Rural landowners generating windfall revenues from alternative energy

From a renewable electricity perspective, New Zealand’s wind resource is globally admired and has proven cost-effective. 

Wind comprises 5% of New Zealand’s energy portfolio – enough to power around 3000 Kiwi homes per year. According to the Global Wind Energy Council, New Zealand’s wind resource is “spectacular” – one of the best in the world.

Turbines installed in the Manawatu region in 2007 recently achieved the record for producing the most electricity by any wind turbine in the world – testimony to New Zealand’s excellent wind regime.

Bayleys national rural sales manager Simon Anderson says there are 19 wind farms operating or under construction in New Zealand. Most existing wind generation is located in the Waikato, Manawatu, Wellington and Southland. Identified growth areas included Northland, South Taranaki, Hawke’s Bay, Canterbury and Otago.

“Wind farms tend to be built on less productive land, so they don’t compromise effective farming land. The impact of an operating wind farm on livestock is minimal. Sheep, cows and horses are not disturbed by wind turbines and typically graze right up to the base of the towers,” Mr Anderson said.

 “Landowners will sign an agreement to allow the wind farm developer access to the property for wind testing purposes and later enter into a formal agreement to host a wind farm on their property in return for payments over the life of the development.

“There are different categories of lease payments – upfront lump sum, fixed annual fee per turbine or variable payment based on actual generation. Owing to the long life of a wind farm, the developer’s rights will need to be transferable to any future owner of the property.”

Mr Anderson said that calculating the market value of permanent wind farm infrastructure and its return to the overall viability of a property required professional valuation. 

“Anecdotally, some owners of rural property with wind farm infrastructure on it have had inflated ideas of what their property may now be worth given the capital investment made by the energy company,” he said.

Meridian Energy investigations manager Graeme Mills says wind farm developments leave a light footprint on rural land, and payment for having the turbines on their property was the biggest benefit for landowners.

“A wind farm typically takes up 1-2% of the land it is built on and has virtually no effect on the farming productivity of the land underneath and around them,” he says.

“Access to the land is often greatly improved, with roading infrastructure for the wind farm enhancing the landowners’ property. 

“Our most recent wind farm, Mill Creek, near Wellington, involved constructing 19 kilometres of new roading, and the land owners are now able to take stock trucks to the heart of their properties making stock management much easier.”

Mr Mills, said the main challenges for rural landowners are during the construction phase when civil works are being carried out.

“But this is a short-term issue and the landowner is usually compensated for any losses during that time,” Mr Mills said.

“Once the wind farm is constructed, there will always be maintenance activities and staff on the land, so the parties have to compromise and work with each other for the lifetime of the asset.”

Mr Anderson says that, from a resale perspective, having a wind farm on a rural property could be polarising. Typically, a turbine tower is approximately 67 metres high. Each has three blades – some 40 metres long and weighing in the vicinity of 10 tonnes.  The power-generating turbine weighs more than 130 tonnes.

“Our Bayleys rural salespeople in the field say some prospective buyers are put off by the concept of an existing contractual arrangement over part of their land, while others are equally open to the idea of an alternative income stream from the property,” he said.

Mr Mills said that having to deal with an operational wind farm on a day-to-day basis might not be for everyone, but in reality, any disruption was minimal. As far as he knew, only one Meridian wind farm unit had sold since being converted into a power-station.

“In that case, the vendor left some of the benefit from the turbine payments with the new owner. So there is certainly the potential for buyers to view these sites as an investment opportunity,” he says.

New Zealand Wind Energy Association chief executive Eric Pyle says that, with consented sites ready to go on rural farmland when needed and the cost of development competitive with all other options, wind is a realistic and renewable energy source for the future.

“It is true that electricity can only be generated when the wind is blowing but it has been proven from operational experience to date that wind is actually more reliable than hydro’ on a seasonal and annual basis at our good sites,” he said.

Mr Pyle said project developers were constantly looking at rural location options for new wind farms. Once identified and leasing terms negotiated with landowners, projects could be built quickly.

He said that in spite of a wind farm being a major infrastructure project, once established it fitted well with normal farming operations.

“In terms of utility-scale generation, it’s wind’s time,” said Mr Pyle. “Large scale hydro is largely off the agenda now in New Zealand – and has been for the last 30-odd years because people value our remaining rivers.  Wind is crucial to New Zealand’s energy future.” 

Jody Robb writes for Bayleys Real Estate