Since the announcement of the feed in tariff in April 2010, the Carter Jonas Energy Team have seen a flurry of interest from property owners and solar developers alike regarding the installation of Photovoltaic (PV) panels on roofs and across large acreages of land.

The driver has been investment returns, with operators looking to capitalise on the highest feed in tariff rates and reducing equipment costs. The consultancy has seen the greatest interest in the south western part of the country with parties looking to complete option agreements with landowners for site leases over 10-15ha areas for the installation of ground mounted panels (solar parks). Typical offers are in the region of £2000-£4,500/ha per annum (RPI linked) as a ground rent, payable following the gaining of consent and final commissioning of the project for a period of 25 years.

The projects themselves are forecast to generate a return to the developer of 10-12% depending on individual site characteristics like the cost of grid. Rooftop schemes offer lesser returns due to the economies of scale associated with them; however they can still be an attractive investment under the right circumstances. For large areas of roof space in excess of 1000sqm there is a rental market, though rents are relatively low, being approximately £1-£1.50/sqm per annum depending on location and site specifics like electrical infrastructure and the nature of the roof.

The majority of developers looking to enter the UK market are linked with European Engineer Procure and Construct (EPC) companies that wish to acquire sites, build out and sell on as part of a larger portfolio to a variety of investors, including infrastructure and pension funds.

It is important any proposals put forward by developers or panel suppliers are assessed carefully to ensure their commerciality and that any entity acquiring site rights has both the ability and backing to realise a development. There are also many parties acting within the sector looking to capitalise on ‘soft’ deals with landowners by selling on acquired site rights to more experienced parties for lump sums. Sound independent advice is important when assessing both the detailed aspects of such agreements and the tax implications to a wider farm business.