August 20, 2026
At Power Capital Renewable Energy, the landowners we work with are an integral part of the lifecycle of our projects. We view our relationship with landowners as a strategic partnership, and we work closely with them at every stage, from our first conversation through to a fully operational site and beyond. Many of the landowners successfully graze sheep on site, which helps keep operational sites maintained after energisation. This article explains how we approach one of the earliest and most important steps in that partnership: the option agreement.
Understanding the Option Agreement We Offer
An option agreement gives us the right, but not the obligation, to take a lease of land at a future point. During the option period we carry out the work needed to establish whether the site can support a viable renewable project. That work usually involves applying for planning permission, securing a grid connection, and completing environmental and technical surveys. If the project can proceed, we exercise the option and the lease begins. If it cannot, the option lapses.
The key point is that we are not leasing land at this stage. The landowner is agreeing to keep land available to us, on terms we have already settled together and to the exclusion of other developers, for a defined period while we establish whether the project can go ahead. It also allows us limited rights of access to carry out the surveys mentioned above.
Throughout the option period the landowner retains ownership of the land and can continue their existing agricultural use of it, such as grazing, subject only to those limited access rights.
Renewable projects take time to move from an idea to an operational site. Planning applications, appeals, grid offers and financing all need to be secured. For that reason, our option periods run for a number of years, sometimes with a right to extend where specific conditions are met.
We Issue the Option and Lease Together
The lease is agreed at the same time as the option, not afterwards. We issue the option and the lease together, with the agreed form of lease then attached to the signed option agreement as a schedule. This gives both parties certainty as to the terms of the longer term arrangement from the outset, so that if we do exercise the option there is no renegotiation and the lease we agreed simply takes effect.
The Points We Address Upfront, and Why
Because we settle the full arrangement upfront, we deal with the key terms of both documents together. For example:
1. The length of the option and lease periods and the terms of any extension.
2. The option fee and the rent, how each is calculated, and when each is paid.
3. The rights required to access the land, and any rights required to connect to the grid. These may be over adjoining land held by the landowner.
4. The ability to transfer our rights to a funder, group company or successor.
5. Reinstatement of the land once the lease term is up.
We include a provision that allows us to transfer rights to a funder, group company or successor and it is worth explaining why. We raise debt finance to build our projects, and in return our lenders need visibility and comfort over the land rights that underpin them. Being able to pass our rights to a funder, or within our group, is what makes a project fundable, and therefore what allows it to be built.
As part of putting the documents in place, we carry out title and planning investigations. The landowner’s solicitor will explain searches, and provide documents such as copy folios, declarations, and consent from any charge holders over the land to enter the option.
The Payment Structure
There are two separate payments to keep in mind, and together they represent an attractive proposition for a landowner. The first is the option fee, which we pay in consideration for granting the option and keeping land available during the option period. This is paid annually, with the first payment made shortly after signing.
The second is the rent, which becomes payable once the option is exercised and the lease begins. Renewable rents compare very favourably with typical agricultural returns on the same land, and unlike farming income they do not depend on weather, yields or market prices. The rent provides a steady, secure and predictable income for the full term of the lease, which can run for decades. For many landowners this is a reliable, long term revenue stream from land that continues to sit in their ownership.
In Summary
An option agreement is a commitment by a landowner to keep land available to us while we establish whether a renewable project can go ahead. It does not lease land straight away, but it settles the terms of the lease that will apply if the project proceeds, so that both parties have certainty from the start.
Above all, we value the partnership with landowners, and we are committed to working to put in place an arrangement that works for all parties over the long term.
This article is for general information only and is not legal advice.