Renewable energy on farmland: Considering the right commercial model for your business
Renewable energy on farmland: Considering the right commercial model for your business
As Australia accelerates its transition to a low-carbon economy, rural landholders are being approached by renewable energy developers. The appeal for the landholder is understandable: dual-purpose land-use strategies, such as integrating wind turbines with grazing or installing solar panels alongside cropping, offer the promise of long-term off-farm income while furthering the existing environmental stewardship efforts of the agricultural community.
But while the opportunity is real, so too is the complexity. Hosting renewable energy infrastructure is not just a land-use decision, but a new commercial relationship with financial, legal, and operational implications.
The opportunity and the responsibility
For landholders, the potential benefits are significant. Hosting renewable infrastructure can provide a steady, long-term income stream, helping to buffer against commodity price volatility, climate variability, and yield uncertainty. It can also align with broader Environmental, Social, and Governance (ESG) goals, enhancing the sustainability profile of your agribusiness.
The scale of Australia’s renewable energy transformation is immense. To meet the Federal Government’s 2030 emissions reduction target, the Australian Energy Market Operator (AEMO) estimates that the country will need to add approximately 50 GW of new renewable generation and storage capacity. This could require between 150,000 and 300,000 hectares of land, depending on the mix of solar and wind technologies and their configuration. Much of this development will occur in rural and agricultural regions, placing landholders at the centre of Australia’s clean energy future.
The fuel behind the demand
Farmland is uniquely positioned to support Australia’s clean energy ambitions, with developers drawn to:
- Vast, contiguous paddocks that are well-suited to utility-scale wind or solar projects
- High solar irradiance and wind exposure
- Greater opportunities for co-existence compared to urban zones, presenting fewer planning challenges
- Proximity to grid infrastructure, which is particularly valuable as it reduces connection costs and delays.
How to monetise the relationship
While not an exhaustive list, there are several business models available to landholders considering renewable energy partnerships:
- Enter into a lease agreement to retain land ownership and receive annual payments from the developer. These are often for a period of 20 to 30 years as compensation for the loss of access you will experience during construction and operational phases
- Receive a share of the electricity and/or revenue generated from the renewable energy project in return for providing the developer with access to your land, based on the amount of energy produced or sold
- Sell part of your land outright to the renewable energy developer in a land sale. This may be attractive if the land is surplus to your operational needs, or you are looking for an exit strategy from the land. Such a move should be considered in the context of longer-term planning for your farming operations
- Agree on equity participation, meaning that you and the renewable energy developer form a joint venture or partnership to co-own and operate the renewable energy facility. You effectively ‘contribute’ the land as part of your investment in the project and share in the revenue and/or profits over time.
Your approach to commercial terms should factor in your risk appetite, and overall business and operating strategy. Each model has different implications for tax, commercial outcomes, land use rights, and long-term control, so it’s essential to seek independent advice before signing any agreement.
Key considerations before signing an agreement
Before entering any arrangement, landholders should carefully assess:
- Project timeline: Development timelines can be long with impacts on operations, so consider whether you are prepared for delays or if you need immediate returns
- Environmental impact: Consider the environmental impact of the project on your land, both in terms of biodiversity and potential impacts on neighbouring properties, and how any costs are covered
- Exit clauses: Be sure to have an exit clause in your agreement in case the developer abandons the project, experiences financial difficulties, or if the project fails to generate the expected revenue
- Operational compatibility: Be mindful of how the renewable energy infrastructure may interact with farming operations and/or biosecurity protocols at different stages of the project’s lifecycle
- Project scope and terms: Understand the commercial agreement duration, payment structure, access rights, and decommissioning responsibilities
- Counterparty: Understand the track record and experience of your potential partner in delivering similar projects. Your fortunes and reputation may be tied to their ability to successfully deliver and operate the asset.
These are not just technical details, they are business-critical decisions that will shape your land’s future for decades.
Land as a climate asset
According to the World Resources Institute, by 2050, we’ll need nearly 600 million hectares of additional agricultural land to meet global food demand, while also requiring vast areas for carbon sequestration and renewable energy infrastructure. This dual demand places landholders at the centre of a global balancing act.
Agricultural land is no longer just about production - it’s about protection, regeneration, and resilience. As a landholder, your decisions today will not only shape your business, but the broader environmental and energy future of Australia.
Looking ahead
Renewable energy on farmland is a promising opportunity, but not a simple one. It requires careful planning, trusted advice, and a clear understanding of your long-term goals. It should also be measured against alternative uses of the land, mindful of your business’ overall objectives and risk appetite.
BDO’s sustainability team have deep expertise in Australia’s food and agribusiness sector. Whether you're evaluating a lease, exploring equity participation, or simply want to understand your land’s potential, we can help you make confident, data-driven decisions.
Get in touch today to learn how BDO can power your decision-making with the right insights, strategy, and support.