Sunday, December 3, 2023

High-profile solar farm projects pique farmer interest

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At present solar energy comprises only about 1% of New Zealand’s total energy supply, but estimates are this could be comfortably ramped up to nearer 10% over the coming decade.
Joel Murphy advises farmers thinking about solar developments to carefully consider where they may want their land to be in 30-plus years’ time once the lease is up.
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A Tauranga legal expert is reporting strengthening interest among farmers in solar energy developments, with multiple contracts for developments already in play or nearing completion.

Joel Murphy, a partner with Tauranga law firm Holland Beckett Law, said that interest has strengthened on the back of some high-profile projects that have either kicked off or are about to.

They include the Harmony Energy project in north Waikato, the Lodestone project near Edgecumbe, the 105-megawatt Kowhai Park development at the Christchurch Airport, and the massive Todd Generation project on the Napier-Taupō highway.

Option agreements have a three- to five-year trigger period for the developer to confirm the development is proceeding and he suspects some of the deals will see the development on-sold “shovel ready” for another developer to complete the solar farm development.

“We are also being contacted by overseas entities who are interested in acquiring solar assets instead of developing,” Murphy said. 

“Overseas, countries are generally more mature in their understanding and appreciation of the role solar will play in sustainable generation.” 

At present solar energy comprises only about 1% of New Zealand’s total energy supply, but estimates are this could be comfortably ramped up to nearer 10% over the coming decade.

In late March the National Party announced its renewable energy policy that included plans to double the amount of electricity produced by solar, wind and geothermal sources through removing red tape delays.

Murphy said interest largely continues to be focused in the North Island, partly due to the average higher electricity prices there, and from Canterbury northwards in the South Island. 

South Island interest has recently been buoyed by the Christchurch Airport Kowhai Park solar project, which will generate energy from a 300ha farm on land just behind the airport runway.

“With more larger scale players entering the New Zealand market, it is giving landowners confidence that this is a real investment opportunity, and not a short-lived speculation.”

Lease terms on the projects are capable of generating revenue ranging between $2500 and $6500 a hectare, often at a marked premium to its next most appealing use option.

Developers are typically seeking land within 10km of a main sub-station, and Murphy suspects many farmers will have already been door-knocked. 

He urges anyone looking at signing documents with a solar developer to think carefully about where they may see their land being used once the 35-plus year period is up. He has recently published an article identifying some key matters that landowners should consider as part of their negotiations.

“You have to consider that if you are taking it out of dairying, it may be quite hard if not impossible to get the land back into dairying in the future, under current legislation and council regulations on nutrient losses. But if it is marginal grazing land, the next best use may not be dairying, and the move to solar may stack up.” 

Other opportunities include energy companies subdividing off the larger portions of a property, leaving a smaller portion for the owner to retain and live upon, possibly grazing livestock on the portion populated by panels.

Murphy is hopeful the government may at some point elect to provide carbon incentives to operators, similar to the “feet-in tariffs” introduced in 2010 in the United Kingdom to induce the uptake of renewable low-carbon generation options.

He said the costs of the technology continue to fall, but more slowly than in the past with projects split relatively equally between fixed raised solar panels and tilting operations that follow the sun.

Some farmers have questioned him on what would happen should the technology fail, or reach the end of its lifespan.

“The solar industry is still relatively new in the scheme of things, so most projects are yet to achieve full term and be decommissioned.  However, we are seeing developers providing guarantees or bonds to provide comfort to land owners of this exact scenario.”

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