Down to the Nitty Gritty on Solar Farm Development

by James A. Bacon

If Virginians want more renewable energy, they need to solve a number of practical problems. One of those is how to decommission old solar panels and wind turbines. When their useful lives have expired, we can’t just let these devices litter the landscape and collect rust. In particular the question of what happens to old solar panels, which contain high levels of heavy metals like cadmium, is one that has concerned many residents of rural counties where solar farms have been proposed.

SolUnesco, a Reston-based developer of solar farms, has given considerable thought to how to plan for the end of utility-scale solar projects. As Lea Maamari and Melody S. Gee write in a company blog post, “finding a good balance of shared benefits, costs, and risks is in the best interest of all stakeholders.”

This year the General Assembly enacted a law that essentially requires localities to enter into written agreements with solar-farm developers to create a Decommissioning Plan and requires developers to post financial security to provide sufficient funds for the decommissioning operation. The law leaves it up to the counties and developers to determine the specific conditions of the plans. SolUnesco’s research has found significant variations in how decommissioning is handled around the state.

Here is how the company describes its vision for the final step in the solar-farm life cycle: 

SolUnesco advocates for creating an environment whereby the land in returned in as-good or better conditionSolUnesco will recommend planting wild grasses and fescue and leaving roads intact for owners’ future use. Having removed farmland from production for thirty or more yearsupon reclamation, the solar project will return it to agricultural uses richer and healthier than before. 

A key issue in decommissioning plans is ascertaining the salvage value of the solar equipment. Due to the difficulty in predicting scrap prices 30 or 40 years in the future, local governments tend to want to eliminate salvage value from the calculation. SulUnesco advocates what it calls “a balanced approach of risk mitigation and calculated discounts.”

Consider a general example: if a project decommission is estimated to cost $10 million with a salvage value of $8 million, the difference of $2 million would be posted as security by the developer. This way, neither party is taking on all the risk or financial burden.

Another issue is what kind of financial instrument to use — performance bonds, parent guarantees, letters of credit, or certified funds? Rather than requiring the solar developer to account for the full financial security up front, SolUnesco recommends a tiered security approach that would phase in financial assurances over ten years, reducing the up-front burden to the developer but providing guarantees to the locality as the solar farm ages.

Write Maamari and Gee: “As we move forward into future projects, we believe it is possible for all stakeholders to balance and share the rewards, costs, and risks of developing utility-scale solar.”

SolUnesco’s proposals sound reasonable, but perhaps they can be improved upon. One way or another, if Virginians want solar to be a larger component of their energy future, these are the kinds of nitty-gritty problems they have to solve.