Renewed interest in farm diversification

The Royal Highland Show, which finished yesterday, provided an excellent opportunity for Davidson Chalmers Stewart to speak with farmers and landowners.

As lawyers for business, we are deeply invested in understanding our clients’ needs and aspirations. Attending events like the Show enables us to understand precisely the issues they face here and now, and hone our advice in light of that.

At the Show, farming meets politics, commerce and community on an equal footing. But for all the tradition and pride on display, this year’s conversations revealed a sector bracing for serious change.

Henrietta Talbot can help farmers negotiate the transmission queue

Continued uncertainties, including upcoming changes to Inheritance Tax and a shift in the farming subsidy framework, alongside typical challenges such as extreme weather and fluctuation in commodity prices, threaten the financial stability of many rural businesses.

Diversification continues to act as a means to generate new income streams. Research by NFU Mutual last year found the number of UK farmers planning to diversify in the next five years has jumped from 3 per cent in 2023, to 17 per cent in 2024.

It’s a shift we continue to see at Davidson Chalmers Stewart with new and existing clients seeking advice on diversification. Whilst the projects we advise on can be varied in nature, by far the most sought-after route is renewables.

With Scotland’s geography, natural resources and climate ambition, renewable energy is a logical fit. Solar farms, battery energy storage, and onshore wind projects can provide long-term income and help landowners contribute to national net-zero goals. But the road to realising those projects is far from straightforward – and it’s about to get tougher.

A new UK-wide energy body, the National Energy System Operator (NESO), is reforming how new energy projects connect to the electricity grid. There are currently more than 3,000 projects waiting in the transmission queue, far more than the system can accommodate.

Projects will be assessed and assigned a status based on their readiness and alignment with the UK’s energy goals. An evidence submission window opens on 8 July, lasting until 29 July, after which the NESO will begin the task of reorganising the transmission connection queue. It’s a deadline already putting pressure on landowners who may be interested in renewables but aren’t yet fully prepared to proceed.

Those with agreed contractual terms with a developer, may find if contract negotiations have stalled, their project will be potentially put on ice, terms renegotiated or even mothballed completely.

It is important that landowners seek specialist legal advice and financial and project management counsel to make the call that’s right for them. If progressing, they need to submit well considered plans that meet regulatory requirements, along with a solid financial plan. A landowner does not want to be locked into commitments that don’t suit the land or the long-term goals of the business.

A renewables project might not be the best fit for every landowner, but the wonderful thing about the sector is its adaptability and there are so many other diversification options open to explore.

Allying extensive knowledge of the rural sector and the challenges it faces with deep understanding of what makes successful renewables schemes, we help clients navigate the regulatory framework of renewable developments including connection reform and contribute to a thorough and meaningful project response to ensure they can make the most of the opportunities available. This could not only have a real impact on helping achieve renewables targets, but also ensure the ongoing financial viability of their businesses.

Henrietta Talbot is a Partner, Davidson Chalmers Stewart​