This week, we explore the pressure on land, a precious, sensitive and finite resource. In particular, the need to satisfy the seemingly irreconcilable components pulling in opposite directions: more housing and industrial development to meet population and economic growth; the need for energy security while decarbonising electricity production; and the strategic imperative for food security with more mouths to feed. But there is a partial solution. It is very obvious. Read on.

Who would be a farmer?

For his legions of fans, Amazon’s “Clarkson’s Farm” has made a welcome return to our televisions in this, the third series. They say that in the last three years through this entertaining but informative biopic-cum-documentary he and his partner Lisa, farm contractor Kaleb Cooper, dry-stone-waller-and head-of-security Gerald Cooper and long-suffering land agent ‘Cheerful Charlie’ Ireland have between them done more to raise the knowledge and awareness of British farming among the public than the entire industry has achieved in the past three decades. Clarkson has undoubtedly also made much more money from the television series than he has from farming itself.

Apart from his personal ignorance and all-fingers-and-thumbs incompetence with his new-found pastime, the core themes of the programmes remain undimmed and unchanging: the mind-warping, will-sapping complexity of the myriad of micromanaging regulations covering every single aspect of farming and land management; his personal war with the rural planners at West Oxfordshire District Council who view him as a menace (and to be fair, so do many of the locals); and the extreme sensitivity of agricultural economics to the vagaries of the weather, the volatility of variable input costs (seed, fertiliser, diesel etc) and the unpredictability of commodity selling prices. In series one, after a full cycle of sowing, nurturing and harvesting, thanks mainly to lots of the wrong weather at the wrong time, low yields and high costs, the agricultural activities of Diddly Squat Farm, 1,000 acres of prime Cotswold arable land, produced a financial return of precisely that: diddly squat. In fact, a total profit of £144. One hundred and forty-four pounds.

Low hanging fruit

It’s enough to make you give up. Or use the land for something else. Which, under the new UK post-Brexit farm subsidy regime which changes the strategic emphasis from food production to environmental stewardship, is what many landowners are doing. Apart from re-wilding schemes (public subsidies to do nothing other than let your land run wild for a fixed period), an increasingly popular diversification attraction, propelled by the allure of supporters describing it as being like “the Klondike”, is turning agricultural land over to renewable energy developments and in particular solar power installations. As landowners make pragmatic financial decisions, or in some cases simply opt for the easy life, solar development prospects of all sizes are popping up like mushrooms. The much more insidious evolution is the compulsory purchase order in the national interest of which more anon.

If a decade ago, the average lifespan of a solar farm was 20 years, today’s projects vary between 30-40 years, such has been the progress in the development of panel technology and efficiency. Opting for development, farmers/landowners benefit from the certainty of a long-term lease or rental income contract in return for which they give up their stewardship rights but equally have no costs; the enterprising, bored with golf and the beach and who are looking for some part-time work and additional pocket money, can avail themselves of a bucket of soapy water, a squeegee on a pole and a strimmer (or a few sheep) and get themselves the annual panel cleaning and ground maintenance contract into the bargain.

A new blue Jerusalem: are solar farms manna from heaven or today’s satanic mills?

The literal extent to which the renewables landscape is changing is astonishing. The ‘green and pleasant land’ of the hymn is rapidly turning blue. Before the new Tory-led coalition government clamped down on proposed developments after being elected in 2010, then what would have been the biggest solar ‘farm’ in the UK was planned a couple of miles down the road from the author’s home in south Lincolnshire; it was proposed to cover 235 acres of unspoiled countryside (it seemed very big at the time when previous developments had tended to assign a field or two, rather than almost a whole farm; it did not go ahead following a sharp reduction in the feed-in tariff rate).



Contrast with today as the push for renewables ramps up. Take as examples five projects of strategic national importance currently at various stages of planning or construction to illustrate the scale of change: Cleeve Hill near Faversham in Kent with a capacity of 373 Megawatts (MW) covering 720 acres and powering an estimated 91,000 homes; Mallard Pass to the north of Peterborough, 350MW over 2500 acres powering 92,000 homes; Badminton Estate in Wilts (Lime Down Solar Farm), 500MW, 2000 acres, 115,000 homes; Sunnica’s development near Newmarket, Cambridgeshire/Suffolk border, 500MW, 2500 acres, 172,000 homes; and the vast donut-with-a-hole shaped complex of the proposed Great North Road solar park to the north-west of Newark in Nottinghamshire, 800MW, using 7,000 acres to power 400,000 homes. Four of these five projects are being undertaken and financed by foreign-owned companies.

70GW of solar capacity: think Bedfordshire; for sunshine, think Barry Island

To put the land areas in context: currently it is estimated that in the UK there is 39.3 Gigawatts (1GW = 1000 MW) of solar generating capacity accounted for comprising 14.4GW already installed with a further 24.9GW in the planning pipeline. The target by 2035 is an installed capacity of 70GW. As the projects outlined above show, the output per acre is variable and inconsistent (as is the number of homes per megawatt of output; all the data is derived from the projects’ own prospectuses), but it is estimated that to achieve that 70GW of aggregate output, agricultural land covering an area roughly the size of the county of Bedfordshire (477 square miles) would need to be plastered in silica panels with all their concrete footings and steel supports, miles of cabling, inverter boxes and, in some cases, extra land being used for new technology battery storage.

