After this crisis, there will be an opportunity to have an honest conversation about the future. The truth is that, despite the fact that there is almost universal acceptance of the need to move to a completely renewables-based electricity supply, it has been becoming increasingly difficult to invest in Scotland’s most successful renewable technology: onshore wind.
However, in the here and now, the economics of making wind farm projects even viable means that delays in some areas can have far-reaching consequences that may no longer make it possible to proceed.
Construction is an obvious candidate. But it’s not simply a case of not being able to erect a wind turbine – it’s also the time taken to manufacture and transport it to the wind farm, which are all currently on hold. Also, the knock-on effect for the layers of legal agreements can be hugely problematic. For example, wind farms are based on leases to developers and the rent payable to the landowner often starts or ramps up when it becomes operational. The leases usually have a backstop date for when the rent increases to a commercial level, regardless of whether the wind farm is generating based on a realistic estimate of how long construction will take. With this now being delayed, developers will need to pay full commercial rents with no income.
It can also take longer for the wind farm to start generating electricity. The planning permission will be for a fixed duration, usually 25-30 years. If there is a delay in commissioning, due to construction delays, the lease may end before the permission ends. This potentially leaves a developer in a very precarious position.
Securing a connection to the national grid is a significant challenge for a developer in normal times. If a developer is at the stage of accepting a grid connection offer, sometimes at a cost of several million pounds, this usually means paying out a large sum of money well before the wind farm has started being built. Delay means that this will need to be funded for longer and there may be a risk that the connection will be lost to another project if not utilised.
There are also essential components that remain too analogue. For example, the online technology at the Registers of Scotland, Scotland’s property register, is not sufficiently advanced to be able to deal with anything other than straightforward applications, and wind farm leases are often in the complex category. Delays in starting leases will, of course, mean landowners lose out on rent for periods when they need the income more than ever.
Planning and grid connection consents need to be streamlined, with these projects even potentially given an essential status so that the Government agencies, local authorities and infrastructure providers must work with the developer towards the renewables energy targets.
When our attention returns to how Scotland will meet its climate change ambitions, we need to have an honest conversation about how we make renewable energy a more attractive investment.
Susan Law, Partner, Rural Services, at Lindsays
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