Why shouldn’t a landowner authorise a developer to apply for a grid connection?
We’ve been getting a message out to landowners for over three years — that is, don’t sign a letter authorising a renewables or storage developer to apply for a grid connection on your land. This has been taken on board by many. But it is concerning that we get calls from landowners who have successfully applied for grid rights in their own name and are now in a dilemma because they are facing expensive obligations.
Why you shouldn’t authorise the developer to apply to the Network Operator
There are a few reasons why a landowner should not sign a letter of authority to a developer. The main ones are:
- Developers are technology specific. The good developers or operators of power and storage plants are always specialists in their field, and only offer one technology — be that battery storage, gensets or a form of renewables. The developer will apply for grid rights for their own technology. However, if grid capacity is available, the local grid network is normally only suited to one technology and not all. So battery storage, for example, could be inappropriate for the network, but gensets or solar would be a better option. By signing to a developer, the landowner is limiting themselves not only to one developer, but also to one technology which may not be appropriate for the site.
- Limiting competition, rents and terms. If a developer’s application is successful in getting a grid connection, they have exclusive use of the grid rights. The landowner’s advisers cannot go out to competing developers, and the developer will use that position of strength in their negotiations on rents and terms. However, if grid rights have been secured and safeguarded away from the developer, the advisers can invite bids from the best resourced and most experienced developers – resulting in safe competition and improved outcomes for the landowner.
What happens if the application is in the landowner’s name?
Some land agents and grid consultants are encouraging landowners to have grid applications submitted in their (the landowner’s) name. This route can expose landowners to thousands of pounds worth of risk.
Accepted grid rights offers also come with obligations, such as a grid deposit (often between £25,000 and £150,000), a substantial second stage payment for plant and equipment, and considerable pass-through charges from National Grid. If the grid rights are in the landowner’s name, then they might have to bear the cost of those obligations.
So, what should a landowner do instead?
Grid rights are typically worth £500,000 and £2,000,000. A landowner must protect the value of their grid rights and safely negotiate and transact them with a developer.
A landowner can avoid the costs of transacting their grid rights, avoid the risks of losing their rights, and can put themselves in a strong negotiating position with developers by taking niche, specialist advice. There are a few grid rights experts in the market, but none with the level of expertise or the unique approach of Roadnight Taylor. We can ensure that grid rights are safeguarded and transacted safely and independently in a way that mitigates risk and maximises the returns for landowners.