PRICE OBSERVATORY

The implementation of wind power involves economic impacts at the local level. One of the main impacts is the income perceived by the owners of wind farm lands. This section provides qualitative and quantitative information about the negotiation process between wind farm owners and developers. On the other hand, the Guide for landowners with wind potential may be downloaded. It provides information of interest and advice concerning land occupation processes for starting up new wind farms. The Galician Wind Observatory, with the support of the Isla Couto Foundation and the Juana de Vega Foundation, aims to become a useful tool for improving income from wind farms in the rural world.

THE MECHANISMS OF ACCESS TO WIND LAND

Wind development requires access to the land required to carry out energy production. The existing regulatory framework favors the occupation of land by developer companies by establishing various options that virtually guarantee their access to them.

The access mechanism also determines the rural owners’ likelihood of obtaining income. Thus, payments to landowners with wind capacity result from the application of any of the access mechanisms established in the regulatory framework. The use of these mechanisms is legally limited according to the type of ownership, private individual or collective private, and the choice is an element that conditions final economic results, understood as generated income flows for rural owners.

Wind power companies basically have three possible options for accessing land with the necessary wind capacities for a wind project development:

Purchasing land from the landowners
Requesting the declaration of public utility from the competent authority to allow for the expropriation of the real estate required to exercise this activity.
Leasing the land from its owner

Land acquisition by the wind farmers can only be exercised on individual private land. This excludes the option of occupying private-collective mountains belonging to the Communal Neighborhood Communities because these goods are inalienable. Therefore, sales may only be carried out by individual private owners. CMVMC cannot access this option. However, the other two options for the acquisition of land by wind farms are valid for all forms of ownership: private, private-collective community and public.

The forms of payment to renting land for wind farms

The following three possibilities have been identified In lease agreements signed between landowners and wind farm companies:

Payment via a billing percentage
Payment according to occupied surface
Payment of a fee based on installed power

Each one of the existing modalities has its specific conditions. We must also keep in mind that mixed modalities will occasionally appear in the same contract.

1. Payment via a porcentage of the invoicing

In this type of payment, landowners receive a contractually predetermined percentage of the invoicing of the wind installation. The payment of a percentage of the invoicing or the gross income of the wind parks implies a greater vulnerability for the landlord in relation to the market conditions. The landlord will benefit if the billing increases and jeopardized if it decreases. The owner participates in the good or bad work of the company by assuming a certain market risk, which is very evident in the current times of demand retreat. Thus, the owner of the land will receive the amount of gross income obtained from the sale of the energy produced by wind turbines installed on the land. This option is of great interest to the owners who can solve the possible vulnerability by establishing a minimum payment in this form of compensation by invoice percentage given the possibility of reduced gross invoicing due to periods of detained production resulting from the breakage of wind turbines.

In this modality, the known cases of wind farms currently in operation show that landowners perceive a percentage of the turnover that generally begins at 1.5% for the first ten years and then rises to 4% over the following years of the contract.

2. Payment according to occupied surface

This payment method is based on the occupation of the land originating from the wind farm project. Full domain and servitude are different types of wind farm occupation; different categories (roads, shoes, flight easement, substation, etc.) are present within these types of occupation. The promoter will therefore pay the owner based on the occupied surface. The Galician case presents two alternatives in this type of payment:

On the one hand, there may be an annual unit payment per affected area for the entire land surface without differentiating between the different existing conditions. That is to say, the owner of the land receives an annual payment that results from multiplying the meters of affected area by a unit amount per surface unit (square meter or hectare) determined in the contract signed by both parties.
The other option is a differentiated annual surface payment depending on the type of effect on the surface. That is to say, the amount will be different depending on the type of effect, e.g. whether the surface is affected by the foundation or platform of the wind turbine, or whether it is a affected by some easement, such as the flight servitude or the wind protection surface. Namely, the owner of the land receives an annual payment that results from multiplying the meters of each specific type of effect by surface unit (square meter or hectare), as determined in the contract signed by both parties.

In the cases of operating wind farms, the annual unit payment per affected surface unit for all types of surfaces ranges between a minimum of € 0.03 / m2 and a maximum of € 0.61 / m2. On the other hand, the payments that differentiate the annual amount according to the intensity of the occupation range from € 8.73 / m2 for the full surface area of wind turbines to 0.003 € / m2 of easement for docks and wiring.

3. Payment of a fee based on the installed power

Traditionally, the most common agreement modality between landowners and wind farms is the establishment of an annual fee based on installed power. This payment modality for access to land is directly conditioned by the number and unit power of wind turbines on the owner’s land. Most developers of wind farms operating in the Galician territory use this form of payment. Payments can greatly vary depending on the developer, the year, the geographic location, etc. The amounts the owners receive based on installed power are reflected in the contract either as wind turbine or power (euro per MW).

According to the analyzed Surface Rights, the economic benefits provided in the contracts with payment by power are calculated taking a wind turbine of a determined nominal power indicated in the documents as the reference. This is indicated in such a way that a hypothetical replacement of the wind turbine model by another one of greater unit power would proportionally increase payments.

Taking this modality to a unit payment to allow for comparing the contracts, we observe that the extremes are located between 1,250 and 7,500€/MW for the known cases of operating wind farms.

Average land lease payment for wind farms in Galicia

Payment modalities for owners of wind farms in known wind farms give very different results for each specific wind farm, but they do reveal the existing averaging dynamics. Thus, we can estimate the average payment received during the development of the wind farms if we take payments to a comparative unit (€/ MW) and update the revenue according to CPI variations. See the following figure.

Figure: Dynamics of the average annual payment received by wind farm land owners in Galicia (€ / MW).