Earlier this month, we outlined the issues and regulatory landscape regarding utility-scale solar systems' end of life, replacement, or removal. The project owner will consider profitability, land leasing, and the system condition and may decide to repower or decommission the project. Repowering means that the system will be refurbished/replaced, and the project will continue to operate at the same location for another lease cycle. Alternatively, decommissioning means the renewable energy system is removed, and the land is ready for redevelopment or returned to its original use. The figure below shows the steps involved in the repowering or decommissioning process.
Figure 1: Flow Diagram on Utility Scale Solar System End of Life
Estimated costs and a decommissioning plan are included as part of the initial project application. This protects the landowner and the surrounding community from the uncertainty associated with lease transfers and the risk of developer abandonment or bankruptcy. Local governments want clear decommissioning conditions so that, if a project owner becomes financially insolvent, the community does not incur responsibility for managing the land or equipment. At present, however, there are few uniform guidelines.
Decommissioning planning is an inevitable component of solar development. But what lens do developers view these issues? What are the biggest considerations when preparing a project, and how difficult is it to understand and execute on expectations? This month, we spoke with three solar experts: Maggie Clark of Pine Gate Renewables, Will Giese of the Solar Energy Industries Association (SEIA), and Blair Kendall of Urban Grid. These individuals work on the ground every day as developers and policy managers, overseeing and negotiating decommissioning action and regulation across multiple markets and jurisdictions.
Before getting started Maggie pointed out that it's important to recognize that decommissioning is no longer just an end-of-life, down-the-road issue for solar. It's a current land use issue. Decommissioning is an extension and result of fragmented land use policy across the country. You can no longer divorce solar's impact on local communities and land use from decommissioning. When localities do not have the tools to regulate land use and solar's interaction with land ordinances-i.e., when there are unclear or non-existent standards-then you may have an area that tries on their own to regulate solar out of a community by imposing restrictive policies.
Decommissioning is an extension and result of fragmented land use policy across the country. You can no longer divorce solar's impact on local communities and land use from decommissioning.
Maggie Clark, Pinegate Renewables
However, education in communities makes a big difference, so developers have gotten pretty good at educating communities about reasonable policy and addressing risks. What is still tricky is that there is such a diverse patchwork of policies across the grid, so it's difficult for developers to know how to incorporate them into the project development timeline. Read on for a more detailed perspective on these complicated industry processes.
Q: Do decommissioning standards matter when considering a market for utility scale solar? In other words, is it better for a market to have very clear standards or not?
Maggie: This is a great question, and I always ask this to other people. Is it better to have 100 counties and however many included municipalities that have their own decommissioning policy that you can then go in and shape? Or, is it better to have a statewide policy that tells localities exactly what to implement? Traditionally, from a development point of view we have preferred localized policy. Typically these local efforts prioritize developer education and implementing favorable policies from elsewhere, and that is beneficial to the broader solar industry. What we're seeing more often now, however, is statewide standardization. This is good in some ways, as it makes things easier to predict and allows us to more easily set expectations. But it can also be troublesome because it introduces politics into the conversation, and can involve legislative action that may intentionally stymie solar development.
Is it better to have 100 counties and however many included municipalities that have their own decommissioning policy that you can then go in and shape? Or, is it better to have a statewide policy that tells localities exactly what to implement?
Maggie Clark, Pinegate Renewables
Will: Decommissioning standards matter a lot. Most developers who work in multiple markets think about new decommissioning in terms of financial assurances and project economics, among other issues. For instance, how is financial assurance calculated? When do they kick in? In what form do they occur? Five or six years ago, solar projects would not need financial assurances until year 20 in the project's lifetime; now, those mechanisms can take a variety of different forms and timings depending on the state or county. This can cause problems with legacy projects for instance, that may have been developed years ago, and now they're having to consider things like financial assurance or other requirements that weren't present at the project's construction. Developers also have to consider what form financial assurance must be posted - for example, bonds - and when they post within the project lifescale-are these bonds due up front in year one, or as a percentage in year five, etc.? Factors like these interfere with financing calculations and create risk from a project development standpoint. It's also important to remember that a majority of projects across the U.S. are still less than 10 years old.
Most developers who work in multiple markets think about new decommissioning in terms of financial assurances and project economics, among other issues. For instance, how is financial assurance calculated? When do they kick in? In what form do they occur?
Will Giese, SEIA
Blair: It is better for a market to have clear standards as this reduces the relative risk of development as every developer is using the same inputs in their model. From our perspective, having some level of decommissioning requirement is part of responsible development and is now really "market." Doing solar decommissioning and doing it well is critical to the long-term partnership between the rural communities and utility-scale solar, and the ongoing growth of our industry.
The question is really, what is reasonable to provide adequate assurance to the local community that we will take care of the land, restore and even improve it, as we are saying we will, and then what is the relative cost. Some decommissioning requirements that we have run into provide iron clad protection to the authority having jurisdiction, however, they unnecessarily add significant risk and cost to the project. In many cases, this is unintentional as the AHJ does not understand the impact of each of the specific requirements. Education is key here as we work with local authorities to develop effective, workable decommissioning requirements.
Misinformation around utility scale solar and decommissioning runs rampant among local opposition, partly due to the fact that no one has done it yet. We hear from people at public meetings that they fear project abandonment and that is based on development projects in other industries, not solar. Once again, community engagement and education are the path forward here.
Q: Do you have any industry resources that you rely on for guidance at all?
