Evolution of Decommissioning Requirements in Renewable Energy

With legislative momentum around clean power generation and net-zero emissions policies rapidly building, the U.S. is seeing rapid increases in installed wind and solar capacity each year.

At the same time, older generations of renewables are facing a new challenge: obsolescence. The first utility-scale wind and solar projects in the U.S. were developed in the early 1980s. Now, as these and other early-generation renewable projects reach the end of their useful lives, and as new projects are being developed, owners, developers, and other stakeholders must decide whether to decommission, repower, or redevelop them.

Accordingly, state and local governments have been working to develop public policy and practices to address the eventual disposition of obsolete solar panels, wind turbines, and other clean energy generation technologies. To date, no single regulatory framework has been developed that comprehensively addresses renewable energy project end-of-life planning, leaving a patchwork of federal, state, and local policies and regulations that owners, developers, as well as landowners and other interested parties must navigate.

Those involved in project development cannot wait until their assets have deteriorated to begin preparing; instead, they may need to proactively plan for the full lifecycle at the project’s outset in order to ensure compliance and anticipate future requirements. Given the variety of obligations (whether statutory, regulatory, contractual or otherwise) and the potential for overlap and conflict between these requirements—and uncertainty around future regulations and costs, failure to carefully plan for decommissioning considerations could result in significant unanticipated end-of-life costs.

In this uncertain landscape, creative problem-solving is required to tackle the numerous challenges involved in retiring renewable energy projects —such as adapting to evolving regulatory requirements, managing hazardous material contained in project components, acquiring land use approvals and real estate for storage of decommissioned equipment, and reconciling project end-of-life obligations with contracts that may not clearly address such issues.

In recent years, state legislatures have begun to impose specific decommissioning requirements for existing and new renewable energy facilities, such as determining costs, financial assurance, and restoration, to ensure the responsible decommissioning of these facilities. These requirements have the potential to affect participants at both ends of the project lifecycle. This article explores the historical context of decommissioning requirements, examines current trends, and anticipates future developments in this critical aspect of the energy sector.

Where We Have Been: Historical Decommissioning Requirements

Historically, decommissioning requirements have sometimes been an afterthought in the energy industry. In the early days of energy exploration and production, little attention was given to the eventual dismantling of infrastructure. For example, in the oil and gas industry, responsible plugging and abandonment of wells has long been recognized as a critical part of responsible development.

Historically, oil and gas operators, along with government regulators, have faced significant challenges in addressing the end-of-life phase for wells. Initially, many wells were simply abandoned with little to no oversight, leading to environmental concerns such as groundwater contamination and methane leaks. Over time, regulations were introduced requiring operators to plug and abandon wells to mitigate these risks. However, enforcement varied, and many operators failed to set aside sufficient funds to cover decommissioning costs, in some cases creating a burden on governments and taxpayers. In response, bonding requirements were instituted, mandating operators to provide financial assurances to cover future well closure and reclamation costs. Despite these efforts, legacy issues from orphaned and abandoned wells remain, prompting increased government intervention and policy reform in recent years.

The same regulations, however, cannot simply be imported wholesale into an entirely different area of the energy industry. Nevertheless, in many respects state and local governments’ experiences with the oil and gas industry are informing aspects of their approaches to renewable energy end-of-life and decommissioning regulations.

Current Decommissioning Requirements: Present Trends

Today, decommissioning requirements are far more stringent and detailed than in the past, driven by factors such as increased environmental scrutiny, public awareness, and the realization of costs associated with decommissioning. Additionally, technological advancements in decommissioning processes have contributed to this shift. For example, the average capacity of an onshore wind turbine in 2021 was 3 MW, representing a 319% increase from 1998-1999. These technological developments, combined with the need to maximize output from locations with high wind and solar energy potential, create additional incentives to decommission older projects and replace them with newer technologies. The most common decommissioning requirements now involve determining costs, securing bonding requirements, and ensuring proper land restoration.

Determining costs: Several states request information on the costs of decommissioning plans in applicants’ initial project proposals. These costs can be associated with decommissioning labor and restoration of the land.

