What are the legal considerations when closing down a solar farm site? Peter Cooper, partner and head of the Energy team, explains how lawyers can assist in creating an appropriate decommissioning strategy.
Should solar farms be built with a decommissioning strategy in mind?
Yes. The planning permission required to build the site will often state that the site should be decommissioned if it is no longer generating electricity but local planning authorities are not often very specific about what form a decommissioning strategy should take.
Solar farm planning permissions are also temporary in nature and are only valid for a certain length of time so it is vital that decommissioning is considered by both the landowner and developer at the outset of the project.
Any decommissioning strategy needs to ensure that the site is fully restored to its former state and this will typically involve the complete removal of all equipment to a depth of one metre underground (other than any equipment which may have been adopted by the network operator such as cabling or substations) and the repair of any land drains which may have ben damaged by the decommissioning process.
In terms of the electrical infrastructure which belongs to the local distribution network operator, reinstatement provisions for this will be dictated by the terms of the wayleaves and other agreements in place between the landowner and the network operator.
A schedule of condition should be prepared at the outset, agreed between the parties and annexed to the completed lease as a record of what the land looked like before any construction works take place. A contamination survey can also be undertaken of the land which together with the schedule of condition will form the baseline to which the developer needs to reinstate on decommissioning.
Reinstatement can be expensive so well advised landowners will insist upon the developer putting in place a form of security which can be called on should the developer either become insolvent or fail to comply with their reinstatement obligations. This can take the form of a sum of money placed on deposit, an insurance policy or a bond. When this security is put in place will depend on negotiation between landowner and developer – landowners will want it in place from the start of the lease whereas the developers will typically seek to put it in place some years later.
It is anticipated that the majority of solar farms will continue to operate rather than being decommissioned on expiry of the lease subject to the developer being able to obtain a fresh planning permission and being able to agree lease extension terms with the landowner.
How can lawyers assist in the creation of a decommissioning strategy?
Lawyers can help by ensuring terms are added to the lease which make it clear what the developer’s obligations are on decommissioning and what will happen to the equipment at the end of the lease. Clarity on these points from the outset is important for both landowner (who will want their land back in good condition) and developer (who will want to ensure the lease is fundable)
What could trigger the closure of a solar farm?
The loss of subsidy (for older sites) or an inability to repay funding if the site revenue is lower than anticipated may cause issues. This may be the case where the site not been constructed correctly, levels of solar irradiance for the site were not predicted accurately enough or poor maintenance result in lower income and potentially the closure of a solar farm.
What are the key legal considerations when looking at decommissioning/closing a solar farm?
It would be necessary to consider:
- the form of decommissioning security and when this is put in place
- ownership of equipment
- good operation and maintenance (O&M) contracts, and
- the valuation of the site during the term
Funds and deposits for reinstatement should be in the names of both developer and landowners and it is important when expiry of the planning permission approaches to ensure any enforcement proceedings are avoided or make sure that planning is reapplied for in good time.
This article was first published on Lexis®PSL Environment September 2014. Click for a free trial of Lexis®PSL. Article updated on 24 April 2023.