Farm energy

from Anglia Farmer May 2021

News

Savings to be made on farm electricity bills

• Review contracts to get best deals • Check detail before signing • Be wary of unsolicited ‘better’ off ers

Farms and rural estates could make signifi cant savings on their energy and heating bills by reviewing supply contracts that have been allowed to run on without being reviewed.

“Over the past 10 years, business users will have seen electricity costs increase signifi cantly,” says Lauren Gibson-Green, head of energy land and property specialists Strutt & Parker.”

The government started recording data in 2004 from eight of the largest gas and electricity suppliers in the UK. Since 2007, small businesses have seen an average price rise of 43%, with large industrial consumers seeing a 75% increase. We saved the farmer £6,000 in the fi rst year.

Many farmers are paying more than they should for electricity

Ofgem – the industry regulator for the gas and electricity markets – estimates that around 41% of businesses have never switched energy supplier. As a result, those businesses are often on more expensive “deemed rates”.

Contract rates

Deemed rates are typically 40% higher than contract rates. They are a direct result of not renewing expired supply contracts. The average rate of electricity is currently about £0.16 per unit – while the average deemed rate is some £0.25 per unit.

“It is estimated that approximately 50% of farmers and landowners are unaware of the price that they currently pay for their supplies, suggesting that many are paying more than they need to,” says Ms Gibson-Green.

“We were recently asked to review an electricity supply contract for a large dairy unit,” she explains.

“After some comprehensive market analysis, we managed to secure a fully fi xed price for three years that saved the farmer more than £6,000 in the fi rst year.”

Ms Gibson-Green says electricity and gas supply contracts are made up of more than just the headline unit price. This means they need careful analysis. Farmers should also be aware of the contract length of the tariff they sign up to, she adds.

“There can be dozens of other charges buried within the rates and that’s

Farmers should review contracts for the best rates, says Lauren Gibson-Green

before we even consider the non-commodity costs. Varying contract lengths, types and exit clauses all need to be carefully considered before signing up to a new supply.”

Strutt & Parker offers a service to help farms and estates with an annual power bill higher than £5,000 to cut their electricity costs. The business is also able to work with its energy experts to review heating oil, mains and LPG Gas costs.

Other advisors can help farmers get better rates too. The farmer-owned buying group Anglia Farmers offers a best value procurement service for members who use its metered services for electricity, mains gas and non-domestic mains water.

Farmers are advised to be wary of companies which cold-call businesses offering cheaper tariffs.

Green energy opportunities for farmers

Law fi rm Clarke Willmott hosted the fi rst in a series of webinars with NFU Energy to look at green energy projects in the agricultural sector.

The Green Energy Diversifi cation event attracted over 230 people from a event attracted over 230 people from a wide cross-section of industries includwide cross-section of industries including farmers, contractors, land and estate agents, funders, green energy consultants and planning specialists.

Chaired by Priscilla Hall, head of green energy at Clarke sector-focused solicitors Paul Hazeldine and Amy Peacey from the fi rm, along with Jon Swain, technical director at NFU Energy.

Topics covered included leases and the pitfalls to avoid, feedstock agreements for anaerobic digestion plants and top tips on how the agricultural sector can play its

Willmott, attendees also heard from specialist energy and agriculture sector-focused solicitors Paul Hazeldine and Amy Peacey from the fi rm, along with Jon Swain, technical director at NFU Energy.

Topics covered included leases and the pitfalls to avoid, feedstock agreements for anaerobic digestion plants and top tips on how the agricultural sector can play its part in helping to reduce carbon emissions through green technologies.

Ms Hall said: “We were pleased to see so many professionals in attendance and I’m sure they found the content both informative and valuable. Our Q&A session was particularly useful with many issues covered from policy and legal queries to technical questions. For further details and a copy of the presentation, email harriet.salisbury@clarkewillmott.com

Don’t take risk with energy agreements

• Undertake due diligence before signing • Complex area requires understanding • Seek good advice from proper experts

Landowners should think twice before signing renewable energy agreements which could see them tied into astronomical bills and unsuccessful projects.

Too many farmers and other landowners are allowing prospective largescale energy projects on their land to be instigated in the developer’s name, according to independent power and energy specialist Roadnight Taylor.

This leaves landowners open to poorly negotiated rents and lease terms – and the high failure rate of most developers’ grid applications. But the alternative – applying in their own name without specialist advice – is even more dangerous and risky.

“In one case recently, a poorly-advised landowner accepted an offer for a 50MW project that was going to cost £11m to connect to the power grid – which was never going to be financially viable,” explains director Hugh Taylor.

Escape route

“They put down a £50,000 grid deposit but hadn’t spotted that they were liable for a £250,000 charge if they didn’t withdraw by a certain date – when they approached us they had just 24 hours to escape.”

In another case, the grid connection offer came with the proviso that the landowner contribute nearly £300,000 towards £1.5 million of network reinforcements – which, taken at face value, didn’t render the project unviable.

Mr Taylor says the landowner didn’t realise they could incur the full £1.5m cost if for any reason they were unable to connect their scheme. This could include the bill for failing to secure the right planning consent.

“It’s so important to safeguard your rights and protect against risks,” explains Mr Taylor.

“Allowing the grid application to be made in the developer’s name means you can’t get developers competing for your site, it reduces your chances of achieving a scheme in the first place, and it cedes control in negotiations.”

