Interest in farmland for vast solar panel arrays is growing throughout New Zealand with farmers in the right locations being shoulder-tapped by developers keen to get projects over the line.
At present solar energy forms less than 1% of NZ’s electricity supply. But efforts to drive NZ’s energy footprint to 100% renewables by 2030 are fuelling projects aiming to get more energy out of the sun.
Joel Murphy, an associate with Tauranga law firm Holland Beckett, has returned to NZ having spent several years working as in-house counsel with Lightsource BP in the United Kingdom, one of the world’s largest solar developers.
“In NZ we are tending to lag behind the rest of the world, where solar has been in play for quite a few years. But here hydro seems to be tapped out, nuclear is not happening and wind farms are limited as to specific areas, have complexities and often controversial – solar is a lot easier to roll out and can often be hidden from sight.”
He said developers tend to be looking for farms within 10km of a sub-station but can extend beyond this if the developer is willing to pay for additional infrastructure or a farm has a nearby high-voltage power line. The latter can be more expensive and technically more challenging.
Those projects already underway in NZ have been relatively low profile to date.
The one closest to commissioning is Lodestone’s Edgecumbe Bay of Plenty solar farm, covering 100ha and supplying 1700 homes and the nearby Fonterra factory.
It is one of five Lodestone projects aiming to generate 1% of the country’s electricity and backed by high-profile investors including Sam Morgan and Xero founder Rod Drury.
Murphy said whether land is being bought or leased, the developments put farmers in the box seat for projects demanding at least 100ha of flatter country to be built on. However, proposed solar farms as small as 45ha are being considered by developers.
The majority of projects are aiming at leasing land, and estimates are landowners can expect from $2500 to $6500 per hectare per year on lease agreements, significantly above the $1000-$1500 a hectare that maize or dairy land returns for lease.
One reported land sale specifically for solar is a vast 1000ha property on the Napier-Taupō road that reportedly sold for $30 million to Todd Energy. The property had a valuation of $18m.
Analysts believe it is feasible that solar may provide 10% of the country’s power before any limitations are hit.
Murphy outlined some aspects of the developments farmers and their advisors needed to be aware of at the early stages to ensure they get the best possible outcome, whether selling or leasing their farms for the arrays.
Typically, given the establishment costs of arrays, anywhere in the vicinity of $1.3-$1.7 million per mW, developers will seek the longest lease possible, often 35 years with landowners.
“The development stage is the critical one for timing and agreement.
“It may require Overseas Investment Office approval first, but overseas ownership of these projects is not a bad thing, as they tend to have a bigger cheque book.”
Resource consent will then add further time. The panels take only six to 12 months to get up and running.
Landowners can initially expect any heads of agreement to include a letter of intent that ensures they cannot approach other developers, often for at least two years. Much of the activity around NZ at present is on behalf of developers aiming to tie in potential sites that may or may not progress. Payments to secure an agreement can range from $5000 to $20,000.
Murphy said agreements typically include an annual CPI increase on the lease, and allowance for decommissioning and any failure of the company during its lifetime.
Cattle cannot be grazed around the panels that sit about 1.7m high, but sheep can.
“And you need to be aware that if you have converted from dairy farming to solar, you unlikely to be able to go back at the end of the lease under the new National Environmental Standard for Freshwater Management 2020 and the National Policy Statement for Freshwater Management 2020 regulations .”
Like pine trees on hill country, the solar panel offers are likely to be controversial, but Murphy said the rest of the world is well on track to boosting solar investment, and they are not limited to sunnier locations.
“We established solar sites all over Europe, even including Ireland and Scotland, not known for being particularly sunny.”
