Feature

Comment: Mega dairy vs. Mega Watts


Nick Green, Savills Energy

Renewable energy development on farmland is not easy money, and there are many examples where farmers have got it horribly wrong - leading to hugely inflated construction costs - because they did not do their homework.

In the UK, Archers fans will be aware of Brian Aldridge’s attempts to assuage Ambridge concerns about his mega-dairy. He was unsuccessfully milking the fact that waste from the intense herding would be turned into renewable energy through an anaerobic digestion (AD) plant at Home Farm. Like all Archers storylines, mega-watts attempting to trump mega-dairy has a firm footing in rural reality.

Although a radio soap, there is something of the ‘soapbox’ about renewable energy and the diversification of land to AD, solar, wind, hydro and biomass. Many farmers with surplus land have recognised that renewable energy plants can harvest cash. But simply having empty acreage is not always enough.

To quote a popular phrase; it is all about location, location, location. Landowners should not simply be thinking in terms of where they can put up a wind turbine but what technology best suits their circumstances.

Successful projects depend upon a blend of assessments of resources, constraints and prevailing policy. Farmers need to work through an entire process to ensure a successful project – one they can live with for 20+ years.

Because no two farms are the same, there are never the same issues surrounding renewables, even the types of power plant being developed. Farmers must look at the practical aspects of the development on their land rather than trying to ‘keep up with the Jones’ simply because the neighbouring farm has diversified into a particular type of renewables.

Many are seduced by income but too often overlook issues such as finance, annual costs, tax, insurance, fees and maintenance, not to mention the practical issues.

A project must ultimately be fundable, and anyone proposing a scheme needs to remember that fact throughout the development process. Getting consent is just the beginning of the financial journey and project management of the scheme is core to its success, particularly because farmers may face months of attrition during the plant’s construction. Securing consent is by no means the end of the road.

It’s not easy money and there are many examples where farmers have got it horribly wrong and led to hugely inflated construction costs simply because they did not do their homework. Where a bank or other funder is involved they will want to see that a robust process has been followed from the outset.

Practical issues can also have a significant impact upon a farm. For example, access onto the land where the investment is in biomass or AD.

If farmers have delivery vehicles with raw materials coming onto the land, ensuring pre-determined access routes are in place will reduce the likelihood of crop and stock loss and general disturbance to day-to-day farming activities as a result.

The Feed-in Tariff (FiT) is another issue. Those who sat on their hands waiting for what the rate may be could end up being 12 months behind the farmer who did his homework and cracked on earlier.

Going for the lowest offer is not always the best solution when the farmer is not earning from that land and his debt is making him more vulnerable.

Finally, the proximity to the grid presents challenges. Just because a landowner has power lines crossing the land does not mean a straightforward connection if there is zero capacity in the line, particularly in Scotland. While a connection may be available the increased cost and timescale will have a significant impact on viability. It is important that Landowners are in a position to negotiate deals that avoid the impact of drops in revenue.

Savills Energy is a dedicated real estate service created to specifically assist the inception, planning, development and continued operation of assets and infrastructure connected to the energy production and storage sector.
 

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Bioenergy  •  Photovoltaics (PV)  •  Policy, investment and markets  •  Wind power

 

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