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Renewable Diversification of Agricultural Land
Article from Caroline Hawcroft, Senior Associate Solicitor, Lupton Fawcett LLP York
Despite the USA’s withdrawal from the Paris Agreements, the rest of the western world remains committed to tackling climate change and continuing to invest in forms of energy production, which do not contribute to greenhouse gas emissions.
Currently, around 30% of the UK’s energy production is from renewable sources, second only to gas. The main sources of this green energy are, of course, from wind, hydro-electric power, solar, and to a lesser extent from anaerobic digestion and heat pumps. Although capacity for renewable energy production is increasing year-on-year, with 69% of UK land currently used for agricultural purposes, there is clearly room to go further, and for the farming community to play a role in delivering the much-sought carbon neutral future.
With Brexit (possibly) on the horizon, although, in what form is hotly debated, and the Agriculture Bill back on the Westminster agenda, farming, as we know it, is likely to face the shakeup of a generation, at least. Responding to this churn and securing sustainability long-term, has got to be a priority.
Diversifying into renewable energy provision is a new approach which is being taken by farmers across the country who are benefitting from a regular income stream generated by green electricity production. Of course, it’s not quite as simple as erecting a couple of wind turbines, selling off your dairy herd, and waiting for the cheques to arrive. So, here a few things to bear in mind when looking to diversify.
- It is important to check the title of your property to determine whether there are any restrictions or third party rights which could prevent the diversification scheme from going ahead. In addition, if the land is secured by a charge it is likely that the bank’s consent would be required for a potential change of use. Equally, if the property is leasehold, it’s important to check the terms of the lease to see whether the terms of the lease allow for diversification, planning permission to be obtained and development works to be carried out. Consideration needs to be given as to whether landlord’s consent will be required for any of these.
- Careful consideration must be given to what planning legislation says about renewable energy diversifications. It is likely that planning consent will be required, not just to allow for a change of use, but any kind of construction to be undertaken. Different local authorities have different development frameworks and local plans, which have a renewable element, so it’s important to seek professional advice.
- Location can also play a big part in planning renewable projects. If connection cannot be obtained direct from the land, easements may need to be negotiated with neighbouring land owners. Consent to connect to public utilities is also likely to be required from statutory undertakers. For example, proximity to a grid connection and a suitable power supply or other essential utilities such as drainage and water.
- Additional finance is likely to be required to fund the diversification project as the cost of the technology can be expensive. If so, it is essential to have discussions with your relationship manager or other potential lenders at an early stage to ensure funding is available and in the timescales required. You should also research if there are any grants available to help fund the project.
- Obtaining tax advice before committing to a diversification scheme is essential as diversification can have tax consequences, particularly in relation to CGT, inheritance tax implications and business rates. As such, it is extremely important that specialist tax advice is taken in the initial stages of the project.
While this may seem like a lot of hard work, the benefits of diversifying farm assets are a valuable tool in securing sustainability and safeguarding against what could be turbulent times ahead.