As some onshore wind farms across the UK reach the end of their intended operational lives, developers are faced with three main options:
- Decommissioning. This involves dismantling the site, removing the turbines and any other infrastructure and restoring the land to its original state, as required by the terms of the project lease and/or consents.
- Extend the life of the wind farm. This involves extending the existing land rights and planning consents (which often restrict operation to 25 years, although longer periods have been imposed in recent years), and perhaps upgrading or replacing some components of the wind turbines.
- Repowering. This involves decommissioning the existing turbines and installing new turbines in their place.
Each of these options presents different challenges, costs and opportunities for developers. This blog will cover some of the main legal points for a developer to consider should they wish to repower or extend the life of a wind farm. It assumes the number and location of turbines does not change; different considerations can apply, especially in consenting, if the proposal is for a different layout of fewer, taller turbines.
Land Rights
Onshore windfarm leases often contain provisions relating to the extension of the lease term which developers can utilise to extend a wind farm's lifespan.
Exercise a right in the project lease to extend the duration of the lease
If the project lease contains a right to extend and that right to extend is definitive (for example, the term and the rent for the extended period are set out in the current lease and are workable) then the developer's ability to extend the original lease term may be relatively straight forward.
More negotiation may be required where project leases do not contain explicit provisions relating to lease extension for lifespan extension or repowering. The provisions will have been drafted – in some cases over 30 years ago – without knowledge of what was proposed for the project decades down the line. Careful analysis of the adequacy of any extension provisions contained in the existing project lease and the future needs of the project can assist in structuring negotiations with landowners.
Negotiate an extension of the duration of the existing lease or negotiate a fresh lease
This may take time and will depend on reaching commercial agreement with the landowner in a free negotiation. Negotiation of an entirely fresh lease may not be necessary, but fairly extensive negotiations of any variations can be expected; windfarm leases have evolved hugely over the years.
Agree a new option
However, in most circumstances we believe that it will be an advantage to negotiate an option either for a new lease or an extension to the existing lease. This is because a variation to the existing planning consent or a new consent will be needed to develop the new project, and the developer may want to proceed with the project only if allocated a CfD. In many ways, the considerations applying to the development of a repowered project are similar to the development of a greenfield project.
In a situation where a developer is not the current operator of the windfarm, that developer can proceed by way of an option agreement with the landowner, to take effect on the expiry of the existing lease. In this situation, it may be useful to buy the tenant company from the existing developer. This would enable the developer to take over the decommissioning obligations of the existing tenant and manage down the existing windfarm in the most economically efficient way when constructing the repowered windfarm. From the existing developer's point of view, it means it can avoid the need to organise the decommissioning of the existing windfarm.
Additional Land Rights
Repowering will involve installing larger turbines to the wind farm site. The developer should seek advice as to whether the original land rights under the lease are sufficient to allow the redevelopment of the site.
It may be necessary, for example, to negotiate wider access rights (for example in relation to overrun and oversail required in the face of substantially larger component parts) with third-party landowners who were previously unaffected by the original scheme, or an extended wind protection zone.
Planning
If a local planning authority (LPA) consent is in place, it may be possible to proceed by way of a new planning permission or a variation to the existing planning permission. The relevant planning permission authorising the construction of a wind farm will generally be limited in its duration and its tip height.
The appropriate approach to be taken depends on whether the duration or tip height of the turbines are stated in the description of the development or only limited by conditions.
- If these restrictions are set out in the description of the development, a full planning application will be required to obtain a new planning permission for the extended term or higher turbines. This would potentially cause difficulties as the principle of the wind farm development will need to be considered against policy – i.e. does a wind farm on that site of that size for "X" years comply with the development plan. If the development plan has changed since the original permission was granted, then this may change the outcome of the application.
- If the description of the development on the permission is silent on the duration and/or turbine tip height, the permission will almost always contain conditions restricting the period after which the wind farm must be decommissioned and/or the maximum tip height of the turbines that can be used. If the restrictions are contained in the conditions (and not the description), the developer would only need to vary the conditions rather than submit a full planning application. This is known as a "section 42 application"; section 73 in England and Wales. The advantage of this route is that the only matter that is assessed is the impact of the extension or increase in tip height of the existing wind farm, not the wind farm itself – i.e. does an increase in the tip height and/or the extension of the existing wind farm for "X" years comply with the development plan. In other words, it is assessing the change only.
There is overlap between the two, but the difference could make all the difference (and affect the application fees payable).
In Scotland, onshore wind farms over 50MW are consented by the Scottish Ministers under the section 36 procedure. If a section 36 consent is in place, you can proceed by way of a section 36C variation or a new section 36 consent. If the repowering increases capacity above 50MW, the local authority consent will need to be replaced by a new section 36 consent rather than a variation.
Consideration should also be given to whether any planning obligations (section 75 or 106 obligations) will need to be varied to reflect the new or varied planning permission.
Grid
The existing project will have a grid connection agreement in place permitting the project to export power to the transmission or distribution network.
If the repowered project increases the capacity of the windfarm, the developer will need to apply for a new or upgraded connection for the repowered project. Even though the developer may have an existing operational connection to the grid, if the developer plans to export more power to the grid, they will join the grid queue in the normal way in requesting that additional capacity. Given the current state of the grid queue, it may be preferential to consider making a grid application for the additional capacity sooner rather than later.
If the grid capacity will remain the same, and the developer intends to continue with the existing grid connection agreement, the equipment connected will change as new turbines are installed. The connection agreement will need to be reviewed to ensure that the wind farm can still comply with the undertakings contained in the connection agreement. In any event, there is very likely to be an obligation to notify the grid operator of any change to the equipment on the site. This is the case under the national terms of connection. It is likely therefore, even if the overall capacity of the project is not increased, some modifications to the connection may be needed.
CfD Revenue Support
It is now likely that some revenue support will be available for repowered windfarms. In January 2024, UK Government consulted on changes to the Contract for Difference (CfD) scheme for the seventh allocation round (expected in 2025) and beyond including the potential for repowering onshore wind projects to be eligible for CfD support. There will be conditions for eligibility which, at a high level, are:
- Projects must have reached the end of their operating life by or before the end of the applicable Delivery Year in the relevant Allocation Round and are not in receipt of any other subsidy at that point;
- Projects must be able to at least retain the capacity of the existing wind farm over the term of the CfD;
- Projects must align to the fundamental CfD case for intervention including high upfront capital costs;
The precise detail of this policy is still under development, but this is a positive measure to support investment in repowering projects.
Power Purchase Agreement
The developer will need to comply with the terms of any power purchase agreement (PPA) entered into in relation to the project. Many PPAs contain obligations about maintaining a certain level of capacity so that the PPA offtaker can estimate the output of the project and hedge their liabilities accordingly.
The developer will therefore need to make sure that your final PPA for the project contains obligations compatible with your decommissioning or repowering programme. This may involve giving notifications of certain amounts of capacity coming off stream so that the developer can manage down the existing windfarm in as efficient a manner as possible.
