Renewable Energy

Statement of Intent

The Lease contains a provision which promotes the procurement of renewable electricity for the Premises and the Building with options for higher quality green tariffs and allowing the parties to prioritise on-site renewables and encourage off-site additionality, which either the landlord and/or the tenant can adopt, depending on practicality and cost.

Preamble

This clause enables landlords and tenants to introduce renewable electricity or low carbon technology where appropriate. The light and medium green versions of this clause relate to the use of renewable electricity, whereas the dark green version also encourages additionality whereby the parties can facilitate the addition of new renewable energy generation to the grid (for example the generation of new renewable energy on site or facilitating new generation off site e.g. through a PPA through a new wind farm).

The clause only relates to electricity, however other forms of energy may be relevant depending on the existing energy systems and what is practically possible for the Building. If relevant, further bespoke provisions may be required to accurately reflect the existing heating and cooling systems in the Building or allow for the use of any fossil fuel back-up generators in an emergency. 

Landlords and tenants may wish to consider participating in, or initiating, local or communal energy schemes such as low and zero carbon heat (and cooling) networks where practicable. Such installations will often be location, technology or building specific and may have detailed commercial arrangements set out in separate customer agreements. Appropriate lease drafting should be considered on a case by case basis. As a minimum, the parties should set out the right or obligation to connect into the network, access and maintenance arrangements for the energy equipment, the ability for occupiers to use other forms of heat and an appropriate mechanism to bind successors in title. 

Where are you on your Green Lease Journey?

A guide to selecting your clauses

Gearing up for your Green Lease Journey

Light Green Clause:

Accelerating your Green Lease Journey

Medium Green Clause:

Driving Transformation with your Green Lease Journey

Dark Green Clause:

Show less

Suggested drafting

Light Green Clause

Toggle

Unless there is no Green Tariff available at commercially reasonable rates, the Tenant must only enter into electricity supply agreements for the Premises using a Green Tariff.  

Unless there is no Green Tariff available at commercially reasonable rates, the Landlord must only enter into electricity supply agreements for the [Common Parts] [Building][Premises] using a Green Tariff. 

Drafting Note: 

The extent of the parties’ obligations under this clause will depend on the extent of their respective obligations to procure electricity and the clause should be amended to reflect this.  The clause should be added to the Sustainability schedule (Schedule 7) of the MCL. The parties will be able to establish the identity of the electricity supplier because of the data sharing provisions. 

Where the Landlord procures electricity for the Premises there may be complications for it in agreeing such a provision where the Building is multi-let or the unit is in a shopping centre and a supply arrangement is already in place. 

The requirement for supplies using a Green Tariff gives the parties the choice of using lower or higher quality Green Tariffs. Lower quality green tariffs do not guarantee that any of the energy purchased is 100% Renewable Energy as suppliers of fossil fuel derived electricity can purchase unbundled Renewable Energy Guarantees of Origin (REGOs) rather than buy or produce 100% Renewable Energy. 

Further information on the procurement of renewable energy and high quality Green Tariffs can be found in the Renewable Energy Procurement Part 2 published by the UK Green Building Council.

Medium Green Clause

Toggle

The Tenant must only enter into electricity supply agreements for the Premises with a Green Supplier.  

The Tenant must provide the Landlord on reasonable request with appropriate documentation to evidence the sources of energy used to generate electricity for the Premises. 

The Landlord must only enter into electricity supply agreements for the [Common Parts] [Building] [Premises] with a Green Supplier.

The Landlord must provide the Tenant on reasonable request with appropriate documentation to evidence the sources of energy used to generate electricity for the [Common Parts] [Building] [and the Premises]. 
 

Drafting Note: 

This version of the clause differs from the light green version because it applies irrespective of cost and requires supply from a Green Supplier who would supply under a high quality Green Tariff.

The extent of the parties’ obligations under this clause will depend on the extent of their respective obligation to procure electricity and the clause should be amended to reflect this.  The clause should be added the Sustainability schedule (Schedule 7) of the MCL.  The parties will be able to establish the identity of electricity supplier because of the data sharing provisions. 

Where the Landlord procures electricity for the Premises there may be complications for it in agreeing such a provision where the Building is multi-let or the unit is in a shopping centre and a supply arrangement is already in place. 

Consider whether you wish to add nuclear and regenerative biomass (e.g. wood, municipal waste, biomass and landfill gas, ethanol and biodiesel) to the definition of  100% Renewable Energy.  However, they are usually excluded from renewable energy sources because energy generated by incineration emits significant quantities of greenhouse gases and other forms of small particulate air pollution. 

