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Five hundred and nineteen commercial solar farms have sought renewable energy (RE) connections on to the Irish grid in the 20 months to August 2016; the total size in MegaWatt (MW) of these commercial solar farms is 3,952MW, circa 4 GigaWatt(GW), covering approximately 20,000 acres, representing an average of 7.6MW/38 acres per commercial solar farm.
Commercial solar farm activity is advancing rapidly in Ireland, with UK and EU developers along with the semi-states recently more active on the ground. The ESB’s head of regulation and strategy Peter O’Shea has called for no subsidy support for solar farms due to ongoing solar panel cost reductions.
The EU minimum import price (MIP) for solar panels maintains an EU-wide artificial price. What effect will Brexit have on solar panels MIP for Ireland? The bet on a solar farm subsidy model akin to the wind subsidy model may not be sound – that debate is for another day. What should the farmer be looking out for in a new commercial solar venture? Where is the devil in the detail from the farmer’s perspective?
Of significant concern to the family farm is farm transfer and succession planning. Section 89 of the Capital Acquisitions Tax Consolidation Act (CAT) 2003 provides for agricultural relief. The relief takes the form of a 90% reduction in the taxable market value of the gifted or inherited agricultural property.
The person taking the gift or inheritance (the beneficiary) of the agricultural property must qualify as a farmer for the purpose of section 89 CATCA 2003. This means that a beneficiary’s agricultural property must comprise at least 80% by the prevailing gross market value of the beneficiary’s total property at a particular date.
In a recent parliamentary question by James Browne TD, Minister for Finance Michael Noonan replied that “The Revenue Commissioners take the view that land on which solar panels are installed is not agricultural property for the purpose of establishing whether or not a beneficiary satisfies this 80% test.
Thus, depending on the amount of an individual’s land that is actually occupied by solar panels, the use of agricultural land for a solar farm may result in a beneficiary’s failure to satisfy the 80% test and to qualify for agricultural relief.
A condition for agricultural relief that applies in relation to gifts and inheritances taken on or after 1 January 2015 is that a beneficiary must actually farm the land for a period of at least six years after taking the gift or inheritance. The ability to farm the land would be affected if solar panels were actually installed on the farm during this six-year period.
The family farmer should take the best legal and tax advice to ensure that they qualify for the 90% CAT agriculture relief for the six-year period. The current post-threshold CAT rate is 33% and it is difficult to predict land prices at any future point in time. There is no point in being penny wise and pound foolish when contemplating a new commercial venture – the long-term implications need to be fully understood.
With commercial solar farms taking up between 25 and 35 acres, the 80/20 90% agri relief qualifying CAT rule may well mean that a commercial solar farm may not be suitable for small- to average-sized farms in Ireland. Lands leased for 25 years with automatic rollover lease options should also be checked for tax obligations.
BPS eligibility
Any agricultural land switched to commercial solar farms will not be eligible for a BPS claim for the duration of the contract. Minister of Agriculture Michael Creed has indicated that: “While cases involving solar panels will be examined on an individual basis, the area covered by the solar panels will be deemed ineligible for the purposes of claiming BPS, in line with advice from EU Commission.”
The BPS schemes introduced in 2015 spread payment over all lands owned/rented/leased. Additional lands to transfer entitlements to may not be readily available. Farmers should check availability and cost of land to transfer entitlements and ensure availability for the duration of the commercial solar farm. Otherwise, the farmer may be rescinding entitlements in perpetuity on commercial solar farm lands.
An additional caveat is that farmland should be owned/leased and used and managed by the BPS applicant in order to qualify for the scheme. Land owned by the farmer but leased to a solar developer for a commercial solar farm should be checked for eligibility.
It is unclear if farmers who installed commercial solar farms on their lands will be recompensed in any way for offsetting agricultural greenhouse gases (GHG) emissions and if those solar GHG offsets will be allocated to the farming sector or allocated to the RE electricity generation sector via the solar developer in meeting Ireland’s EU 2020 targets.
Farm sector GHG emissions are in the EU spotlight, should GHG reduction via commercial solar farm activity be reflected in farming sector emissions.
Will a delivered agri carbon credit be ringfenced for the agri sector for dairy or beef production? Will the solar farmer benefit and/or be able to trade these credits in the farming community? How will large-scale commercial solar farms be treated in relation to Food Harvest 2020 and Food Wise 2025? Will marginal lands be preferential over prime agriculture lands?
There are no national or local solar guidelines; this is the environment in which farmers are being asked to make commercial decisions.
Farmers should be aware that a valid grid connection application linked via an option/lease to their farmlands may become a tradable item exercisable at the discretion of the developer.
The farmer should receive good legal advice on how to protect their farm from commercial strangers and how to move their commercial solar farm contract to a competitor solar developer should a particular solar developer sit on their hands – for whatever reason.
Caution
The farmer should exercise caution about signing any contract with regard to their lands that allows a developer to exercise optional control in perpetuity, even to successors, over their lands; before putting pen to paper, all tax obligations should be fully understood.
Some effort has been made in the promotion of the concept of commercial community solar farms. Farms tend to be owned by farmers. Communities, and more importantly individuals, should not be excluded from the benefits of solar. Any proposed solar RE feed-in tariff (REFiT) should be made available for rooftop solar for all.
Our houses are both energy users and energy storage devices. Solar energy can be stored in hot water tanks and storage heaters, and the excess RE can be sold to the grid. Farm dwellings and outbuildings can avail of rooftop solar in the same way.
Is there any point in proposing a commercial solar farm REFiT of 17c per kiloWatt hour (c/kWh) when this is circa the same price the ESB charges to consumers? This can only mean prices increasing for everyone – check your latest energy bill.
An equitable in/out rooftop solar c/kWh rate does make sense. It benefits all, even the farmer who has the greater roof space. Putting in/out energy infrastructure in place may benefit the farmer for other alternative methods of energy production.
The “green deal” funding model whereby the energy bill is commoditised makes the investment affordable for all. Rooftop solar would create significant construction employment. New and sustainable jobs in a new indigenous industry not reliant on FDI must be welcomed.
A commercial solar farm REFiT will not likely be in place until mid to late 2017. The farmer should maintain full control and marketability of their lands until the economic reality of commercial solar is known.
Solar will undoubtedly be of benefit to Ireland in its future energy mix. The question is how to best implement solar. Ireland has a choice: go down the well-trodden contentious and legally adversarial REFiT path of subsidies for large commercial business or open up the REFiT subsidies to all, automatically including the small- to medium-sized farmer, by allowing a Solar REFiT for your main assets – your home/business premises.
A commercial solar farm REFiT can only work if the price of everyone’s energy bills goes up. Would an in/out rooftop solar REFiT reduce energy consumption (and bills) by incentivising households to reduce their energy consumption – the carrot versus the stick?
Ireland’s struggling renewables sector at a crossroads
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