Back in 2020 when Covid first reared its ugly head, bringing machinery production to a... Read more
A Snapshot of the Energy Market
Stephensons Rural act for farmers and landowners throughout Yorkshire and are involved in over 50 energy projects including solar, battery storage, wind & AD plants.
The energy market is constantly moving fast and below are the trends that have seen in the last few weeks and months:
Any project which connects into a local substation will need a Grid Connection Offer from Northern Powergrid. The race to obtain these offers is hotter than ever! A Grid Application needs to be linked to a land parcel and that is why every farmer in Yorkshire is being asked to sign ‘Exclusivity Agreements’ or ‘Letters of Authority’ to allow Developers to research the grid in that area.
Beware of these agreements and who is researching on your behalf. Ensure you are not dealing with one of the many cowboys in the market – if in doubt, ask an Agent.
The process of obtaining a Grid Connection Offer is bizarre involving a virtual queue and further consultation. Any offer will outline the cost of upgrading the network to accommodate the project – these can be astronomical costs and are expected to be covered by the Developer. It is on receipt of these costs that many Developers pull out.
National Grid Projects
Due to the difficulties of obtaining a Grid Offer from Northern Powergrid, we are seeing a large increase in projects connecting directly into a National Grid owned substation. These are typically larger projects and pro-active energy Developers are starting to snap up any capacity within these substations.
The disadvantage for a Farmer on a National Grid projects is that the Connection Offer does not have to be linked to a parcel of land from the outset. The advantage is that they are often very large projects with attractive rents.
The biggest trend we are seeing on both local and National Grid projects is that timescales are constantly being revised and pushed back. It is not uncommon to have a project that may not be able to connect (and therefore be built) until 2030 or beyond.
The reason for the revised timescales is mainly that National Grid have finally worked out how long it will take them to upgrade networks or provide the relevant reinforcement works. They are under-resourced and their timescales reflect this.
Despite the revision of timescales, in our experience, this is not putting Developers off and they are quite happy to sign farmers up into long term option agreements. These should be treated with trepidation and at the very least have some milestones that the Developer will need to hit. Again, if in doubt – ask an Agent.
Rents are strong and we have definitely seen an increase in rents coincide with the increase in electricity prices.
Given the above comments about timescales, we seem to be agreeing rents now for projects that will be built in 2030 or beyond. This is the way the market works but doesn’t make a great deal of sense in a volatile market and in a volatile economy where inflation is currently at 10%. There are ways and means of protecting your income streams here and again, if in doubt – ask an agent.
Johnny Cordingley MRICS FAAV is a Surveyor within the Stephensons Rural team at Murton. Following 8 years with a National Firm in the Midlands working with their Sustainable Energy team, Johnny is more than well-placed to assist the Yorkshire farming community navigate the ever changing energy markets.
Tel: 01904 489731