The Irish solar power sector has almost, but not quite, ground to a sudden halt after the frenzy of the last year to 18 months.

At least 12 separate firms suddenly appeared and were busy approaching farmers to sign “option agreements”. The credibility and experience of the different firms varied enormously but the developing bubble in the sector was suddenly punctured by the Minister responsible, Denis Naughten, answering a question in the Dáil in early October.

He said he was advised by the Revenue Commissioners that land occupied by solar equipment would not qualify for agricultural relief.

This has enormous consequences for farmers on family farms as it means that such land would not qualify for the 90% reduction in market value applying to the passing on to the next generation of agricultural land.

In addition, because the land would be leased, it would not qualify for the normal business relief. This statement, coupled with an IFA statement of 3 November, quoting Minister Naughten that his Department “is unlikely to provide any significant support for solar energy in the short term”, added to the doubts.

It is a pity that Irish policy is so out of step with most of Europe and particularly Britain in its active discouragement of the development of solar power.

All the evidence is that with the current hugely reduced cost of solar panels and the EU obligation to meet renewable energy targets that solar energy has a valid role to play.

The best estimate is that with modern panels, each acre devoted to solar power produces about €10,000 of electricity per year.

Typically the rents being spoken about to farmers are in the region of €1,000 to €1,500 per acre, per year. The costs of development for the developer are high but there is clearly no shortage of companies willing to enter the Irish industry – if the conditions are right.

There are a number of crucial steps that both farmer and developer need to be aware of.

The most critical is a grid connection. Once a developer has identified a suitable site for a solar farm, he must find out if the site is going to be acceptable to the ESB as a source of electricity generation. The ideal is if the site is close to a generator with spare capacity.

At that stage, the developer can approach the site owner and ask if he can apply for a grid connection, assuming the site is going to be developed.

Significant fee

The ESB demands a significant fee for giving the theoretical go-ahead. Also, the ESB will only entertain one application for a particular site so the farmer will need to be happy that he is giving a reputable company permission to apply using his land as the site.

At the same time, the developer will be approaching the local authority to get some indication on the likely attitude if a planning application were to be made for a solar farm on the identified site.

If a grid connection seems possible and likely and the preliminary guidance from the local authority is favourable, then it’s all systems go.

The developer and his solicitor will try to tie down a legal option on the land. This option will be exercised and turned into a full lease if all the planning and technical details fall into place.

Normally, the farmer can expect a significant signing fee and annual payment once the option agreement is in place. Usually it would last for around three years so that all the development and legal details can be ironed out. It’s only then that the full lease would be put in place and the full lease income begin to flow.

Negotiations

The normal length of the lease would be 25 years and this will be subject to really detailed negotiations between the developer and the farmer. The terms of the lease should be absolutely clear before the legally binding option agreement is signed.

Broadly, the lease will be based on detailed maps showing the exact position of the intended solar farm but it will cover lots of other areas such as: the conditions around entry to the land, what happens if the developer wants to sell on the completed solar farm and what happens the grid connection rights if full planning permission is refused.

Some agreements attempt to put in limitations on what can be done on the rest of the farmer’s land – even if it is not joining the solar farm area. Then what cables will be laid by the developer and for the ESB, where will these go and if there will be compensation.

Good legal, tax and technical advice is essential before the option agreement is signed, not afterwards, but all that said, the goal of a project for a farm is well worth pursuing.

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