Solar Farms, Land Owners Beware

Since the feed-in-tariff came into place in April there have been a large number of companies looking to sign up land owners to option agreements to build solar farms on their land. Land Owner Now this can be an excellent way for a farmer/land owner to maximise the income they generate and also to diversify their income.

Typically the option will be a rental agreement lasting for 25 years where a fixed fee is paid or a percentage of the FIT is offered. The yield will almost always be multiples of what could be made by farming the land sounds great so where is the catch?

The catch is that the site has to be built and producing energy by March 2012 to be viable, so with planning timescales this means you have just one chance with one company to generate this income.

Some of the companies out there signing land owners up don't have any intention of building the sites instead they are looking to get the option agreement signed and sell it on to a company with the infrastructure in place at a profit. This means if they don't manage to sell the option on the site will not be built and the land owner will miss out on this once in a lifetime opportunity to benefit from the feed in tariff. So what should you look for?

Proof of funding is the most important element. If a company contacts you and the cannot prove they have funding in place do not deal with them. Whatever they offer you is irrelevant as they don't have the means to build the site.

I would also ask whether the company providing the finance (generally investment bank etc) has invested in green energy before and if they have any other solar projects up and running. This reduces the risk of funding being pulled at a later stage.

Next most important is which company is building the site and what experience do they have in large scale solar farms? Ensure the company has experience in building solar farms and preferably as some running effectively in other solar markets such as Spain or Germany.

Ensure the company has experience in dealing with planning issues on renewable energy. This is important with the tight time scale of the FIT. Once again you have only one shot at getting the site built on the land and you want someone with experience to ensure the process runs smoothly.

Finally look at what the companies are offering you financially, dependant on where you are in the country and grid connection costs a rough guideline is between £500-£1000 per year per acre. If the company offers much less than this you are being short changed. If the company offers much more than this alarm bells should be ringing as the project is unlikely to be viable and therefore you may miss out on your chance to utilise the FIT.

Kevin Langley is a leading knowledge in the Solar Investment and Renewable Energy world. Having worked with the subject for many years, he is fast becoming an expert on green energy and investments in green stocks.