Tomorrow is World Environment Day, a global awareness day that aims to inspire action for the protection of our planet. This year’s theme is “Reimagine. Recreate. Restore.” which calls for urgent efforts to restore the Earth’s ecosystems and reverse the loss of biodiversity. One of the key sectors that can contribute to this goal is the real estate industry, which has a significant impact on energy consumption and greenhouse gas emissions.
According to the United Nations Environment Programme – Finance Initiative, the real estate sector is responsible for around 40% of all greenhouse gas emissions globally. Therefore, the real estate industry must consider ways to reduce its carbon footprint and embrace renewable energy sources. In this article, we explore how the real estate sector can adopt innovative leasing models that benefit both landlords and tenants as well as the environment. We will look at some examples of renewable energy leases, such as electric vehicle charging points, solar panels, and wind turbines, and how they can create value for real estate portfolios.
Lease of Electric Vehicle Charging Points
At the UN Climate Change Conference (COP26) in Glasgow in 2023, more than 30 countries agreed to stop selling new CO2-emitting cars and vans by 2040 worldwide and 2035 in leading markets. This will lead to more sales of electric vehicles (EV) and more EV charging points. EV charging points can be set up in domestic homes (all new homes from the 15th June 2022 must have EV charging points), workplaces and large public charging point facilities such as motorway service stations and land owned by private individuals. Domestic homes and small office spaces can get a low-cost package off the shelf and larger and/or public sites may need a more customised package at a higher cost. Customised EV packages will need the lease to offer more flexibility to allow for the installation of updated software without affecting the use of the charging point.
With the increase in sales of EVs and the government plans of over £1 billion in funding, it would be a good chance for landowners who want to partner with an EV charge point operator to benefit from the growing demand for providing enough charging infrastructure.
The EV charging point lease will control the installation, operation and maintenance of a charging station and infrastructure by the EV charging point operator on a landowner’s property.
Solar Panel Leases
Solar panel leases are a way of producing renewable energy from sunlight. Solar panels can be bought or leased. A solar panel lease means that a third-party company owns, installs and maintains the solar panels on the property owner’s land. The property owner can get rent and/or use the electricity from the solar panels. Solar panels lower electricity costs and create green energy.
Buying solar panels is expensive, so a solar panel lease is a cheaper alternative to producing renewable energy. However, problems may occur when selling a residential or commercial property with solar panel leases, especially if a prospective buyer is getting a mortgage or legal charge on the property, which may cause delays in completion.
Lease of Wind Turbines
There has been an increase in the use of wind turbine leases especially in open exposed areas prone to high levels of wind and gales, generating significant amounts of electricity.
A wind turbine lease is an agreement between a landlord and a developer to enable the developer to develop a wind farm on the landlord owner’s land in exchange for rent and an agreed annual turnover.
A lease would be required for the construction and operation of a wind turbine. The lease would contain provisions permitting the installation and use of the wind turbines including associated infrastructure.
The benefits of wind turbine leases are that they generate electricity via a renewable energy source, generate an income stream, utilise land space, save energy bills and reduce use of the grid.
Looking ahead
Renewal energy leases are on the rise and offer a great solution to the reduction of carbon footprint as well as offering landowners a long-term rental opportunity.
Given that renewal energy leases are still relatively new and divert significantly in some circumstances to traditional leases it is vital that landowners seek independent professional advice to ensure that the provisions contained in the lease are tailored to the site in question and the landowner’s specific requirements to insure, that landowners can also reap the benefits of renewal energy leases.
If you are considering granting a renewal energy lease, please do not hesitate to contact our commercial property department for further information at 0191 384 2441.
