Primary Author: Irene Cox is a graduate policy intern. She worked as a member of the Energy Transition Initiative at the Weldon Cooper Center for Public Service.
Advisors: Bill Shobe (Director, Center for Economic and Policy Studies) and Elizabeth Marshall (Senior Project Coordinator, Virginia Solar Initiative) served as advisors on this report.
Utility-scale solar facilities are an important component of electricity generation and decarbonization in the Commonwealth of Virginia, but few guiding documents are available to support localities’ approach to the decommissioning process.
This report analyzes existing state and local laws, recommendations from state and federal agencies, and approaches in comparable markets to present an inventory of decommissioning best practices for Virginia localities hosting utility-scale solar facilities.
Several local policy strategies can protect localities’ financial interests, mitigate unnecessary temporal and fiscal costs to facility owners, and reduce inefficiencies in the decommissioning process:
- Establishing an effective decommissioning ordinance;
- Defining a legal framework to enforce decommissioning;
- Requesting appropriate forms of financial assurance; and
- Factoring salvage credit, inflation, and administrative costs.
The legal protections available to localities, such as clear definitions of “decommissioning” and “abandonment”, entry right statements, appropriate decommissioning plan contents, and the conditions under which a locality may access financial assurance to complete decommissioning are generalizable across virtually all utility-scale solar projects. In every case, the financial assurance amount available to a locality should be sufficient to complete the decommissioning of an abandoned or end-of-life facility and should be posted until decommissioning is complete.
Other key considerations are context specific: When creating financial assurance requirements, localities should carefully consider the facility owner’s access to capital and the relative ease of paying decommissioning security as an operating cost once the solar facility is actively producing power rather than as a capital cost during site construction. Localities should establish financial assurance guidelines appropriate to a solar project’s size, expected duration, and complexity.
Emerging best practice factors some portion of solar hardware’s salvage value, subtracting an appropriate salvage credit from the decommissioning cost estimate. Both the decommissioning cost estimate and projected salvage value should come from a Virginia-licensed engineer rather than a solar developer or facility owner.
The optimal combination of strategies discussed in this report will depend on the characteristics of each solar project.