Where a Battery Energy Storage System (BESS) is located is an important consideration for developers.
While there are less constraints on the location of a BESS development compared to weather dependent electricity generation plants, the proximity of a BESS to connection points and where it sits within a grid will affect construction costs, revenue generation and grid stability.
Establishing land use rights
Securing land use rights for a BESS development is similar to the process for solar and wind farm developments.
During the investigations and preliminary activity phase, a developer will need access. This is typically provided in an exclusivity agreement, option deed or a licence agreement.
- Exclusivity agreement: This agreement is typical in the very early stage of negotiations and it will require the landowner to give the developer exclusive rights to negotiate longer form binding agreements, in exchange for an exclusivity fee. It may also include access rights to carry out surveys and preliminary activities, which may be needed to determine the further commercial terms.
- Option deed: An option is the most commonly used document at the second stage of the project. This deed can either grant the developer an option to lease or an option to purchase land during a specific timeframe called an option period. Typically, the option agreement will allow developers to access the land during the option period to carry out investigations and to determine if that land is viable for the project.1
- Access licence: A developer can also enter into a licence agreement. This would usually be for an adjacent piece of land and would usually be for road access to the option/ exclusivity land.
- Traditional owner agreement and engagement: Traditional owner engagement needs to be started early. Some preliminary activities on land on which native title exists may require an indigenous land use agreement, although typically the Indigenous Land Use Agreement is not finalised until later.
A developer is unlikely to incur the costs of the preliminary activities without having secure rights to tenure.
If a developer concludes that a piece of land is suitable for its renewable energy project, the developer can enter into the following agreements with a landowner:
- Lease: A long term lease is usually preferred to freehold. This is because it is a better use of capital and is often more appealing to landowners that have held the land for generations. These leases typically are for terms of 20 – 40 years (taking into consideration the operative life of the infrastructure).
- Sale Contract: Developers will also buy land if the landowner is willing and there are no capital constraints. Good land with viable grid connections will typically sell at a significant premium to their rural land value alone.
- Indigenous land use agreement and cultural heritage: Traditional landowners may also have native title rights and developers should engage early and often in a meaningful way. Developers may also need a Cultural Heritage Management Plan to comply with state based legislation and also for social licence as well as respect for local communities and their heritage.
Additional requirements will apply if a developer intends to undertake a project on Crown Land.
Foreign Investment Review Board (FIRB) approval will generally be required for any licence or lease of land in excess of 5 years or purchase of land by a foreign person, above the applicable monetary thresholds. Generally, an option deed or contract for sale will be subject to a FIRB condition precedent.
Distinction from solar and wind farms
A BESS’ footprint is much smaller than a solar or wind farm.2 For example, a 1 MW BESS facility typically requires around 50 square meters.3 In comparison, every MW of energy generated on a solar farm will have a 2 – 3 hectare land footprint.4
Further, developers are not as constrained when choosing a location for a BESS development in comparison with weather dependent energy developments, which requires significant testing and investigations to identify the most suitable areas for maximum production.5 The location of solar and wind farms are also constrained by exclusion zones due to their size and impact on the local community – for example, the flickering and noise generated by wind turbines and the shadows casted over its surrounds.6
A BESS can be connected within many spots in the pre-existing transmission and distribution network without the same level of geographical consideration.7
One disadvantage that is posed by a BESS is the loss of availability for land for other purposes. While solar and wind farms occupy a larger space, they can often coexist with farming and agriculture uses.8 The installation of solar panels have even been found to enhance the conditions of the land for grazing and crops due to the shade it provides.9 In contrast, land occupied by a BESS cannot co-exist with other uses in this manner.
Relevant Considerations
Competing land uses
Similar to solar and wind farms, the development of a BESS project must take into consideration competing land uses and the terms of co-existence between the BESS, agricultural uses, mining activities and potentially native title rights.
See our article discussing issues with competing land uses here.
Community engagement, social benefits and impact on neighbours
In respect of a BESS project, neighbours are often concerned with increased noise levels and visual impacts of BESS structures.10 BESS can generate a humming or buzzing noise which can be disturbing to noise receptors.11 There is also likely disturbance from construction traffic.
Some developers enter into agreements with neighbours to compensate for or mitigate the impacts caused by their renewables project. This process can occur at an earlier stage to address potential roadblocks through consultations directly with the neighbours. These agreements may include various mechanisms such as annual payments to neighbours, reimbursement for items such as visual screening or an option to acquire the neighbour’s property.12
Developers will also usually have a community benefits programme which supports local projects and community groups to establish good relationships with the community.
Subdivision requirements
When entering into lease agreements, the developer must also consider the potential need to subdivide the land. In NSW long term leases of BESS are ‘premises’ leases and do not trigger deemed subdivision rules. In Victoria and South Australia, lease of part of a lot for renewables projects do not trigger deemed subdivision rules that apply in other states. In Queensland and Western Australia, long term leases of part of a land requires subdivision approval.
Fire risk management
Batteries are prone to thermal runaway (a rapid and uncontrolled increase in temperature), caused by manufacturing defects or overuse.13 Potential locations need to be assessed for effects BESS may have on the public and nearby hazards prior to development. Developers will need to plan an adequate mitigation strategy for fire risks.14 For example, nearby bushland can be affected by bushfires that may spread to the BESS infrastructure. Developers may also need to erect an adequate exclusion zone for public safety.15
Contamination and biosecurity
BESS can present a contamination risk, but it does depend on the type of technology. If there is a fire, toxic gases can be released and there can be contaminated run off water.
