Renewable Energy Projects Nearing End Raise Abandonment Concerns

Source: By Drew Hutchinson, Bloomberg Law • Posted: Thursday, September 7, 2023

Guidelines for decommissioning solar and wind projects vary from guidelines differ state to state. Photographer: Waldo Swiegers/Bloomberg

As wind and solar development speeds up across the country, more states are running into questions about how to responsibly decommission or repower projects at the end of their lives.

In the absence of federal guidelines, more than two-thirds of US states have requirements for decommissioning or renewing wind and solar projects at the end of their first life cycles, according to a report from law firm Lewis Roca. Regulations usually protect the private property where projects are developed, the report says.

But guidelines differ state to state, with some focusing on ensuring that decommissioning costs are covered up front and others outlining specific standards for end of life, according to the report. Many states leave the specifics to local governments.

Although industry professionals have suggestions, there are no widely agreed upon set of best practices for how to handle decommissioning, and no one state serves as a perfect example, said Tom Dougherty, partner at Lewis Roca.

“The risk is that projects reach the end of their life and then maybe don’t get removed,” said Dietrich Hoefner, who’s also a partner at Lewis Roca.

Plenty of areas have seen legacy energy projects like coal plants and oil rigs abandoned at the end of their life cycles, causing eyesores, damage to farmland, and other issues. Setting decommissioning standards for wind and solar can help avoid that same decline of public trust, especially in the rural areas where they’re often built, Dougherty said.

“The best practice should be something that gives the host community some reassurance that they’re not going to be left holding the bag for something bad,” said Brian Ross, vice president of renewable energy at the Great Plains Institute.

‘We’ve Seen What Happens’

Louisiana is trying to steer solar and wind projects away from the same problems its oil industry caused.

A 2014 audit found nearly 3,000 orphaned wells in Louisiana — many the product of a 1980s oil glut — and officials are still grappling with how to plug them without breaking the bank, said Patrick Courreges, communications director for the state’s Department of Natural Resources.

The state passed a law in 2022 requiring most solar developers to put up bonds and submit decommissioning plans in permit applications. The state Department of Natural Resources was also directed to set clear end of life solar standards to guide those plans.

The first round of public comments took place last fall, Courreges said. The agency is currently working on a draft rule.

“We’ve seen what happens” to energy assets when no financial securities, like cash or bonds paid up front by developers, exist to offset decommissioning costs, Courreges said.

The same concerns now apply to renewable energy projects, especially solar farms. Louisiana’s utility scale solar generation was nearly five times greater last year than two years earlier, according to the US Energy Information Administration. The state is also attempting to add 5,000 megawatts of offshore wind power capacity by 2035.

“Immediately landowners and legislators are thinking, ‘OK, what happens if John Q. Solar goes out of business? What happens to all the panels in my field’?” Courreges said.

Setting Standards

Many wind and solar projects built in the 1980s are reaching the end of their lifespan and will soon need to either be repowered or removed, Dougherty said. The majority of utility grade solar and wind farms were built later on, so in coming years “the rate at which these projects are coming offline is going to increase pretty rapidly,” he said.

Federal clean energy grants from the Inflation Reduction Act and the 2021 bipartisan infrastructure law have created a new push to set decommissioning standards for renewable energy projects, according to analysis from renewable energy investor Leyline Renewable Capital.

Kansas is one of just a few states with no statewide decomissioning standards, according to Lewis Roca’s report. Opponents of renewable energy sometimes try to use the nonuniform permitting process to kill projects, said Dorothy Barnett, executive director of the Climate and Energy Project, a Kansas-based nonprofit.

But overall, the local process of removing and renewing projects goes smoothly due to a few key provisions included in most of the conditional use permits, which developers need to start building, she said.

“Even with repowering, that still goes through the local siting process,” Barnett said. “We haven’t heard anything from the developers or anything from those counties to say we need a different system.”

Starting the process of codifying uniform end of life standards could be good for the industry—as long as developers have a say in those rules, said Dennis Richter, president of Solterra Energy in North Carolina.

“We want to do the right thing,” he said. “But we also want flexibility.”

Solar and wind developers usually lease land for their projects, and those contracts often outline at least some decommissioning responsibilities to protect landowners. But it’s harder to get financing for projects if developers have to add up-front decommissioning costs to budgets, Richter said.

One compromise is to make developers post bonds up front, but then reexamine the contract every few years in case the costs change, Ross said.

“I think most of us would be open to that, versus doing it project by project, county by county, where it’s a whole new negotiation each time,” Richter said.