With wind, solar and battery developments playing a critical role in achieving Australia’s renewable energy targets, landowners continue to be approached by energy proponents and developers across the country seeking to secure agreements to undertake energy developments on their land.
It is all too easy for landowners to be dangerously distracted during negotiations by the returns promised by energy developers and the benefits associated with income diversification.
However, an energy development is not a “set and forget” project. They are long term deals that generally span at least 30 years, and are usually documented by a suite of documents, including a formal lease.
If landowners do not carefully consider the long-term implications of allowing an energy development to be undertaken on their land, they could be signing up for risks and costs that were not anticipated.
Size of infrastructure
One of the most significant considerations with any energy development is the large-scale infrastructure that is likely to be installed on the landowner’s land. For example, wind turbines often scale up to 120 meters in height with large concrete footings. It is not uncommon with large scale wind farms for there to be up to 50 turbines on the subject land (or multiple parcels of land, especially if a group of landowners are negotiating as a collective with an energy developer).
The construction phase for the energy development can be many years and can result in a significant disruption to the business operations of the landowner. This raises many questions, including:
How will the landowner be compensated for this disruption?
Will construction be prohibited during certain times (for example, lambing season if sheep are run on the land)?
What about the use of large machinery and equipment to transport and install the wind turbines? What access roads will be used?
Who will bear the cost of maintaining and grading the roads and fencing off certain areas for the development?
The decommissioning of wind turbines, solar panels, batteries and associated infrastructure used in the course of energy developments can be very expensive.
What happens once the wind turbines or solar panels have reached the end of their operational life?
In the case of wind turbines this timeframe is generally around 30 years. When will the decommissioning works be undertaken?
What is the nature and scope of the decommissioning works?
Works may also be required to rehabilitate the land to a usable state and/or remediate any environmental harm resulting from the development.
How will such works impact future farming operations?
How will any delays on future productivity and land value be dealt with?
Long term viability
Consideration needs to be given to what happens if technology or market conditions change such that the energy developer runs into financial difficulties and the energy development is no longer financially viable.
Will the energy developer be able to fulfil its decommissioning obligations under the lease?
What happens if the energy developer defaults under the lease?
What form and how much security will the landowner request to protect itself if the energy developer fails to meet its obligations under the lease?
Documenting the deal
In our experience, these considerations are often “overlooked” by the parties when they seek to negotiate the formal documents.
If the formal documents are not adequately drafted and do not provide sufficient protections for the landowner, what may have initially been considered a lucrative and “easy” financial return could very quickly became a financial nightmare for the landowner.
It is therefore critical for landowners to ensure there are suitable protections in place before entering into any formal agreements with an energy developer.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.