Wind farm rentals rise

RENTAL income from wind farm developments increased by between 10 and 15 per cent throughout 2011, according to research by property firm CKD Galbraith. The rise in agreed rents paid to landlords in the 10 years from 2002 to 2011 inclusive was 250 per cent, the study found.

Along with rental increases, CKD Galbraith noted that other financial agreements, such as payments for use of minerals, frequency of rent reviews and option payments, also increased as developers acknowledged the value of land to renewable energy projects.

CKD Galbraith said 13 wind farms became operational in Scotland during 2011, providing an additional installed capacity of 382 megawatts (MW). This, added to existing installed capacity, means that Scotland has 2784 MW of wind power potential. Ayrshire and Lanarkshire saw the biggest increases in installed capacity, with 176MW and 141MW added respectively. These were primarily due to large developments coming online, such as the Arecleoch wind farm near Barrhill, rather than several smaller projects.

Developers continued to face challenges in completing projects – 17 wind farms (309 MW) were refused planning permission throughout 2011.

CKD Galbraith identified several key trends in the wind farm market:

• Leases are becoming more site-specific and complex as landowners seek to maximise returns and protect assets;

• Negotiation periods are becoming shorter in many cases as legal advisers gain experience in the sector;

• Landowners are more focused on the tax implications of deals agreed – primarily because returns are greater than previously, with income payable over long terms, making tax planning essential;

• Habitat management agreements and compensatory woodland planting are increasingly a condition of planning consent, requiring developers to improve the environment elsewhere on properties, or plant woodlands if forestry is felled to accommodate wind farm.

• Developers are reverting more to landlords to extend wind farms because (a) as the public adjusts to visual impact, there are fewer objections to additional turbines (b) with infrastructure already in place, development is more straightforward on an existing site.

Developers of single-turbine projects are offering landowners rentals of between 8 and 15 per cent of gross income. These are often fixed rents only, with no staged increases or rent reviews. Single-turbine projects remain subject to planning delays as councils decide how to measure cumulative impact on the local countryside.