Margi Campbell on renewables
What opportunities exist for rural businesses to invest in renewable energy projects?
The renewable energy landscape presents numerous opportunities for rural businesses. Whether it's establishing a rental stream, forming a joint venture, or taking full ownership of a project, the options are diverse.
A key consideration is the balance between risk and reward. Rental agreements offer a steady income with minimal risk but often result in lower returns and limited tax benefits. Conversely, joint ventures or full ownership can be more tax-efficient but carry higher risks.
If you're running a project yourself, you have full autonomy. A joint venture on a modest scale can be easier to establish and agree than you participating in a small way in a large scheme, and so each project tends to have a slightly different profile.
Ultimately, the optimal approach depends on individual circumstances and risk tolerance.
What financial incentives (grants or tax breaks) are available for businesses investing in renewable energy?
There are a lot of financial incentives. Capital allowances offer tax benefits for businesses investing in assets like hydro plants. However, the landscape of incentives is evolving. While feed-in tariffs once provided guaranteed income streams, these are diminishing due to changing energy prices and government policies.
While grants are less common, tax breaks and capital allowances remain crucial in supporting renewable energy investments.
What are some of the main renewables business challenges you’re seeing?
A significant hurdle in the renewable energy sector is grid connection. Despite growing enthusiasm for renewable projects, limited grid capacity can result in projects which appear feasible becoming unworkable. I'm based in Scotland, which has high levels of renewable energy generation and where competition for grid connections is intense.
The planning process for renewable energy projects can also be complex and time-consuming. Public opposition to infrastructure developments, such as big pylon lines, further complicates things. Also, securing the necessary equipment and expertise to maintain and repair renewable energy installations presents ongoing challenges. Once you’re connected to the grid, getting the electricity to the right part of the country is also a huge challenge. The north of Scotland could generate much more electricity, but the transportation of that to where it's needed can prove a stumbling block.
Thinking about the current geo-political climate, such as the Russia-Ukraine war and the impact that had on energy prices globally, has that encouraged more people to get involved with renewable energy to help the overall UK energy situation?
I think the desire for energy security and reduced reliance on fossil fuels has made a huge difference. That's why we're seeing many old projects, which had been dismissed as uneconomic or unappealing, revisited, and the general political will has certainly changed the outlook.
"The potential for growth is evident. The Labour government’s renewed focus on renewable energy, coupled with advancements in tech and increasing public support, create a positive outlook for the sector."
Where do you see the future going for UK renewables?
It feels really promising. I think there's been a growing recognition of the need for energy security. The shift towards a greener economy is driving increased interest in these projects.
While challenges remain, like the grid connection and planning for these huge projects, the potential for growth is evident. The Labour government’s renewed focus on renewable energy, coupled with advancements in tech and increasing public support, create a positive outlook for the sector.
People are more open to exploring these opportunities themselves individually too. There was a huge amount of that 10-15 years ago and it feels like that’s coming around again. However, the transition to a renewable energy future will require substantial investment, careful planning and ongoing innovation.
What role do professional advisers (like ourselves) play in helping those on their renewables journey?
There are two core questions to ask those considering getting involved in a renewable project: fundamentally, should you do it? And can you finance it alone?
As a firm we want to implement the most tax efficient structure for the family. It also needs to be practical as well as tax efficient. Structuring it early is key.
Also, bearing in mind these are 30, 40, 50-year projects, it's probably not only the client you're speaking to today that is affected, it's also the next generations and so it’s really important that they’re aware of that too, whether personally or bearing them in mind in any discussion.
"Succession planning is paramount, ensuring that future generations can benefit from these investments. Whether it's funding education or providing financial security, renewable energy projects can contribute to long-term family wealth."
Succession planning is paramount, ensuring that future generations can benefit from these investments. Whether it's funding education or providing financial security, renewable energy projects can contribute to long-term family wealth. With all families, everybody needs to be on the same page and understand the reasoning behind a structure. If that doesn’t happen, a change in the structure may unravel a lot of work by mistake. Our role as a trusted adviser is to ensure that everybody understands that they mustn't make changes without checking, because it could result in significant tax implications.
The primary message here is, don't go into anything without full consideration of the implications. It's better to check than to create an inadvertent tax bill.
"I also act for another client who has two small hydro plants for their own use. The electricity generated does go into the grid, but fundamentally they use most of their own power."
Can you share any success stories of those that have integrated the above?
I have a client with a large estate, thousands of acres, who has wind turbines on their land, and they’ve had a rental agreement with the operator for many years. It’s put the estate into a sustainable position, and permitted it to become financially stable and it’s now coming to the end of its first 25-year lease. They're now in a position to discuss the possibility of a joint venture, or a decommissioning of the site, which allows us to future proof it for the next generations and reconsider the financial and tax planning position again with the current position in mind.
I also act for another client who has two small hydro plants for their own use. The electricity generated does go into the grid, but fundamentally they use most of their own power – that has totally changed their lives. It’s also changed the dynamic of their businesses on the estate, while helping their carbon footprint as well.
What lessons can others learn from these examples?
Investing in renewable energy isn’t going to be a quick project that results in a quick income stream. It takes time to establish and is a long-term structure.
The main lesson is: early advice is key, and it's vital to consider the long-term position.
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