The UK energy market is changing fast. Political and economic pressure to invest in clean energy is strong, but the shift in energy mix includes more than just renewables.

Energy infrastructure viability: A closer look at leases

Across the energy sector, from battery storage to hydrogen to EV charging infrastructure, developers and investors are dealing with the same core challenge: how do you build and operate energy projects that stay commercially viable over their entire lifespan?

Regulatory reform is helping in some areas – the National Energy System Operator has started overhauling the grid connections queue over the last 12 months, making it easier (in theory) to access the grid sooner. That said, access to land, planning timelines, and clarity on the consumer base (ie. whether it’s local businesses, universities or the wider grid) are all part of the viability picture too. However, there’s one element of any potential scheme we can look to have greater control over: the lease.

Why leases are a viability issue, not just a legal formality

Lease negotiations often happen under commercial time pressure. Developers are focused on grid access, planning consents and finance. The lease can feel like a minor part of the scheme. It isn't.

The terms agreed at heads-of-terms stage – consent to alterations, break rights, reinstatement obligations – are exactly the terms that determine whether a project can adapt to changing technology, respond to shifts in demand, or exit a site cleanly when the time comes. Get them wrong and the lease itself becomes a real barrier to viability.

This isn't an issue unique to renewables. Any energy project with a modular or evolving infrastructure profile faces the same exposure. And while the specific legal framework governing these issues differs between jurisdictions (English leasehold law operates differently from commercial lease arrangements in the US or continental Europe, for example) the underlying business problem is the same wherever you are: the technology moves faster than the lease terms are typically written to accommodate.

Consent to alterations

A common sticking point is whether a tenant can carry out future works without the landlord's consent. Landlords, especially those with existing infrastructure on site or contamination concerns, are often cautious, and that's a legitimate tension.

But commercially negotiated carve-outs are achievable. Where a tenant can demonstrate minimal disruption to the wider site, a landlord may agree to allow certain alterations without prior consent. This gives developers the ability to respond to demand surges, regulatory changes, or new technology without going back to the landlord every time.

Any works will still need to comply with applicable planning requirements, building regulations, and other applicable requirements, so it’s important that project management timelines are built into planning from the outset.

Break rights

If a project becomes unviable – because consumer demand falls, maintenance costs rise, or a better site becomes available – a tenant needs the ability to exit. Break rights can take several forms: a one-off fixed break, annual rolling breaks, or breaks every three or five years.

These conditions matter as much as the right itself. Developers should think carefully about what happens to the infrastructure on exit. Some equipment may still have useful life and could be relocated, so it’s worth negotiating what needs to be removed and what can stay at the same time as negotiating the break.

Where removal doesn’t make sense, a break fee can offer a clean alternative: the tenant pays the landlord a fixed amount before the break date in place of carrying out removal works, giving both parties a straightforward exit.

How we can help

In a market moving this quickly, the lease is one of the first things developers should be thinking about, because no amount of regulatory reform will future-proof a project if the legal structure holding it together wasn't built to flex.

Browne Jacobson advises investors, developers and landowners across the energy sector – including combined heat and power, solar, wind, and recycling. We support projects at every stage, from initial site acquisition through to decommissioning.

If you'd like to talk through what this means for your project, get in touch with our specialist Energy and infrastructure team.