Blog – December 2018 – Renewables are coming of age
The UK may be in all sorts of muddle over Brexit with the country split, the Tory party split and the Labour party apparently playing a political game, but, at least, in one area we seem to be making progress. The sources of production of electricity is shifting more and more towards renewable sources. In the second quarter of 2018 31.7% of the total generated electricity came from renewable sources. On one day, 9th April, 26.25% of the total energy demand was supplied by solar and, when the other renewable sources were taken into account, the amount so supplied amounted to 46.989%.
There is political will for the use of renewables and that, coupled with the difficulties associated with the construction of nuclear power stations and the dealing with the waste produced, makes me say “renewables are coming of age”.
Added to that there is the forecast for consumption of electricity which is that it will substantially increase from about 2025. That increase will be largely be fuelled by the increase in the use of electric vehicles. If such forecast is correct then the electricity will either have to be produced in the UK or imported. In some ways, the importation of electricity is the easiest method as it overcomes the problems of (A) the withdrawal of support mechanisms such as the feed in tariff and (B) local opposition to the infrastructure needed for the production of electricity, (C) availability of grid connection and (D) the possible push toward nuclear (which now seems unlikely in a reasonable timescale), fracking or interconnectors. Even if those threats have an adverse effect on the renewables market, it will continue to grow.
Coupled to that growth will be the need to store the produced electricity. One disadvantage of renewables is that the electricity cannot only be produced when it is needed. Regretfully, the wind does not blow, nor the sun shine, to order.
This will lead to a growth in the market for electricity storage facilities which can be large or small scale. There are a variety of ways of becoming involved in that market but, for most people, the commonest and easiest is where there is an option for the operator to take a lease on an area of land which is exercised if the operator obtains the necessary planning permission.
Usually, there is considerable pressure from the operator to get the documentation signed. Some operators even try to make the landowners sign without having proper advice from a surveyor, as to whether the proposed deal is financially reasonable and the general terms acceptable, or a lawyer, to advise as to whether the landowner has proper protection in respect of ensuring payment of rent, indemnity against claims or decommissioning of the site. That is not a complete list of what the surveyor and the lawyer should be considering.
There is one other area to consider which is whether the erection of a battery storage system will reduce the value of the surrounding land. Most short-term operating reserve systems (STOR) will sterilise future residential development within 30 metres radius. That is something in the region of 75 acres or 30 hectares. The effect on the value of the retained land is therefore significant. Taking a pessimistic value of residential land in this area the loss of value is likely to be in the region of £45 million. The siting of a storage facility must, therefore, be carefully considered even before the landowner becomes involved in the niceties of the documentation.
To summarise, I do see an increase in the number of operators knocking on landowners’ doors and the need for those landowners to be properly advised to ensure that the proposed transaction properly reflects what is on offer in the marketplace and that the potential value of their retained land is not significantly adversely affected.