Dual land use: energy and environmental

Renewable energy projects are increasingly being developed alongside natural capital initiatives. The statutory requirement for new planning applications to demonstrate at least 10% biodiversity net gain has been a key driver, but it is not the only reason developers and landowners are exploring this kind of dual land use.

Dual land use in renewable energy projects is not new. Solar projects are particularly suited to complementary biodiversity initiatives thanks to their limited infrastructure footprint. For developers, ecological enhancement can support the planning case, improve stakeholder engagement (or at least minimise detractors), and enhance their ESG credentials. It can also help address local concerns that land is being “lost” to infrastructure by showing that energy generation and environmental improvement are not necessarily competing objectives.

For both developers and landowners, the opportunity may be broader than the energy project itself. With increasing demand for rural land from energy generation, food production, housing and environmental mitigation, there is growing interest in whether a single holding can support multiple uses and income streams. Landowners can benefit from a variety of natural capital opportunities, such as carbon sequestration, by adapting or limiting agricultural use. The emergence of natural capital markets has added a further commercial incentive, particularly where biodiversity enhancement above the statutory minimum may create an opportunity to generate additional revenue by selling units to other developers requiring off-site mitigation.

However, these opportunities are not always freely stackable. Energy generation, biodiversity, agriculture and the sale of environmental units may each impose different legal, practical and commercial requirements. If those requirements are not properly understood and structured, one use may restrict, dilute or even prevent another.

Dual land use is not simply a case of adding biodiversity to a renewable energy project. The land strategy, legal rights, operational obligations and commercial allocation of value all need to be considered from the outset. Let’s consider some of the practical issues when it comes to this kind of dual land use.

Permitted use and land rights

A solar or storage project lease may not automatically allow the land to be used to create and sell surplus biodiversity units. If a developer wishes to pursue that opportunity, the lease’s permitted use may need to be varied. In addition, a lease will typically only grant rights to carry out those works required for the energy project and to comply with its planning permission. To undertake additional ecological works, the developer may require additional rights to create and manage those habitats.

Compatibility with project design and operation

Habitats and landscapes created to support biodiversity initiatives must remain compatible with the energy project’s operational requirements, avoiding any restriction or interference with cable routes, access tracks and maintenance works, such as module replacement or cable repairs.

One way to do this is to create buffer zones between the operational parts of the site and any biodiversity land, so that if any works are carried out, they do not breach the planning or conservation covenants around the ecological use. Where this is not possible due to space being constrained, other forms of ecological use which are more passive, such as grazing or hedgerow enhancement, may be more suitable.

Long-term management obligations

Many natural capital initiatives require long-term commitments. BNG schemes usually require areas to be maintained for at least 30 years, often secured through a conservation covenant or a planning agreement and supported by a habitat management and monitoring plan.

These obligations need to be considered alongside the operational needs and potential of the energy project and funders’ expectations. Responsibility for habitat and landscape management, monitoring and funding must be clearly allocated, and funders will require certainty that ecological obligations do not undermine the operation, value or bankability of the energy asset.

Selling units and revenue allocation

Once the planning obligations surrounding use of the habitat land are in place, the site must be registered on the national biodiversity gain sites register before units can be allocated to specific developments. The parties will need to agree how revenue generated from natural capital initiatives will be allocated.

Generally, benefits arising from the ownership or management of the land will often fall to the landowner, whereas value created through the development or through ecological enhancements delivered by the developer (including off-site works carried out as part of the project) are typically due to the developer. The allocation and any other revenue sharing arrangements are usually set out in the lease for the energy project.

Avoiding double counting

Works used to generate biodiversity units cannot generally also underpin carbon credits or other environmental market schemes. Care must be taken to ensure environmental outcomes are allocated clearly between different schemes. It is also important to distinguish between biodiversity enhancements required to satisfy the project’s own planning obligations and any surplus enhancement that may be capable of being sold separately.

The same habitat creation works should not be assumed to generate multiple saleable environmental benefits. Clear records will be needed to show which works are being used for the project’s own BNG requirement, which are intended to generate off-site biodiversity units, and whether any separate carbon or nutrient mitigation scheme is being pursued.

End-of-term liabilities

Landowners will want to ensure they do not inherit unexpected obligations at the end of the developer’s lease term, particularly where long-term habitat commitments extend beyond the operational life of the energy project. This risk may be addressed through decommissioning obligations, security arrangements or provisions dealing with the transfer of ongoing management responsibilities.

If the landowner is expected to inherit the benefit of a natural capital scheme, the parties should also consider whether the associated income is sufficient to meet the ongoing monitoring and maintenance costs. Conversely, if the developer remains responsible after decommissioning, the landowner will want to know how that obligation will be secured and enforced once the energy project has ended.

Future-proofing

Natural capital is a relatively nascent market and is likely to evolve significantly over the coming decades. Agreements should therefore allow as much flexibility as practicable to accommodate changes in regulatory frameworks, environmental standards and project technology.

Flexibility will be particularly important where the developer may want to upgrade panels, reconfigure the site, add battery storage or extend the operational life of the project. Those changes may require new cabling, additional compounds, revised access arrangements or amended planning permissions. If ecological commitments have been drawn too tightly, they may unintentionally restrict those future works. Equally, landowners will want to avoid granting rights that prevent them from participating in future natural capital markets that do not yet exist.

Key takeaways