Landowners, especially those in Queensland, will be very concerned about traffic on and off the property and the potential for spreading of weeds and other biosecurity risks. Landowners will often require developers to have a wash down facility.
Developers will need to secure water for the washdown facility and other operational needs. This can be a challenge in remote or arid locations and may need to be trucked in.
Documents with landowners will generally require the developer to indemnify the landowner for contamination and biosecurity risks.
Decommissioning
Decommissioning involves removing equipment on the land and returning the land to as close as possible to its original state. Decommissioning a BESS poses safety and contamination risks. Decommissioning obligations are usually contemplated in lease agreements with the landowner and can involve the developers providing the landowners with security for decommissioning although this is usually heavily negotiated as it adds to the cost of capital.
Increasingly, development conditions or legislation require developers to provide a statutory decommissioning bond. Developers should avoid a ‘double up’ of these obligations.
Expansion of battery schemes
There has been a recent uptick in the number of BESS projects due to improved technologies, falling costs, the need for grid stability and the availability of various government grants. There is likely to be an increased uptake in residential BESS reducing demand on the grid.16 Communities with high adoption of this small-scale technology will significantly reduce the demand for commercial BESS sites in the vicinity.17
However, commercial BESS sites will remain crucial as home batteries do not have enough capacity to completely stabilize the demand-curve.
Final thoughts
BESS play an important role for developers as a complementary hub technology to a solar or wind farms. Increasingly, they are also being deployed in stand alone situations as there is more flexibility for location. The importance of BESS for grid stability has seen Australian Energy Market Operator (AEMO) drive BESS development. This creates opportunities for capitalising on pricing structures that place a premium on peak load capacity.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
1 Department of Planning and Environment, NSW Government, Draft Private Agreement Guideline (Guideline, November 2023) 5-6 (‘Draft Private Agreement Guideline’).
2 Ace Energy, ‘Little River Battery Energy Storage System’, Little River BESS (Webpage) <https://littleriverbess.com.au/>.
3 Shell Energy, ‘The Five Attributes of an Ideal BESS site (Webpage, 17 September 2024)< https://shellenergy.com.au/energy-insights/the-five-attributes-of-an-ideal-bess-site/>. s
4 Queensland Treasury, ‘Solar Energy Fact Check’ (Webpage) <https://www.energyandclimate.qld.gov.au/energy/types-of-renewables/solar-energy/fact-check#:~:text=Solar%20farms%20and%20land%20use,-Fact:%20Large%20solar&text=According%20to%20the%20Queensland%20Solar,(MW)%20of%20power%20generated>
5 Chend Cheng, Andrew Blakers and Anna Nadolny, ‘Australia needs much more solar and wind power, but where are the best sites? We mapped them all.’, Australian National University (Webpage, 15 December 2022).
6 Paul Lehmann and Philip Tafarte, ‘Exclusion zones for renewable energy deployment: One man’s blessing, another man’s curse’ (2024) 76 Resource and Energy Economics 1-2.
7 Edina, ‘Battery Energy Storage System (BESS) (Webpage)< https://www.edina.eu/power/battery-energy-storage-system-bess>.
8 Umwelt (Australia) Pty Ltd and RES Australia Pty Ltd, Agricultural Impact Assessment – Walla Walla Renewable Energy Project (Report, July 2022) 17-18.
9 ABC News, ‘Solar farm trial shows improved fleece on merino sheep grazed under panels’ (Webpage, 30 May 2022) <https://www.abc.net.au/news/rural/2022-05-30/solar-farm-grazing-sheep-agriculture-renewable-energy-review/101097364>
10 Murray Thornhill, ‘Sustainability and Renewable Energy – Land Access Agreements’, Business News, (Webpage, 25 March 2024)< https://www.businessnews.com.au/article/Sustainability-and-renewable-energy-land-access-agreements>.
11 Ethan Bush, ‘Don’t let noise be a drain on BESS developments’, Energy Storage News, https://www.energy-storage.news/dont-let-noise-be-a-drain-on-bess-developments/
12 Australian Energy Infrastructure Commissioner, Neighbour Matters, Australian Government (Webpage)< https://www.aeic.gov.au/observations-and-recommendations/chapter-2-neighbour-consultation-agreements>.
13 Jens Conzen and Michael Townsend, ’Mitigating Lithium-Ion Battery Energy Storage Systems (BESS) Hazards’, Jensen Hughes (Webpage, 8 December 2023). ss
14 Transect Team,’ Building Trust: Understand and Mitigate Opposition to BESS Projects’ (Webpage, 7 October 2024)< https://www.transect.com/blog/understand-and-mitigate-opposition-to-bess-projects>.
15 Energy Australia, ‘Mt Piper Battery Energy Storage System Fire safety’ (Fact Sheet, December 2024) 1 < chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.energyaustralia.com.au/sites/default/files/2024-12/EA_189_Mt%20Piper%20Fire%20safety_v5%20%282%29.pdf>.
16 Solar Victoria, ‘Solar Battery Loans’ (Webpage) <https://www.solar.vic.gov.au/solar-battery-loan>; Government of Western Australia, ‘WA Residential Battery Scheme’ (Webpage, 28 March 2025) < https://www.wa.gov.au/organisation/energy-policy-wa/wa-residential-battery-scheme>.
17 Tom Monaghan, ‘Battery Storage: Australia’s current climate’ (Webpage, 22 August 2024) < https://www.energycouncil.com.au/analysis/battery-storage-australia-s-current-climate/>.
