South Australia continues to lead the nation in renewable energy generation, presenting significant commercial opportunities for rural landowners.
With the growing increase in renewable energy operators seeking to establish solar farms, wind turbines, and battery storage facilities on agricultural properties, landowners are being presented with new and often lucrative offers.
While these proposals can deliver long-term financial and environmental benefits, they also involve complex legal arrangements and potential impacts on farming operations. Understanding the broader implications is essential before entering into any agreement.
This article outlines the commercial benefits of hosting renewable energy infrastructure, and the key legal considerations South Australian landowners should keep front of mind.
Why Renewable Energy projects make commercial sense
1. Secure, diversified income
For many landowners, the most compelling feature of renewable energy projects is the steady income stream they generate. Typical agreements offer fixed or performance-based annual payments over 25 to 40 years, often indexed to CPI. In many cases, landowners receive upfront access fees or royalties tied to energy output.
This form of passive income offers long-term financial stability, independent of fluctuating commodity markets or seasonal variability.
2. On-farm infrastructure improvements
Operators often upgrade site infrastructure as part of the project, improvements may include internal roads, fencing, electrical cabling, telecommunications or water infrastructure.
These upgrades can provide lasting benefits to the property, extending beyond the immediate needs of the project.
When presented with an opportunity we recommend that landowners think about what improvements could be gained from such a project and put this to the Operator as part of the negotiation process.
3. Productive use of marginal land
Renewable energy developments present an opportunity to monetise land that may otherwise be underutilised. Areas with rocky soil, uneven terrain, or limited water access, unsuitable for high-yield farming, can be ideal for solar arrays or wind turbines.
Because each technology has different spatial and operational requirements, projects can often be designed around ongoing agricultural use. Wind farms, for instance, occupy minimal ground space and typically allow grazing to continue, while solar farms may be co-located with low-intensity pasture or otherwise unproductive land. Battery storage facilities are generally compact and sited near existing infrastructure to minimise disruption.
Recent examples have shown that solar panels can provide significant benefits for landowners who integrate them with their grazing operations. For instance, farmers have observed that solar panels offer shade for grazing sheep, which helps protect them from extreme weather conditions. Additionally, the condensation that forms on the panels during the mornings trickles down into the soil, providing a valuable source of water. This water helps to keep the pasture green and supports the growth of nutritious forage for the sheep. This innovative approach not only enhances the welfare of the livestock but also improves the quality and quantity of wool produced.
4. Strengthened sustainability credentials
Hosting renewable energy infrastructure can enhance a farming operation’s environmental credentials. This is valuable from a procurement perspective as most supply chains or buyers prioritise sustainability. It can also strengthen a farm’s reputation within the community by contributing to decarbonisation and clean energy goals.
Considerations before signing an agreement
Despite the commercial upside, renewable energy agreements are detailed, long-term legal instruments. They affect land use rights and obligations for decades and should be approached with diligence.
Length of commitment and land use control
Most agreements cover a multi-decade period, including initial feasibility, construction, and operational phases. Renewable energy operators often seek exclusive access during the feasibility stage to conduct site investigations.
Landowners must understand how long the operator will control the land and what rights the landowner retains during and after the project. Exclusivity, termination rights, and the ability to conduct agricultural activities must all be clearly defined.
Clear communication between the parties during the negotiation process can result in flexibility being built into the agreements to ensure there is minimum impact on the operations of the farming business.
No two properties are the same and it is important that any special or unusual circumstances are disclosed at the outset so that the parties can work together to build this into any agreement to avoid disputes in the future.
Landowners need to ensure any existing leases or licences to third parties are disclosed to the operator at the outset. These could include grazing or cropping leases and licences or leases to telecommunication providers or other arrangements such as easements relating to infrastructure on the land. Failure to deal with these matters could mean a landowner finds itself in breach of an agreement with an operator down the track.
1. Impact on farming operations
Project infrastructure can affect everyday operations, including livestock movement, crop spraying, machinery access, and biosecurity management. Landowners should carefully review how their current farming activities may be disrupted and ensure negotiated protections, such as designated access tracks, exclusion zones, or co-use agreements, are documented in the final agreement.
Productive land should be excluded from the project site unless specifically agreed otherwise. Some agreements define broad option or access areas without distinguishing between low and high yield land. This can result in infrastructure encroaching on land critical to the business. Exclusion zones should be clearly mapped and legally binding.
2. Compensation structure
Landowners should ensure that payment terms are clearly set out. Agreements should specify whether payments are fixed, CPI-indexed, or linked to energy production, and confirm when payments commence and under what circumstances they may be withheld.
It is also important to clarify whether the operator will cover legal, valuation, and other professional advisory costs.
Termination clauses in favour of an operator and consequences of abandonment or underperformance should be reviewed carefully, as they may materially affect long-term returns.
3. Decommissioning and site rehabilitation
A robust agreement will include enforceable obligations for the removal of infrastructure and restoration of the land at the end of the project. This includes:
- A detailed decommissioning and rehabilitation plan
- Defined restoration timelines
- A financial security mechanism (such as a bond or bank guarantee) to ensure compliance
Without such safeguards, landowners may be left with the cost and burden of clearing unused infrastructure.
4. Access rights and dispute management
The agreement should specify who may access the site, when, and for what purposes. Restrictions on contractor behaviour, operating hours, and notification protocols should be clearly stated.
Importantly, a clear dispute resolution mechanism, such as expert determination or mediation, should be included to resolve any future disagreements efficiently and cost-effectively It is important to ensure that the relevant jurisdiction that applies to the agreement is the state in which the landowner’s property is located -e.g. South Australia. The form of agreement presented by an operator will usually include the jurisdiction in which their head office is based.
Speak to an Expert Before You Sign
Renewable energy projects present a compelling commercial opportunity for South Australian landowners. However, these agreements are not one size fits all, they carry long-term legal, operational, and financial consequences that must be carefully evaluated.
At Mellor Olsson, our agribusiness and property lawyers have extensive experience advising on renewable energy agreements. We work closely with clients to ensure their commercial interests are protected, and their farming operations can continue alongside new energy developments.
If you’ve been approached by an operator or are considering your options, we invite you to get in touch with our team for tailored legal advice via [email protected] or (08) 8414 3400.