When considering suitable sites, for which there is growing competition, developers need the following essential ingredients: open land with minimal or zero shade; reliable sunlight (as defined by a combination of daylight hours, quality of sunshine and the sun’s azimuth i.e. the angle of the sun’s rays when striking earth) and proximity to a grid connection with adequate capacity to carry the additional load. Back to the telly again, empirical meteorological evidence says the UK national sweet spot on the Venn Diagram for optimal annual hours of daylight, clear sunshine and effective azimuth is Barry Island in south Wales, familiar to fans of Gavin & Stacey. Inevitably, the further north, the less is the attraction as yields on installed capacity decline, though to an extent in the overall project economics (as we see in the Great North Road development) this may be offset by the economies of scale offered by greater availability of contiguous open land at slightly lower prices. Other factors to be considered include whether to use cheaper fixed panels with their limitations of maximising sunlight capture, or the much more expensive swivelling type which have greater sunlight capture capacity but incur parasitic energy costs to power the motors (as well as the additional capital outlay and the increased requirement for specialist maintenance).

NSIPs: planning stacked in developers’ favour

The incentive to go for bigger projects is not just driven by economies of scale. The planning regulations state that any onshore generating project with a capacity of more than 50MW becomes a Nationally Significant Infrastructure Project (NSIP). While local consultation is required, this is a lip-service formality (it is about how the project can be accommodated locally, not stopped): NSIPs are automatically referred to the Secretary of State where the default setting is to approve (he/she has to justify why a project should not go ahead rather than being automatically given the green light).

 

On approval, a Development Consent Order (DCO) is issued, colloquially a compulsory purchase order. Environmental protection and enhancement conditions will be applied and a date stated for when the installation will be decommissioned. Decommissioning is a major bone of contention: it is defined as restoring the site to agricultural land, to be returned as it was before the first hole was dug. However, particularly in those cases where the DCO has involved the commercial developer buying the land as freehold (rather than a lease or through a fixed-term rental in both of which cases the freehold remains that of the superior landlord), the suspicion is in 30 or 40 years’ time, developers (and quite possibly the original owners where they retain the freehold) will attempt to have the land re-designated as brownfield/industrial and therefore much more easily able to gain planning consent for homes or industrial development with the commensurate increase in the land value. That is still to be tested, but the experience of the degradation of Green Belt and National Park planning constraints over recent decades suggests much the same pressure will be applied to agricultural land used for renewable energy projects at end-of-life.

Strategic thinking or muddling through?

The pathway to carbon net zero by 2050 is enshrined in UK law. There is no debate about the target. There is however a very live disagreement about how to get there in an orderly and affordable fashion. Labour is just as confused as the Conservatives and the SNP (Starmer’s energy pledge, increasingly obviously pie-in-the-sky, was watered down this week to launching a British Green Investment Bank with no mention of the previous commitment to 100% decarbonisation of the electricity generating capacity by 2030). And here the competing and conflicting pressures on land usage for housing, economic growth, energy and food security are clashing and disorderly to the point of incoherence.

“You can’t fit a quart into a pint pot”

The population of England has grown more than 15% since 2001 to 57m people today; the ONS estimates that it will increase by a further 9.9% by 2036 to nearly 63m. Since 2001, the number of English dwellings has increased by 18% to 25m and government targets remain to build 300,000 new homes annually. Land usage for industrial development and infrastructure projects has also increased substantially.

At the end of 2023, according to Gov.UK the Utilised Agricultural Area of England was 8.8m hectares (21.7m acres), 68% of the total English land area. 4.9m hectares (55%) of the UAA was ‘croppable’ while 3.5m hectares (40%) was permanent grassland for grazing (dairy, beef, sheep). In 2001, the English UAA was 9.2m hectares or 71% of the total English land area. In less than a quarter of a century, 400,000 hectares or 988,000 acres of productive English farmland have been lost to development. In terms of percentage of the total, the three percentage point loss might seem marginal but in aggregate it is an area roughly the size of Kent. Under its “Food to Fork” programme, the government has a target that a minimum of 60% of UK foodstuffs should be sourced domestically; currently that figure stands at 52%.

Perhaps an easier way of understanding it is to condense these numbers into a land sustainability rate: in 2001 there were 0.185 hectares of agricultural land to feed each person in England; by the end of 2023, that figure had declined 17% to 0.154 hectares per person. And critically, today it still only supplies half of each person’s annual consumption.

