Assessing the compensation for electricity wayleaves

This paper examines the measure of compensation payable for electricity wayleaves through afforestation and considers the merits of using a discounted cash flow approach to calculate the level of compensation. The research finds that the majority of negotiations take place “under the shadow” of compulsory powers and that the measure of compensation is based on the principle of equivalence; the compensation payable being the loss to the landowner and not the gain to the electricity supply company. It concludes that great caution is needed when applying a discounted cash flow approach to the valuation of afforestation owing to the large number of inputs and the sensitivity of the estimated land value to changes to key variables such as the discount rate and tree species.