalent to the length if not the value of the historic feed-in tariff (FiT) and Renewables Obligation (RO) incentives that drove site acquisition markets until mid-2015.
There are good, long-term reliable returns to be had, but anyone considering these routes should take independent, expert advice. Anyone selling land should also consider energy opportunities that represent a higher-value use. Land prices can be significantly higher where the proper prerequisites for a project have been established.
Whether buying, selling, or acting on behalf of a client, carrying out due diligence is important – including an energy project feasibility study – because failure to do so could cost millions of pounds.
The end of the FiT and RO in 2015 killed the solar market. But the cost of solar photovoltaic panels themselves has more than halved, and wholesale energy prices have soared by up to 60 per cent since then. Solar operators are increasingly securing PPAs with large corporate organisations, and the amount of clean energy secured this way in 2019 was up more than 40 per cent from the previous year's record, according to Bloomberg New Energy Finance.
We're now seeing developers focus predominately on large-scale solar, keenly seeking sites with good grid and planning prospects of 15–80ha in size. Depending on their site, and, in particular, the cost of the grid connection, landowners can expect ground rents of more than £1,975 per hectare for solar leases of 30–50 years.
Another technology option is gas gensets. Flexible schemes such as these can be switched on quickly, and without them we would be seeing many more blackouts like those of August 2019, or paying more for our electricity. Batteries helped to keep the lights on for about half an hour when the Beast from the East hit in February 2018, but gas gensets helped see us through the harsh weather.
Gas gensets can return up to £150,000 per year. A typical project requires around 0.2–0.8ha of ground and proximity to the gas grid, which needs to be at a suitable pressure and diameter for the size of scheme. As gas gensets are noisy they should be more than 100m from any dwelling. Existing background noise such as traffic, industrial activity or quarrying will help mitigate planning risk.
Distribution network operators (DNOs) must have the capacity to maintain their network fault current within statutory limits, which is higher for gensets than for battery storage or solar schemes.
Feverish activity in battery storage around four years ago subsequently cooled in response to an oversupply of schemes in National Grid's frequency response markets. This depressed the revenues achieved in the grid's monthly auctions, and also coincided with a sharp reduction in capacity market revenues for storage schemes. However, the markets and associated revenues are now recovering, albeit gradually – and the cost of lithium-ion technology continues to tumble year on year – so good battery storage sites can attract more than £50,000 per year. Globally storage deployment is expected to increase over a hundredfold by 2040, with the UK being among the ten countries leading this charge.
A typical battery storage scheme occupies up to 0.8ha, comprising multiple 12m shipping-style containers. Like gensets, storage schemes won't be suitable on all parts of the network; unlike other technologies, storage requires symmetrical import and export capacity to discharge and charge cells. Voltage step-change issues also preclude battery schemes on many parts of the grid.
Of course, any opportunity for any technology starts with the local electrical network. Proximity to the local DNO's assets is important. The best sites are close to a 33kV circuit or have a primary substation, typically 33kV/11kV, a bulk supply point typically 33kV/132kV, or grid supply point, typically 400kV/132kV nearby. However, smaller schemes – typically up to 8MW – are better connected at 11kV and ideally, but not crucially, less than 1km from a primary substation.
Yet proximity to the right hardware is the simple part – connecting successfully to any given circuit can be very complex.
Different technologies have specific grid requirements, and many opportunities depend on flexible connection arrangements such as active network management and export limitation schemes.
All applications must also adhere to new and more stringent G99 engineering standards issued by the Energy Networks Association.
From April 2018, each grid connection application also costs up to £8,000. As an example, Electricity North West alone saw 80 per cent of applications to connect large-scale schemes to its network fail in 2019. Before you submit your application, ensure that your information is based on thorough, expert network studies – and close liaison with the DNO – for the right technology at the right scale for the right part of the network, to avoid paying repeat fees.
There are many factors to consider other than the grid, not least access, wayleaves and easements, and planning considerations such as existing use, visibility, noise, landscape or habitat designations and flood risk. In addition, there are other important factors if a scheme is to be successful. The following tips and hints can help you start if you are thinking of getting into energy schemes.
Hugh Taylor is CEO at consultancy Roadnight Taylor email@example.com
Related competencies include: Energy and renewable resources, Land use and diversification