Land is a finite resource (particularly on an island). There is pressure to build new homes and infrastructure for growth and meeting the needs of a rising population. Also obvious is the land being assigned to renewable energy projects. But with a new agricultural policy which actively incentivises the removal of productive land from our food security system (note that in the case of NSIPs, the loss of food production is explicitly not a reason to be considered for refusal of energy projects), is it possible to square the strategic security circle? An additional consideration are environmental lobby groups applying the strong political pressure not only to increase the use of renewables including wind and solar, but at the same time to reduce the intensity of farming practices and to resist new, potentially higher-yielding technologies such as genetically modified crops. It is currently difficult to see how the 52% domestic production figure is maintained, let alone 60% attained.

The Future’s Bright. The Future’s Nuclear.

For the politically brave, there is a solution to alleviate the pressure. It is a win-win for both energy and food security. It comes in the shape of a very neat, compact package. The Great North Road solar project needs 7,000 acres to power 400,000 homes. This alternative source delivers 470MW of electricity 24/7, 365 days a year instead of only when the sun is shining; it can power up to one million homes from a footprint of only ten acres, no more than two football pitches. And it has a duration of 60 years rather than 30 or 40.

What is this phenomenon of energy production efficiency? Step forward the Rolls Royce Small Modular Reactor (SMR), a factory built modular nuclear-powered generating station which is bolted together on site. The concept might be new but the technology is proven and tested, being a direct development of the propulsion mechanism used in Royal Navy nuclear submarines for nearly 70 years.

At £1.75bn a unit it is not cheap; but the economics begin to look much more attractive when you look at the situation holistically. However seductive solar and wind technologies are with their free ‘fuel’ (and they certainly have a place in a diversified generating portfolio), their innate limitation is they don’t work when either the sun doesn’t shine or the wind is not blowing (nuclear requires public investment; wind power is provenly financially unsustainable without public subsidy; solar no longer requires direct development subsidies but still benefits from price guarantees through the tariff system). It is impossible to run the world’s sixth biggest developed economy entirely on wind and solar. There must be an adequate permanent back-up to make up any shortfall in the renewable fleet output, especially in prolonged periods of high barometric pressure in winter when daylight hours are short and the light quality is poor and wind conditions are typically still but demand for electricity is high.

Further, as we move away from petrol/diesel ICE vehicles towards EVs over the course of the next 15 years, demand for overnight electricity capacity is going to rise exponentially. Putting your car on charge as you go to bed will become as routine as charging your phone. SMR units can meet that demand unconditionally without the need for all the complexities and controversies of differential pricing currently being contemplated. If the SMR meets the security criterion in terms of reliability and predictability, it also meets the need as defined by control: these units are British, not French or Chinese or anybody else’s: the on/off switch is controlled here, not by a foreign state. That is not to say that a malign actor might not try and hack them in a cyber-attack, all power installations being potential targets; but go back to the first week of Teresa May’s sojourn in No 10, even before any pitched battle with her backbenchers or the EU over Brexit, her very first row was with the Chinese government about who controlled the switches for Hinckley Point Power Station (without the murders, the basis for the story in the current ITV thriller series “Red Eye”; just for reassurance, the author does not spend all his time watching the goggle box).

Time to get a grip

Firmly grasping the nettle on nuclear, particularly the small scale units, would bring strategic clarity and security to the UK energy conundrum. It is clean, sustainable, constant and highly efficient.  It is also undeniably politically sensitive; but as in most cases where difficult political choices must be made, overcoming the obstacles is about leadership. While flirting tentatively with nuclear, currently both main parties are opting for the path of least resistance with electricity generation: putting most of their eggs in the one basket labelled “unreliable renewables”. Such insecure infrastructure foundations for an economy we all want to grow and which over three decades will be subject to the greatest change in societal behaviour in the way we consume our energy that we have seen in three centuries will test the system to its limits. It need not be that way.

And just think of all that precious, productive farmland which would remain available to provide us with food security. All it needs now is the right economic regime in place to make farming financially viable and sustainable (but that’s a story for another day). Then we can have lots more informative farming entertainment from Jeremy, Lisa, Kaleb, Cheerful Charlie, Gerald and the crew. What fun.

The Jupiter Merlin Portfolios are long-term investments; they are certainly not immune from market volatility, but they are expected to be less volatile over time, commensurate with the risk tolerance of each.  With liquidity uppermost in our mind, we seek to invest in funds run by experienced managers with a blend of styles but who share our core philosophy of trying to capture good performance in buoyant markets while minimising as far as possible the risk of losses in more challenging conditions.

Authors

The value of active minds – independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Fund specific risks

The NURS Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. The Jupiter Merlin Conservative Portfolio can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Jupiter Merlin Income, Jupiter Merlin Balanced and Jupiter Merlin Conservative Portfolios’ expenses are charged to capital, which can reduce the potential for capital growth.

Important information

This document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with a financial adviser, particularly if you are unsure whether an investment is suitable. Jupiter is unable to provide investment advice. Past performance is no guide to the future. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.  The views expressed are those of the authors at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change.  This is particularly true during periods of rapidly changing market circumstances. For definitions please see the glossary at jupiteram.com. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Company examples are for illustrative purposes only and not a recommendation to buy or sell. Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ are authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM or JAM.