What's the capital value of land in solar?

[barleyboy]

If operators are paying £1,000 - £1,250/acre rental for solar, anyone know what that makes the site worth per acre (after site is built and energised)?

Presume it's worth more than bare agricultural land?

 

[Doing it for the kids]

Good question, I’d be interested in an answer too now.

@warksfarmer

 

[barleyboy]

Good question, I’d be interested in an answer too now.

@warksfarmer

I'll hazard a guess.

Some investors would be happy with a nice safe 5+% return, so if it's an almost guaranteed income like solar rents would be for 40 years. That would equate to about £20k/acre.

Current interest rates might make that say 7% desired return.

Interested to hear other opinions.

Edit. Solar rent would be index linked, so the investor's percentage return would increase over the years.

 

[Levelsman]

I'll hazard a guess.

Some investors would be happy with a nice safe 5+% return, so if it's an almost guaranteed income like solar rents would be for 40 years. That would equate to about £20k/acre.

Current interest rates might make that say 7% desired return.

Interested to hear other opinions.

Edit. Solar rent would be index linked, so the investor's percentage return would increase over the years.

...until the Lease expires!

 

[Against_the_grain]

If operators are paying £1,000 - £1,250/acre rental for solar, anyone know what that makes the site worth per acre (after site is built and energised)?

Presume it's worth more than bare agricultural land?

£1250 x 40 years = £50,000/acre. More or less than this depending on the views of the current owner and if he wants to release capital or not

 

[teslacoils]

Difference between the value of the land with solar on it, and the value of the lease. You can sell the 40yr income stream to a pension fund but retain the land for example.

You'd be looking at the present value of all those payments, with an appropriate multiplier for rate of return for the lease income stream.

 

[Steevo]

...until the Lease expires!

And/or the government decide to change the rules.

A few years ago a telecoms mast was worth £5k+ annual income.

Post renewal many are now lucky to be getting £500 a year, while there has even been talk of offers of £50 a year.

 

[Highashgrange]

If operators are paying £1,000 - £1,250/acre rental for solar, anyone know what that makes the site worth per acre (after site is built and energised)?

Presume it's worth more than bare agricultural land?

. One has just been sold I know of at £50,000/ac.

 

[warksfarmer]

Solar farms that got the tariff in a standard sunlight year at pre energy price rises will turnover around £25,000/ac/year which is a mix of elec sales and rocs.

newer farms without the tariff would effectively be 50% less although factor in new tech it might be a bit lower at 40% less.

So the value of the land will vary depending on tariff basically. The idea that solar farms will be removed at the end of the initial planning periods typically 25 years is wrong. They’ll never be removed as they are now to important to how we create energy in this country.

so to value them you need to think about the fact your only going to sell it once. The buyer is going to be earning upto £25,000/ac/yr until the tariff runs out then 50% if that per year. Then factor in index linking.

yes there’s running costs to factor in but in my view to sell one with tariff your into £100,000/ac territory at the very least.

If you’ve got one with tariff and let’s say 20 yrs left earning £25k/ac/yr that’s £500k of total income per acre. Then it runs another 20 yrs at £12.5k/ac/yr, that’s another £250k/ac. that’s without factoring in index linking or higher sale prices of elec due to the ongoing energy crisis. Total income £750,000/ac. If you’re selling at under £100,000/ac you are mad. If nobody will buy it at that level don’t sell it and keep earning from it.

 

[Steevo]

The capital value of land in solar is a complex subject that depends on many factors, such as the location, size, design, and performance of the solar project, as well as the environmental and social benefits it provides. One way to estimate the capital value of land in solar is to compare the land use of solar photovoltaic (PV) systems with the electricity they generate. According to one source, the land use of solar PV systems can typically range from **60 to 400 ft per Megawatt-Hour (MWh)** for new utility-scale installations. This means that the more electricity a solar project produces per unit of land, the higher its capital value. However, this is not the only factor to consider, as solar projects can also enhance biodiversity, restore ecosystems, and support agriculture, which can increase their natural capital value.

Is is just me, or does that sound almost exactly like it was written by AI?!

 

[snarling bee]

The solar land will not be eligible for any IHT reliefs unless you operate it (as opposed to rent it out). Whereas agricultural property relief for IHT on land has artificially kept prices high.
My view agrees with above that a solar park is unlikely ever to be returned to agriculture.

 

[serf]

And/or the government decide to change the rules.

A few years ago a telecoms mast was worth £5k+ annual income.

Post renewal many are now lucky to be getting £500 a year, while there has even been talk of offers of £50 a year.

Best cut them down then and take them away !

 

[barleyboy]

Solar farms that got the tariff in a standard sunlight year at pre energy price rises will turnover around £25,000/ac/year which is a mix of elec sales and rocs.

newer farms without the tariff would effectively be 50% less although factor in new tech it might be a bit lower at 40% less.

So the value of the land will vary depending on tariff basically. The idea that solar farms will be removed at the end of the initial planning periods typically 25 years is wrong. They’ll never be removed as they are now to important to how we create energy in this country.

so to value them you need to think about the fact your only going to sell it once. The buyer is going to be earning upto £25,000/ac/yr until the tariff runs out then 50% if that per year. Then factor in index linking.

yes there’s running costs to factor in but in my view to sell one with tariff your into £100,000/ac territory at the very least.

If you’ve got one with tariff and let’s say 20 yrs left earning £25k/ac/yr that’s £500k of total income per acre. Then it runs another 20 yrs at £12.5k/ac/yr, that’s another £250k/ac. that’s without factoring in index linking or higher sale prices of elec due to the ongoing energy crisis. Total income £750,000/ac. If you’re selling at under £100,000/ac you are mad. If nobody will buy it at that level don’t sell it and keep earning from it.

Sorry, I didn't explain my question very well.

I meant if it's owned by the farmer, but the panels and electricity income owned by the operator. i.e. farmer is just the landlord and getting say £1200/acre rent. So if farmer sells his interest in the property.

 

[barleyboy]

The solar land will not be eligible for any IHT reliefs unless you operate it (as opposed to rent it out). Whereas agricultural property relief for IHT on land has artificially kept prices high.
My view agrees with above that a solar park is unlikely ever to be returned to agriculture.

Suppose you could pass it to next generation under the seven year rule? (If you're lucky enough to time it right).

 

[Levelsman]

Suppose you could pass it to next generation under the seven year rule? (If you're lucky enough to time it right).

CGT?

 

[barleyboy]

CGT?

Could you explain please (if you know). Is CGT due at some point? On passing it over?

 

[Levelsman]

Could you explain please (if you know). Is CGT due at some point? On passing it over?

I'll PM you.

 

[Exfarmer]

I think CGT can be defferred , certainly used to be. Of course the liability is still there in the future, but if the land did revert to agriculture it would then lose the spike in value during the occupation of the panels.
It could be an intresting point that towards the end of thre lease there may b e a period when the land value drops but would be a case for a good accountant and tax lawyer

 

[curlietailz]

The original opinion post may not have been correct. I need to make some inquiries. I have taken it down to avoid giving anyone the wrong impression.

 

[serf]

Hold over relief