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Wind Farm Investment? 10 Things You Might Want to Know… Wind Farm Investment? 10 Things You Might Want to Know…

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Apr 16

Wind Farm Investment? 10 Things You Might Want to Know…

Written by Jonathan Mortimer
Consultant Partner

DDI: 01423 726608
M: 07850 993952
E: jonathan.mortimer@raworths.co.uk

Many landowners presume that the most difficult part of a wind farm business is the initial set-up.  In particular, securing planning permission, sourcing the infrastructure and entering into numerous supply agreements.  Thereafter, they can take advantage of the green incentives, sit back and watch the profits accumulate from their investment.

However, in my experience, there are many problems which can be encountered after the initial set-up which need careful management if there is not to be a risk to income generation and difficulties with the repayment of loans frequently taken out to fund the initial investment.

The top ten problems encountered are as follows:

1. Maintenance and service agreement disputes

Ordinarily, the wind farmer will enter into a form of exclusive maintenance and service agreement, possibly for an annual fee.  There are frequently disputes as to what work is, or is not, covered by scheduled maintenance or may amount to unscheduled maintenance or additional services at an additional cost.

2. Maintenance and service company failures

 Difficulties are frequently encountered with maintenance companies failing to provide the service.  I am presently dealing with a problem for a wind farmer in West Yorkshire who has been without blades for many weeks caused by a serious service failure. 

3. Claims on guarantees from original manufacturers

The maintenance and service agreements are ordinarily only intended to cover running and in-service issues.  More substantive defects with the equipment call into question the application of any carefully crafted guarantee which will ordinarily have been issued at the time of purchase.

4. Co-operation between contractors 

Larger wind farms in particular will have separate contractors responsible for certain infrastructure such as power cables and foundation bases but problems as to division of responsibility are frequent. 

5. Renewal of agreements

With most wind turbines having an operational life of around 20 years, most agreements relating to the wind farms will expire well before the equipment.

6. Application of business disruption or other insurance policy

Many wind farmers have insurance policies but it can be difficult to persuade the insurance company to pay in the event of a problem.

7. New technology

Technology is rapidly advancing.  Considering the lifespan of the equipment, the electronics are likely to be upgraded or even replaced leading to operational problems.

8. The wind turbines produce less power than anticipated

This could be caused by operational problems or even amount to a possible miss-selling claim.

9. Termination of key agreements 

If after-sales support leaves you dissatisfied, it can be tempting to terminate, say, a maintenance and service agreement.  However, being able to release yourself from any agreement can be problematic and, if undertaken incorrectly, can leave the wind farmer exposed to a claim for loss of profit that the supplier should have made on the remainder of the contract. 

10. A supplier becomes insolvent 

The industry has a surprisingly high level of business failures, Evoco Energy Limited and Urban Wind Limited to name just two.  Such failures can leave wind farmers high and dry on the continuing support they need. 

There is no doubt that wind farming has the potential to provide significant economic benefits.  However, careful management of contracts is required throughout the life of your equipment if a secure income stream is to be maintained.

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