For wind turbines, costs may be related to the removal of turbines, substations, tower foundations, and buried cables. For solar facilities, these costs should generally be able to cover the removal of the solar panels, support structures, buried cables and other related equipment. Even after states approve decommissioning plans, some states require project developers to update their costs every five years. Other states require decommissioning costs to be reevaluated at least once every two years to account for price fluctuations.

Bonding requirements: The most common decommissioning requirement is a demonstration of the developer’s financial capability to decommission its wind or solar energy project. Many states accept performance bonds, letters of credit, corporate guarantees, cash escrows, or other securities to guarantee the removal of solar and wind projects. Several states’ bonding provisions require proof of insurance for liability for damages resulting from decommissioning.

Other states allow project owners to demonstrate financial capability to decommission their facilities over a period of time. For example, while Tennessee requires a full decommissioning plan, it requires the grantee to obtain and deliver to the landowner financial assurance for removal and restoration.

These assurances must include no less than 5% of the decommissioning cost on the date of commercial operations, no less than 50% on the 10th anniversary of commercial operations, and no less than 100% on the 15th anniversary. Texas has different financial assurance requirements for wind and solar energy projects. For wind, the agreement must provide that the grantee shall deliver financial assurances no later than the termination date of the wind facility or the 10th anniversary of the commercial operations date. For solar, the agreement must provide that the grantee shall deliver financial assurances no later than the termination date or the 20th anniversary of the commercial operations.

States have consistently demonstrated an interest in ensuring project applicants have effective and responsible project decommissioning plans, reasonably estimate the costs associated with decommissioning, and have the financial capability to implement the decommissioning plan. As a result, bonding requirements for decommissioning solar and wind energy projects is one of the more consistent policies across the 50 states.

Land restoration: Many states have also addressed the need to restore disturbed land. For example, California requires applicants to provide evidence of a “restoration security instrument,” which should be sufficient to cover costs of re-grading, re-vegetation, and labor, with the requirement of fully restoring the land to its original condition.

Other states require the restoration to be as close as possible to the land’s original condition. For example, Hawai’i requires project owners to restore the disturbed land to “substantially the same physical condition [that] existed prior to the development…” Even though Hawaii does not require applicants to submit a decommissioning plan, it still requires wind and solar facility owners to ensure that projects are “compatible with agriculture uses and cause minimal adverse impact on agricultural land…”

Maine specifies that decommissioning plans need to provide information on how developers will restore farmlands, including regrading and revegetating disturbed land up to a minimum of 24 inches below grade. New Jersey codified in its decommissioning requirements that restoration of the land also means any other “measures necessary to address ecological and visual impacts…” Oklahoma describes proper decommissioning of a wind energy facility as the removal of wind turbines, towers, buildings, cabling, electrical components, foundations and any other associated facilities to a depth of 30 inches below grade.

The Future of Decommissioning Requirements: What Lies Ahead

Decommissioning requirements are expected to continue evolving. Each year, more and more states are promulgating decommissioning requirements for solar and wind energy facilities. One significant driver of future changes will be the transition to renewable energy sources from more traditional sources.

The future of decommissioning is expected to place a stronger focus on sustainability and the principles of the circular economy. This shift could lead to new regulations that prioritize the reuse and recycling of materials from decommissioned energy infrastructure, significantly reducing waste and minimizing the environmental impact. For instance, companies like Veolia are pioneering innovative technologies, such as a powerful machine capable of crushing wind turbine blades into smaller pieces that can then be repurposed as fuel for concrete production. This is just one example of the continuous evolution of sustainable decommissioning practices.

Washington also has its own unique requirements revolving around circular economy. It has mandated that manufacturers contribute to improving recycling of solar photovoltaic (PV) panels. Washington implemented a take-back program for solar PV panels that requires manufacturers to finance the takeback and recycling of modules at no cost to the owner. This requirement applies to all solar PV panels sold in or into Washington. The program is expected to be implemented on July 1, 2025, and will require PV manufacturers to prepare and submit a stewardship plan to the state by the “later of July 1, 2024, or within 30 days of its first sale of a photovoltaic module in or into the state.” The manufacturer must describe how it will finance the take-back and recycling system, including the costs of collecting, managing, and recycling PV panels.

For a more robust analysis of each state’s decommissioning requirements, please download Lewis Roca’s complimentary analysis here.

—Dietrich Hoefner is a partner and Emma Donachie is an associate with the Lewis Roca law firm.