About the author: Craig McNally has been a Pulaski County resident for the past 16 years after graduating from Virginia Tech with a mechanical engineering degree. He plans to put panels on his own house in the next couple of years.
The Pulaski County Solar Farm is coming. The project will provide green energy, preserve farmland, and bring in additional revenue for the County. The plan, however, is not without its faults. One of the lesser discussed issues involves the long-term financial implications once the facility has reached its end of 25-35-year lease term. The decommissioning plan provided by the solar developer, Hecate Energy, lacks concrete numbers, and members of the Pulaski County staff and board have not been forthcoming on details. Better planning of the decommissioning would protect the County financially. How can policies be improved going forward?
What is solar decommissioning and reclamation?
Most leases for a solar farm property expire after about 30 years. When the project ends, the site is decommissioned. The decommissioning and reclamation process involves removing everything related to the solar project at the end of its lifespan and returning the land back to its original condition. During this process, all equipment (e.g., steel posts, panels, wiring, inverters, transformers, etc.) and fencing is removed and disposed of, the gravel is scraped away, new soil is brought onsite (if needed), and grass is seeded. This work costs money, which must be carefully considered and secured through bond funds before and during its lifespan.
What does the state of Virginia say?
Virginia law requires:
- Localities create a written plan with the landowner or solar developer for decommissioning of the system, but leave the details of how that is accomplished very open.
- A surety bond is to be established, putting funds away in advance for the work, but salvage value can be considered in lieu of money.
- The locality is permitted to decommission the system should default occur, though liens are not mentioned, so it is undefined who will assume the cost to do so.
What’s in the Pulaski Solar Farm decommissioning plan?
The only publicly available documents are a six page plan submitted by Hecate, along with a set of conditions issued with the special use permit. The special use permit requires that Hecate update the decommissioning plan after 15 years (and every 5 years thereafter), but it lacks clarity on what is required in those updates. When speaking with members of the staff and board at Pulaski County, I was told they knew little beyond the information in the plan and permit, and that Hecate is presumed to be acting in good faith.
Let’s look at the numbers provided for the recently passed Pulaski Solar Farm provided by Hecate. A surety bond of $2,000 per megawatt ($560,000 total for the proposed development) will be required. Its primary objective is to protect against default should the project be abandoned during development. The special use permit states this will be refunded to Hecate upon startup of each phase of the solar farm, though I was told the County will hold the funds through the entire lease. This sounds like a good chunk of money, but it only represents 4% of the total estimated cost to decommission the system. Sale of the scrap material is intended to make up the remaining 96%. Hecate provided (and the County accepted) its own estimate, basing it off another unspecified project in Virginia. The numbers do seem feasible for the current market. Hecate estimates decommissioning of the 2,700 acre facility is projected to cost $13.2 million. The salvage value of materials is being estimated at $16.2 million. If this remains true three decades from now, $3 million can be reclaimed by cleaning up the site.
What’s wrong with the Pulaski Solar Farm decommissioning plan?
No one knows how much decommissioning will really cost 30 years from now. Labor rates are currently low in this area, but might provide a better pay scale in the future, increasing removal costs. The scrap value of materials is also based on today’s market price, but this market is volatile, with regular swings of 2x or more. A small change in numbers of the provided estimate leads to enormous financial implications. It may be that in 25-35 years, labor rates go up 20% and scrap prices drop 20%. That’s well within error for an estimate should the work happen today, let alone decades from now. Decommissioning becomes a liability, potentially even causing a company to declare bankruptcy with enough projects like this being decommissioned around the same time. With $15.8 million for decommissioning and only $13.0 million recovered from salvage, the entire motivation for the company to clean up relies entirely on the surety bond, which may or may not exist, and wouldn’t be sufficient to cover an extra $2.8 million anyway.
When the installation is decommissioned, panels can be sold off or recycled, but it is difficult to know if they will have any value 30 years from now. In another few decades, when the first large scale installations of photovoltaic panels are removed from service, we will begin to see how these enormous quantities of electronic waste are handled. Panel output degrades at about 1% per year and photovoltaic technology is continuously improving. A similar analogy are televisions. Thirty years ago, everyone owned big clunky CRT monitors. While they are still functional today, they are outdated, no one wants one, and they cannot even be donated to the thrift store. The current decommissioning estimate of the Pulaski Solar Farm likely assumes the panels are disposed of in a landfill or sold used to a 3rd world country since no recycling cost is accounted for. In the current market, a single panel costs about $20 to properly recycle, though no mandates currently require it. The Pulaski Solar Farm will comprise of approximately 900,000 panels. If future federal or state regulations require them to be responsibly recycled, that can potentially add $18 million to the decommissioning cost that has not yet been accounted for.
The decommissioning plan will be updated in 15 years, but will Hecate be required to put additional funds into the bond if necessary? I have been told yes, but without being able to point to that stipulation in a document, it is difficult to know. There are no specifics outlined to ensure this is the case. Will Hecate continue to provide its own decommissioning cost estimates? That would be the fox guarding the hen house.
What should future projects consider?
The bond needs to be reevaluated at regular periods, perhaps every 5 years, with updated estimates to account for changing labor rates, scrap value, and other potential costs like recycling the panels. If there is a deficit, more money needs to be secured in the bond. It is suggested this be funneled from the sale of electricity and deposited incrementally over a 5-year term. The entity providing the estimates is just as important. As a decommissioning review is updated, it should be completed by an independent third party with no financial interest of the outcome.
In the worst case at the end of a solar farm’s lifespan, the solar development company may default, passing liability to the landowner and leading to lawsuits as the inoperable equipment sits in disrepair and becomes a nuisance. State law permits the locality to decommission a system should default occur, though liens are not mentioned, so it is undefined who will assume the cost to do so. An important inclusion for the financial protection of the County would be an abandonment and removal clause. A regulation could be added to the special use permit, allowing liens or fines to be placed upon the property should the project become abandoned after a set period of time, perhaps 6-12 months. This clearly places financial liability upon the landowner, rather than leaving the situation open to interpretation.
So, what now?
The story of companies coming into Pulaski County with new technology promising to increase our local tax base, create jobs, and position us on the front lines of innovation is not new. Anyone who has visited downtown Pulaski can see how that story played out in the 20th century and how we are still struggling to figure out how to clean up the mess aesthetically, environmentally, and economically. With future solar projects, we have the ability to plan ahead, ensuring that none of us will get left with an eyesore 25-35 years down the road that either landowners or the local government has to figure out how to clean up. The Pulaski County Solar Farm is an exciting initiative. Given the large amounts of farmland in the County and the urgent global need to generate clean energy, we will likely have other opportunities to negotiate agreements like this one down the road. I hope that when we do, we can learn lessons from other communities on how to do so with a long view in mind locally, as well as globally.
Interested in learning more? Check out these useful sources of information:
Public documents from Pulaski County related to the New River Valley Solar Farm:
Virginia law regarding decommissioning requirements. https://law.lis.virginia.gov/vacode/title15.2/chapter22/section15.2-2241.2/
New York State Solar Guidebook, a 230 page document that provides comprehensive recommendations for residential as well as large scale solar installations. Contains excellent information navigating special use permits, agricultural and landowner considerations, and decommissioning.
Solunesco 2018 Review of Counties Solar Decommissioning Requirements in Virginia, provides a complete listing of all (those with formal policies) Virginia county requirements regarding zoning, permitting, bonds, decommissioning.