Maggie: I think the template solar ordinance in North Carolina is one of the best resources out there, although at this point it's around six years old and doesn't necessarily reflect the current solar landscape. We need more robust, current guidance now for decommissioning. In terms of model legislation, I like to refer people to Texas. They have a very straightforward, commercially reasonable law that accurately reflects the risk of project abandonment. If someone is looking to replicate existing guidelines, Texas is the state to focus on.
Will: Industry resources are still being developed given the nascent nature of decommissioning nationwide. Again, many of these projects are still 10-15 years away from this reality. There are approximately 15 states in the U.S. that have some specific solar decommissioning language in the state statute. Typically, the Texas bill that passed last year is the "gold standard for decommissioning" that SEIA often references and utility scale solar developers point to it frequently. SEIA also has decommissioning guidance available. I will say that it's hard when new resources come around and suddenly legacy projects that are already in place have to contend with new guidelines. It doesn't seem that they should be subject to new decommissioning standards, especially if it interferes with the existing financial calculus of the project. But yet they are
Blair: At Urban Grid, we consider what is best for the community, take into account unique project attributes and reference best practices. Often we will refer to successful language or decommissioning standards from other existing projects or Authority Having Jurisdictions (AHJs) which have found the right balance of interests.
Recently, through our work with TenneSEIA, we were involved in the development of a state level solar decommissioning bill, SB1925, which passed the Tennessee General Assembly earlier this year. It was a great collaborative process that involved all stakeholders, including the Farm Bureau, and balanced the needs of the farming communities that typically host solar projects, and the solar industry. It took inspiration from the Texas legislation, but was adapted for Tennessee's specific needs.
Q: There is no national guidance on decommissioning. How much does that matter to you in this industry?
Maggie: In my opinion it matters a lot. I am currently part of a national Uncommon Dialogue hosted by the Stanford Woods Institute. This is a moderated, mediated discussion with the solar industry, national level agencies/departments, land use entities, and environmental NGOs. So while there isn't really national guidance, there are a lot of national conversations and they are centered around land use. Like I mentioned before, decommissioning is a product of land use concerns, and so we need to tackle land use conversations first because they then should lead to better conversations around decommissioning.
Another important component would be to ensure that a national guideline doesn't have negative impacts on revenue-we would need to make sure that costs align with risks, that financial commitments don't occur too early in the project lifetime. If you have a requirement for a bond on salvage value that kicks in too early (and is speculative at best), then that could really detract from project revenue. This then would run the risk of facilities being abandoned. Costs of compliance with new regulation would need to align properly with the risks of project abandonment, which are very low.
Will: Where there is some national guidance, it's still iterative and highly dependent on the state or locality that a project is located. SEIA has a national decommissioning model bill that we have produced for utility scale solar. We believe that is a primary resource that could be set for guidance and then be applied specifically to a state. Statutory language could be adopted by a state and then customized to that state's unique characteristics. You could give that guidance to a national legislator and guide and incorporate financial assurances down the road. It is different from landfill regulations (which are currently the only real decommissioning mentioned on a federal scale) and includes repowering and salvage value, which are important.
Where there is some national guidance, it's still iterative and highly dependent on the state or locality that a project is located.
Will Giese, SEIA
Blair: I am not sure that national guidelines would be helpful unless it provided a menu of options. As you know, the U.S. is the 50 states of solar and any national template would need to be adaptable to each state's or region's specific reality. There is no one size fits all. Any national guidance would also need to carefully balance any bonding requirements by allowing salvage value to be calculated into the security and by allowing a gradual phased approach with the security. It has to work for both sides, the renewable energy industry and the local communities.
Q: We have heard that many local governments are enacting stringent requirements such as moratoriums to control what they may perceive as an influx of utility-scale solar. Is decommissioning a factor in any of these decisions?
Maggie: I believe moratoriums are a factor of land use, so decommissioning requirements are trying to deal with this. The big concerns are around if solar is an appropriate use for the land where it's proposed to be located. Moratoriums are usually very broad, and a lot involve local concerns about taking land out of agricultural production. They often boil down to more of an acceptance issue - acceptance of solar - and while decommissioning guidelines can address part of this there are more social factors at play.
Will: In my experience, moratoriums seem to be almost ideological in nature. I'm not convinced that most moratorium concerns are actually about decommissioning but rather are about historic land use - people are concerned about agricultural land being co opted for solar panels and destroying generations-long livelihoods or culture. While proper end-of-life treatment and land use is critically important, SEIA's engagement in these conversations are based on facts, rather than feelings. The reality is that the amount of land requirements to provide most states' power needs is comparatively small, often less than 5%. Additionally, fields like agro-voltaics and sustainable solar development go far in addressing concerns about land use.
Blair: In our experience, solar moratoriums are primarily a response to local concerns about the loss of farmland which may already be dwindling due to other land uses such as residential development. We feel that utility scale solar can support the local rural economy and long-term land conservation, as projects can be returned to agricultural use at the end of the operational life of the solar farm. It is incumbent on us as developers to make the case here with development best practices, dual use and long-term community engagement.
Decommissioning can be a factor when localities set moratoriums, but usually it's of secondary importance. If a local government really wants to block solar, it is more easily achieved with zoning requirements, major setbacks from the project perimeter, or strict megawatt/acreage caps.
Decommissioning can be a factor when localities set moratoriums, but usually it's of secondary importance. If a local government really wants to block solar, it is more easily achieved with zoning requirements, major setbacks from the project perimeter, or strict megawatt/acreage caps.
Blair Kendall, Urban Grid
Looking Ahead
It's clear that policy and standards are still evolving, and decommissioning remains a complex and sometimes polarizing topic for solar industry stakeholders. Leyline will continue to monitor updates and keep our readers abreast of any changes in solar decommissioning policy, at both the national and state level.
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