The parties could use bundled REGOs as the appropriate documentation to evidence the sources of energy for a renewable energy tariff. REGOs are currently issued by the energy regulator to certify that electricity has come from a renewable source. Further information on the procurement of renewable energy and high quality Green Tariffs can be found in the Renewable Energy Procurement & Carbon Offsetting Guidance for Net Zero Carbon Buildings published by the UK Green Building Council.

Dark Green Clause

Toggle

Landlord’s obligations 

  • 1.  The Landlord must:
    • 1.1. procure that all of the electricity supplied to the [Premises] [Common Parts] [Building] during the Term (except in the case of a backup generator used only in case of emergency) is 100% Renewable Energy using one or more of the procurement options in clauses [2.1] to [2.3]; and
    • 1.2.only enter into electricity supply agreements for the [Premises] [Common Parts] [Building] with a Green Supplier.
  • 2.  The Landlord must procure the electricity supplied to the [Premises] [Common Parts] [Building] in clause 1.1 through one or more of the following procurement options: 
    • 2.1. the installation of equipment capable of generating or storing or both 100% Renewable Energy on the Premises or in or on the Building or other adjoining land owned or occupied by the Landlord;
    • 2.2.if complying with clause 2.1 for the whole or part of the relevant electricity supply is impractical or cost-prohibitive, entering into a PPA with a Renewable Energy Project Developer to purchase 100% Renewable Energy to the extent that the 100% Renewable Energy is not supplied pursuant to clause 2.1; or
    • 2.3. if complying with clauses 2.1 and 2.2 for the whole of the relevant electricity supply is impractical or cost-prohibitive, paying a Green Supplier a tariff for 100% Renewable Energy to the extent that the 100% Renewable Energy is not supplied pursuant to clause 2.1 and 2.2.
  • 3.  The Landlord must provide the Tenant on reasonable request with appropriate documentation to evidence the sources of energy used to generate electricity for the [Common Parts] [Building] [and the Premises].

Tenant’s obligations

  • 4.    The Tenant must:
    • 4.1.procure that all of the electricity supplied to the Premises during the Term is 100% Renewable Energy (except in the case of a backup generator used only in case of emergency) using one or more of the procurement options in clauses 5.1 to 5.3; and
    • 4.2 only enter into electricity supply agreements for the Premises with a Green Supplier.
  • 5.    The Tenant must procure the electricity supplied to the Premises in clause 3.1 through one or more of the following procurement options: 
    • 5.1. the installation of equipment capable of generating or storing or both 100% Renewable Energy on the Premises or on adjoining land owned or occupied by the Tenant [subject to [Drafting note: insert relevant alterations clause reference in the Lease]]; 
    • 5.2. if complying with clause 5.1 for the whole of the relevant electricity supply is impractical or cost-prohibitive or both entering into a PPA with a Renewable Energy Project Developer to purchase 100% Renewable Energy to the extent that the 100% Renewable Energy is not supplied pursuant to clause 5.1; or
    • 5.3. if complying with clauses 5.1 and 5.2 for the whole of the relevant electricity supply is impractical or cost-prohibitive or both, paying a Green Supplier a tariff for 100% Renewable Energy to the extent that the 100% Renewable Energy is not supplied pursuant to clause 5.1 and 5.2.
  • 6. The Tenant must provide the Landlord on reasonable request with appropriate documentation to evidence the sources of energy used to generate electricity for the Premises.

Drafting note: 

This clause provides options aimed at prioritising on-site renewables and encouraging off-site additionality, which the Landlord or the Tenant or both of them can adopt, depending on practicality and cost. The parties should consider whether each version of this clause is appropriate at the outset of the lease negotiation, having regard to the physical constraints of the Building, the length of the Lease, the nature and extent of each party's respective property interests and rights and who is responsible for procurement of electricity for relevant areas. The parties should also consider whether rights each party benefits from or reservations in favour of the Landlord should be amended to remove any obstacle to the installation of on-site generation equipment. This may be particularly relevant for access to and rights over the roof and airspace. 

Power purchase agreements (PPAs) between electricity consumers and renewable energy generators allow for a more robust link between renewable energy generation and consumption and create additionality. However, given that these are bespoke sophisticated legal documents, the parties should seek appropriate advice before entering into them. 

For guidance on developing a renewable energy strategy (including further information on REGO backed supplier tariffs and PPAs), refer to Guidance Note 4.11: Procuring renewable energy in the Responsible Property Management Toolkit published by Better Buildings Partnership.

Any tenant works carried out pursuant to this clause should be made subject to the relevant alteration provisions in the Lease. 

Page 23 of 33