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How should landowners weigh the promises of renewable energy? Photo: Michelle Kroll.<\/p>\n
Across regional Australia, renewable energy developers are pitching wind and solar farms to the people who own the ground they want to build on.<\/p>\n
Landowners are under no obligation to entertain the idea, but those who do will need to take on lengthy negotiations and review complex documents.<\/p>\n
For that reason, there\u2019s one piece of advice MV Law\u2019s accredited property law specialist Jennifer Jaeschke would give them.<\/p>\n
\u201cAsk the developer to cover your legal costs,\u201d she says.<\/p>\n
\u201cDevelopers will often agree to this, but impose a cap. The trick is making sure the cap actually reflects the complexity of the job. These documents are multi-layered agreements tied to exceptionally technical projects.<\/p>\n
\u201cAsk your lawyer for an estimate of costs first, so you can negotiate a cap at the right amount.\u201d<\/p>\n
As you consider whether hosting a renewable energy farm is the right move for you, some considerations go beyond the fiscal.<\/p>\n
To start, renewable projects can be divisive in certain communities.<\/p>\n
\u201cLandowners can feel pressure to reject the idea even if they\u2019re personally open to it,\u201d Ms Jaeschke says. \u201cSometimes the loudest voices aren\u2019t the people who\u2019ll actually have a stake in the agreement, but they can still shape whether signing on feels socially possible.\u201d<\/p>\n
If a landowner is willing to entertain the idea, the dance begins with a document called a terms sheet. A summary of what the parties are negotiating, this document holds no more obligation than a sketch on the back of a napkin.<\/p>\n
\u201cDevelopers will sometimes shop the same proposal around to multiple landowners at once, hoping to secure the footprint they need,\u201d Ms Jaeschke says.<\/p>\n
Should talks progress, the next document is where things get real with an \u201coption to lease\u201d. This binding, formal agreement sets the tone for the entire project.<\/p>\n
It includes an option period of typically two to five years, during which the developer must figure out whether they can actually get the project off the ground.<\/p>\n
In that window, the landowner must grant certain access for studies and approvals and agree not to make changes that undermine the site\u2019s viability.<\/p>\n
This is where due diligence becomes as critical as rainfall.<\/p>\n
\u201cOften, the people landowners are negotiating with are almost like salespeople; front-end operators who assemble the project before handing it to investors,\u201d Ms Jaeschke says.<\/p>\n
\u201cThat\u2019s not necessarily a red flag, but landowners should ask for the details of their previous projects and crucially, their long-term intentions.<\/p>\n
\u201cAre they planning to sell? Will there be international investors involved? Any number of factors might impact your view on the decision.\u201d<\/p>\n
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Jennifer Jaeschke advises landowners on the long-term legal impacts of wind and solar farm agreements. Photo: MV Law.<\/p>\n
Once the project graduates to a full lease \u2014 typically 25 to 30 years, with extension options that can stretch it out to 60 \u2014 clarity becomes everything.<\/p>\n
Ms Jaeschke says while a lease may coexist with farming (and many do), it won\u2019t exist in a vacuum.<\/p>\n
\u201cThe exact land area, what rights are granted and how those rights interact with existing operations need to be nailed down early,\u201d she says.<\/p>\n
\u201cFor farmers, that means thinking about stock movements, crop rotations, access routes, fire plans, weed management and, increasingly, biodiversity credits.<\/p>\n
\u201cDepending on the nature of the renewable energy project, easements may be required where an energy developer requires accessways, installation of electricity and powerlines or rights over airspace. The granting of an easement will usually restrict the landowner\u2019s use of the affected land.\u201d<\/p>\n
There\u2019s also the matter of legacy. Long leases outlive people.<\/p>\n
\u201cIf you have an intended inheriting family, it\u2019s a good idea to make them part of the conversations,\u201d Ms Jaeschke says. \u201cThey will, after all, eventually be the ones living with the decision.\u201d<\/p>\n
Ms Jaeschke says the question that comes up most often is whether a landowner is getting a good deal.<\/p>\n
In black and white terms of strictly dollars and cents, only a valuer can answer the question. Market rates depend on project size, technology, location and competitive interest.<\/p>\n
But for many landowners, money isn\u2019t the only currency when it comes to renewables.<\/p>\n
For some, a renewables lease represents something more stable than rainfall.<\/p>\n
\u201cA wind or solar lease can effectively drought-proof a property, ensuring your entire income is not contingent on unpredictable factors like the weather and crop yields,\u201d Ms Jaeschke says.<\/p>\n
\u201cDevelopers will also point out the environmental and possible social benefits of being part of the renewable energy movement.<\/p>\n
\u201cWhat matters is that landowners know the rules of the game, ask the right questions and take the time to decide whether this is the future they want built on their land.\u201d<\/p>\n
For more information, visit MV Law<\/a>.<\/p>\n