1. Energy in Agriculture, Gurteen Aug.2016 Large Scale Solar Farming; a UK perspective Jonathan Townend Oren Associates Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates1

2. 1. Development of UK large-scale solar PV farms Foreign companies with expertise in solar led the way Property developers became renewables developers, numerous RE development companies spawned Large investors with ‘clean tech’ funds looked to ‘aggregate’ schemes NFU/NFUW and CLA promoted uptake of renewables Land agents became agents for developers Plant & construction costs, particularly solar panel costs fell significantly The sector overheated several times, subsidies became unsustainable Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates2

3. 3 From DECC ‘Solar Photovoltaics Deployment’ June 2016

4. 3. Development of UK large-scale solar PV And now … Reduction in subsidies means only very large scale (i.e.>25MW) currently regarded as bankable by many investors. Consolidation of ‘players’ in the sector/market. Grid capacity is disappearing – limited connections for several years. Battery storage and direct-wire connections providing new opportunities. Solar PV becoming cheapest form of RE and achieving ‘grid parity’. However… Many farmers have benefited – many in Wales dependent on RE income. Many farmers have been left in limbo when Gov’t pulled the rug. Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates4

5. 4. Self-development or commercial development? Doing it yourself…. Are you confident that you have a viable scheme? What energy yield do you expect? What is the anticipated IRR? Stand-alone or providing energy directly to consumer? Do you have a viable grid connection? Can you cash-flow the development phase to hit programme targets? ‘Bankability’ essential if funding required or intention is to sell on. Give careful consideration to tax position and impact on farm subsidies. Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates5

6. 5. Self-development or commercial development? Doing it yourself… Process involves - Legal agreements (e.g. Finance, Connection & wayleave agreements, EPC, O&M, asset sale, power purchase) Designs (electrical system, array layout, elec. plant specification) Planning and environmental consents Construction, grid connection and commissioning Accreditation for support payments Not straightforward – you may lose your investment - get good professional advice! Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates6

7. 6. Self-development or commercial development? Funding it yourself… Development capital – €90-120k for fees plus deposit for grid connection. Construction capital – c. €925k per MW installed + connection (and battery storage) costs Operational & Maintenance costs – c. €12k /pa per MW installed Returns to you … Sell pre-construction at say c. €90-120k /MW, (plus grid connection costs) Sell post construction at say c. €175-250k /MW (plus construction costs) Be the generator and sell your energy You may lose your investment - get professional advice! Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates7

8. Example: UK 5MW solar farm – projected annual costs/receipts (Q4 2014, stand-alone, yield 950kWh/kWp per annum) ItemRateUnit Value COSTS (excluding loan repayments / cost of finance) O&M12pPer kWp installed£ 60,000 Administration £ 10,000 Business rates4.82pPer £ of rateable value£ 16,870 Decommissioning fund£ 2,000 TOTAL COSTS £ 88,870 REVENUE FiT support rate6.1pPer kWh generated£ 290,928 Power purchase5.8pPer kWh generated£ 275,500 TOTAL RECEIPTS £ 566,428 Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates8

9. 7. Self-development or commercial development? Signing up with a developer … Developer takes the risk and rewards. Experience, dedicated capacity to deliver project to time and budget. Do you know who you are dealing with? Due diligence needed – get word-of-mouth recommendations and check who stands behind the developer. Work with the developer to achieve best chance of success. Joint developments: Best of both worlds if you have the money to invest and can accept the risk? Get good professional advice! Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates9

10. 10 Robin Foord and Bernard Blackwell Monmouthshire

11. 7. Heads of Terms – commercial development Standard offer – Rent per acre, per annum, index-linked to inflation. Area required – c.5 acres per MW E.g. €850-1200 pa/pa – subject to energy yield and efficiency of land use Plus connection bonus at say €6 – 11k /MW All reasonable landowner legal costs for option & lease covered (allow €4-6k) Occasionally benefits in kind – e.g. improved access to farm Duration of lease usually set by subsidy period + 1 year. Rent plus revenue share. E.g. Lower rent of say €900 pa/pa plus say 2.5% of subsidy payments. Slightly riskier, transparency needed on financial modelling. Careful consideration of tax position and impact on farm subsidies. Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates11

12. 8. Option and Lease – commercial development Use a solicitor who is familiar with RE projects. Access and exclusivity agreement - developer will seek asap – 6 months. HoT agreed, developers set up dedicated company (SPV) – the Tenant. Option Agreement –Lease subject to consents and grid connection - usually 24 months to allow for delays in development. Terms for access for surveys etc including geophysical, drainage, trees. No significant damage likely to arise but seek restrictions. Developer should commit to pursuing development with reasonable alacrity –to secure grid connection and planning consent. Report on Title required + title for connection route. Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates12

13. 9. Solar Farm Lease – typical provisions Access rights - temporary construction, ongoing maintenance, ESB ESB: Sub-station separate lease required? Easements & wayleaves for cables. Land management – grazing rights, shooting rights, maintaining boundaries Off-site mitigation works - landscaping etc Over-shading – restrictions on tree growth, adjacent developments Damage to equipment interrupting generation – compensation to Tenant! Break clauses – notice and compensation to Landlord Decommissioning / land restoration – ensure suitable funding arrangement. Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates13

14. Clare and Christopher Lees, Dorset Look after your soil and drainage! Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates 14

15. 11. Site access & management plans: Opportunities for further income? Large Scale Solar - UK Perspective Jonathan Townend, Oren Associates15