Energy development on your land? Don’t throw caution to the wind
Clarke, Cowell
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).
Business interruption
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:
Decommissioning
The decommissioning of wind turbines, solar panels, batteries and associated infrastructure used in the course of energy developments can be very expensive.
Remediation
Works may also be required to rehabilitate the land to a usable state and/or remediate any environmental harm resulting from the development.
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.
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.
Cowell Clarke [1]
June 15, 2023
Lexology [2]
URL to article: https://www.wind-watch.org/documents/energy-development-on-your-land-dont-throw-caution-to-the-wind/
URLs in this post:
[1] Cowell Clarke: https://www.cowellclarke.com.au/
[2] Lexology: https://www.lexology.com/library/detail.aspx?g=f1634288-739f-4e13-aaf5-f89ec9fdd2b6