As the urgency grows to effect the transition to zero carbon emissions, renewable electricity generation projects are proliferating.
Most of the technologies being deployed have a finite lifespan and their planning permission is of a fixed duration, so consideration needs to be given to the obligations arising at the end of the project’s useful life.
Costs associated with the decommissioning and restoration of onshore windfarms have been a staple part of our professional workload for a long time. The majority of onshore windfarms are developed under a leasehold arrangement with the terms of the lease placing the obligation to meet decommissioning and restoration costs on the tenant.
The projected cost of this obligation is generally secured by a bond or a sum of money held on deposit; however, it is important that such costs are reviewed regularly to ensure the sum is sufficient to meet the liability.
Most leases allow for review of decommissioning costs every five years, but it is an aspect of the lease which is often ignored as it has no immediate impact upon the landlord’s income.
However, for obvious reasons, it is not something to be ignored particularly as many early developments are approaching the end of their permitted life.
Of course, time-limited renewable energy technologies extend beyond wind to solar (photo voltaic) and battery storage and we are increasingly considering the decommissioning and restoration costs of these developments before a spade has been put in the ground.
This is largely a consequence of councils and planning authorities taking a much more proactive approach to future liabilities.
Part of this change in attitude may result from the failure of Scottish Coal a decade ago when it was discovered that insufficient provision had been made for the restoration of opencast coal sites.
Further evidence of the cautious approach being taken by public authorities in this regard is their increasing tendency to refuse any value to be attributed to recyclables arising from the decommissioning process.
In terms of renewable developments the old adage of ‘what goes up, must come down’ is particularly true and it is important to give detailed consideration to future costs and liabilities at an early stage.
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