The UK government has recently set out its aim to become Net Zero by 2050. As a result, there has been a lot of investment in greener energy sources. B P Collins’ commercial property solicitors advice on one way that greener energy may become more accessible and affordable is through the use of battery storage.
Battery storage, what is it?
Battery storage is a technology that enables energy generated from renewable sources such as wind and solar energy, to be stored when demand is low, and utilised when demand is high. Through the use of lithium-ion batteries, renewable energy can be retained for use at a later time. Container-like batteries are installed on land and connected to the energy grid. The batteries then store the energy ready to be released quickly into the energy grid when demand is high, therefore making green energy more readily available and affordable.
Energy companies are becoming increasingly interested in installing battery storage technology at suitable sites. Generally, the most suitable land is: flat, large enough to store the batteries, is in a relatively secluded location away from houses and has an existing or easily accessible connection to the electricity grid.
Potential benefits for landowners
There are a number of potential benefits to landowners in hosting these batteries such as:
- Rental income – landowners can charge rent from energy companies. This could be fixed or linked to energy usage.
- No cost to the landowner – landowners can negotiate the lease so that any costs incurred will be covered by the energy company/developer.
- Diversification of income – battery storage could allow the landowner to produce an income from otherwise un-used land.
Legal considerations for battery storage
It is advisable that any landowner that is considering leasing their land for battery storage seeks independent legal advice. This is to ensure any agreement is fair and balanced and that they are fully aware of their obligations as Landlord.
Option Agreement
If an energy company is interested in using some land to host batteries, the parties may enter into an option agreement. An option agreement would mean the energy company would have the exclusive right to call for the lease to be granted within a set period (the option period). An option fee is usually payable to the landowner, with a further fee paid if the option period needs to be extended. When negotiating the option agreement, consideration will need to be given to the length of the option agreement. The energy company will need to ensure that enough time is given to allow for all planning permissions and consents to be granted. Additionally, the landowner might consider negotiating a break clause in the option agreement to allow the landowner to pull out of the project if needed. The agreed form of lease would generally be annexed to the option agreement.
Lease
If the relevant planning permissions and consents are in place, then the landowner and the developer will usually enter into a lease whereby the landowner (Landlord) will grant a lease to the developer or energy company (Tenant).
There are a number of important issues to be considered when negotiating the lease.
Rent
Careful consideration will need to be given to how rent is calculated and charged. The landowner could opt for a fixed annual rent, or, the rent could be calculated with reference to the amount of energy generated from the batteries at the property. This would mean that the more energy that is utilised, the higher the rent would be.
Reinstatement
The installation of energy batteries would involve substantial works to be carried out on the land. The landowner may consider preparing a schedule of condition before the lease is entered into. A schedule of condition would include photographic evidence of the state of the land before the batteries are installed. The lease would usually contain an obligation for the tenant to return the land in at least the same state of repair as evidenced by the schedule of condition.
Termination
In the event that the battery storage project is no longer viable for either party, it would be prudent to ensure that a break clause is negotiated in the lease to ensure that the lease can be terminated if needed.
As the UK attempts to shift its reliance on fossil fuels to greener, renewable energy sources, it is likely that we will see an increase in these types of energy projects. B P Collins’ property team has extensive knowledge in the environmental sector and can provide expert support along the way. Please get in touch by emailing enquiries@bpcollins.co.uk or call 01753 889995.
