The Center's view: A review of the Center for Rural Affairs "Decommissioning Solar Energy Systems Resource Guide"

The Center for Infrastructure and Economic Development provides additional guidance on decommissioning to complement the Center for Rural Affairs’ decommissioning resource guide.

Introduction

The Center for Infrastructure and Economic Development (The Center) believes in policies and projects that balance citizen concerns, energy needs, and that economic benefits from these projects are vital to the prosperity and vitality of both urban and rural communities. 

With these things in mind, our Team at The Center has reviewed the recent work in the solar energy arena by the Center for Rural Affairs, specifically their “Decommissioning Solar Energy Systems Resource Guide.” The Center has additional suggestions that we believe enhance their resource guide and provides greater consistency and certainty.  

First and foremost, we commend the Center for Rural Affairs.  This document incorporates balanced, rational recommendations for addressing solar resources as projects are developed and as they near the end of their useful life so that both local officials and developers can include transparent requirements within their plans and ordinances.  In addition, The Center offers additional suggestions that might improve this resource guide, leading to greater consistency and certainty for all involved.  These suggestions complement those in Sections III.A. (Components of a Decommissioning Plan) and B. (Financial Assurance Mechanisms):

Section III.A - Components of a Decommissioning Plan

Decommissioning Solar Energy Systems Resource Guide

Decommissioning plans often include: 

  • Estimated lifespan of the project. 
  • Defined conditions upon which decommissioning will be initiated, such as the end of lease, inoperation of the facility for a certain period of time, or a pre-identified end date. 
  • Identification of the party responsible for decommissioning. 
  • Statement defining how notification will be made of intent to start the decommissioning process. 
  • Description of any agreement made with the landowner regarding decommissioning. 
  • Plans and schedule for updating the decommissioning plan over time. 
  • Decommissioning tasks and timing, including:
  • Removal of all equipment, structures, fencing, roads, and foundations. 
  • Restoration of property to condition prior to solar development. 
  • The timeframe for completion of decommissioning activities. 
  • Detailed decommissioning cost estimates prepared by a knowledgeable independent party. This may or may not include the salvage value of solar equipment and infrastructure. 
  • A description of expected impacts on natural resources. 
  • Financial surety, which may be established through different financial instruments, such as trusts or escrow accounts, bonds, letters of credit, or other types of agreements. 

Nebraska is one of the few states with a state-level decommissioning requirement. Nebraska Revised Statute 70-1014.02 requires that private electric suppliers comply with any decommissioning requirements adopted by local governmental entities, submit a decommissioning plan, bear all costs of decommissioning, and post a security bond or other instrument within 10 years of commercial operation securing the costs of decommissioning the facility.

– Heidi Kolbeck-Urlacher, Senior Policy Associate, Center for Rural Affairs. “Decommissioning Solar Energy Systems Resource Guide” ,(June 2022)

Our View

  • Local Ordinances should define a single source to assign financial surety to avoid having to issue bonds or other surety instruments to multiple entities. Additionally, we recommend including an assignment clause to ensure the financial surety is transferred should the project be sold to a new owner.
  • The Guide references “Plans and schedule for updating the decommissioning plan over time.”  While doing so appears to make sense, it also suggests a measure of uncertainty that should be avoided.  Changes mid-agreement may be challenging to track and perform over time.  While the need to review surety at scheduled times during the length of the contract can and should be spelled out at the initial execution of a decommissioning agreement, the plan itself should not be modified once signed. An additional option could be to incorporate a Cost of Inflation escalator that would be reviewed at a predetermined increment, such as every three to five years. 
  • The Guide references “Detailed decommissioning cost estimates prepared by a knowledgeable independent party.  This may or may not include the salvage value of solar equipment and infrastructure.”  The Center agrees with the use of a knowledgeable independent party.  That said, we recommend that the estimated cost of decommissioning specifically incorporate depreciation of the asset and/or a recycling amount. A cursory review clearly points to a growing industry and demand for recycled and reused solar panels, so this important asset should not be ignored in the final decommissioning cost.   
  • The Guide doesn’t include a recommended depth to which a project owner should remove specific structures and components.  Standardization is important for enabling the developer to budget accurately for removal and restoration back to the property’s original condition.  The Center recommends a depth range of 36” to 48” below ground level, unless agreed upon in writing by the developer and landowner, which from our review, is the industry standard.
  • Provisions for restoration should acknowledge the obligation to remove all improvements from the site, including fencing, roadways and other infrastructure, unless it’s mutually agreed in writing by the county, developer and landowner that such amenities should remain. 
  • Hazardous wastes such as fuels, hydraulic fuels, and oils that will be used should be identified, along with the appropriate state and local regulations for their management and proper disposal.

Section III.B - Financial Assurance Mechanisms

Decommissioning Solar Energy Systems Resource Guide

Some local governments may decide to require financial mechanisms, such as trusts, escrow accounts, bonds, or letters of credit, to ensure appropriate decommissioning and reclamation. Requiring financial assurance is a tradeoff, as it provides additional protection for local governments, but may increase overall project costs, which could deter development.31 If requiring financial assurance, a more favorable approach for developers is if assurances can be paid over time rather than prior to project operation, as the assurance may be absorbed as operating costs rather than upfront capital cost.32 

For example, Nebraska statute requires suppliers to post a security bond or other instrument within 10 years of a commercial operation securing the costs of decommissioning the facility.33 Guidance from the Minnesota Department of Commerce Energy Environmental Review and Analysis (EERA) unit recommends that financial assurances be implemented in a stepwise manner with initial payments by year 10 and increased over time to ensure full funding no later than the end of the power purchase agreement.

– Heidi Kolbeck-Urlacher, Senior Policy Associate, Center for Rural Affairs (June 2022). “Decommissioning Solar Energy Systems Resource Guide”

Our View

  • In regard to financial assurance mechanisms, the Guide states “if requiring financial assurance, a more favorable approach for developers is if assurance can be paid over time rather than prior to project operation…” While this is true, we also note that it is important to have all financial assurances and decommissioning agreements in place prior to permit issuance. 

Conclusion

Most assuredly, best practices for the decommissioning of renewable energy and other infrastructure investments will continue to evolve. At The Center for Infrastructure and Economic Development we look forward to being part of that discussion and discovery.

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