But if seeking grid connections in your own name it’s absolutely vital to take specialist professional advice, he adds. Too many land agents think that they can advise on grid connections, but it is an incredibly complex area.

A thorough understanding of the energy market is vital to see whether a grid connection offer is financially viable. The network operator has to provide a connection quote for every project – but if the quote is too high then no developer will take it on. The acceptance rate of grid connection offers is as low as 8%, depending on the Distribution Network Operator. Each of those failed projects would have cost over £1,000 in consultants’ fees and up to £8,000 in application fees, says Mr Taylor.

In many cases, the flawed application will have cost the landowner many millions in future ground rent receipts too. In contrast, Roadnight Taylor says it had an acceptance rate of over 90% for its landowners’ connection offers.

Mr Taylor says this secured enough grid capacity for 2GW of solar panels – equivalent to around 2400ha (6,000 acres). It can also hold grid rights on trust for the landowner, completely insulating them from financial risk.

Knowledge gap

“Getting the correct connection rights is very challenging, and there are risks to accepting offers that contain cost ap-

Farmers should seek to insulate themselves from risk says Hugh Taylor

portionments and securities for wider works, as they can easily reach £100,000s.” Another risk to allowing connection rights to start in the developer’s name is that they could go bust, lose interest in the site, or not negotiate in good faith. Mr Taylor says landowners should be proactive and get in there before your neighbours.

“Make sure you’re being properly advised,” he adds. “If you do decide to accept a grid offer, you then need to safeguard your rights and then, at the right time, smoothly transact them with a developer of your choosing to take the project forward.

“The grid rights need to end up in a developer’s name at some point – unless you wish to pay for the planning application and project build – but you must guard against the risk of them going cold on the site or going bust.”

‘Faster solution needed’ on Net Zero target

Landowners are committed to helping the UK reach Net Zero by 2050 – but a faster solution is needed, says the Country Land and Business Association.

CLA president Mark Bridgeman said the association’s members had involved in peatland restoration, tree planting, increasing onland biodiversity and wildlife habitats to help the UK Government achieve its net zero target by 2050.

“Many are already pioneering new land management methods such as peatland restoration to remove carbon dioxide from the atmosphere. The UK’s forests store 3.7bn tonnes of carbon so, the more trees we plant, the more carbon we remove.”

The forthcoming Environmental Land Management Scheme offered a strong platform, added Mr Bridgeman. But with funding not available until 2024 a quicker solution was needed to offset carbon emissions.

“We are already starting to see the impacts of climate change across rural communities and it is critical that the government supports actions to combat the increased risk of flooding, drought and severe weather events.”

The UK’s greenhouse gas emissions are now 51% below 1990 levels meaning that the UK is now halfway to meeting its target of net zero emissions by 2050.

PLANNINGFarm energy FOR THE FUTURE, THE ENERGY-EFFICIENT HOME New start-up could benefit farmers BUILT TO ENJOY RETIREMENTgenerating renewable energy

Astart-up company which aims to connect commercial buyers with farmers who generate renewable energy has received almost £1m in funding.

With the agricultural industry embracing anaerobic digestion, backers say the platform will make it easier for farmers to gain visibility of clean energy markets, capitalise on market opportunities and achieve the best prices for power sold to the grid.

Called PPAYA, the new virtual marketplace aims to maximise the price of Power Purchasing Agreements (PPAs) for farmers and other energy generators while minimising the associated administrative burden.

It works by bringing people together and encouraging collaboration between all stakeholders involved in the PPA. This is set to become more important as the UK strives to de-carbonise to meet climate change targets.

New climate change commitments announced by the government last month set the UK on course to cut carbon emissions by 78% by 2035. Renewables energy is seen as a key way of achieving this goal.

The commitment, which is set to The commitment, which is set to become law by the end of June, brings forward the government’s current target for reducing carbon emissions by 15 years. Doing so would position the UK as a world leader on climate change.

The subsidy free market The subsidy free market is expected to unlock about £20bn of investment in the UK between now and 2030. PPAYA will and 2030. PPAYA will also help existing genalso help existing generators maximise reerators maximise returns when they look turns when they look to renew their current PPAs.

The funding will The funding will be used to widen the company’s offerit comes to executing PPAs and most the tools or time to alert them to power price spikes. established network to the industry – and the benefi ts we can bring to managers.”

be used to widen the company’s offering to agricultural energy generators, by backing projects that will support the UK’s transition towards renewaWhen the time came to start planning for a ble generation and achieving net zero more relaxed lifestyleemissions. after more than 50 years of farming together, the comfort of retirement didn’t sit well with the PPAYA founder and chief executive Kristina Rabecaite (left) said: “The energy industry is very reactive when challenges of maintaining a 16th Century it comes to executing PPAs and most Grade II listed farmhouse, for Suffolk people and companies do not have farming couple Harry and Alison Standley. the tools or time to alert them to power price spikes. Initially farming at Benningham Hall Farm “We are delighted to have in the mid-Suffolk village of Occold, secured support from an slaughtering 500 pigs a week for some established network 30 years, before a move to Aldeburgh of energy investors preceded in Laxfield the purchase of Yew Tree Farm in 2004, the time was right for who recognise the value that PPAYA can bring to the industry – and the the Standley’s to start planning for a more benefi ts we can bring to relaxed future. generators, renewable asYew Tree Farm is an arable-only operation, set developers and fund managers.” growing winter wheat over half of the