This article was first published in Clean Energy Pipeline on 30 May 2019
Dozens of UK onshore wind farms are over 20 years old and many more are either at, or approaching, the end of their design lifecycle.
Post-2030, half of all UK wind farms and nearly as many solar PV parks will be over 20 years old.
Not only will the wind turbines, solar panels and their associated equipment have reached the end of their design life after 20 years, but the projects' leases, planning permission and other contractual arrangements will in most cases have been structured around the original lifecycle of the projects.
The resulting effect is that that obligations relating to decommissioning and remediation will undoubtedly arise in the coming years for today’s renewable energy project owners.
End of life options
The owners of aging wind farms and solar parks have a number of end of life options, some of which will not have been at the forefront of the original developer's thinking when the leases, planning permission, grid connections, off-take agreements, construction and maintenance contracts (Project Documents) and funding terms were being negotiated and agreed.
The default position will be to dismantle the installation, remediate the site and to restore it to its former use. That scenario is likely to have been what the authors of the aforementioned suite of contracts will have been anticipating when they were doing their best to ensure that everything had been thought of and that their drafting reflected their clients' wishes.
However, as these early projects reach the end of their design life their current owners may wish to extract some additional value from them either by: i) allowing them to continue running for as long as the equipment lasts; ii) extending the life of the installation by fitting new key components into the existing equipment; or iii) dismantling and replacing the old equipment.
As far as the Project Documents are concerned, many of the same considerations will arise regardless of whether a project owner opts for an extension of life, repowering, or developing a new project. However, there are some practical advantages to extending a project's life or repowering it when compared to developing a project at a new site.
The wind or solar resources at the site of an existing project will be well known compared to a new site, which will provide added certainty in relation to forecast power generation.
The grid connection will be in place (although it may not be sufficient if the repowered project has higher level of output) and the original environmental assessments for the project may provide the basis for faster assessment of the extended or repowered project. Also, there is less likely to be resistance from the nearby community to an existing wind farm or solar park continuing to operate than there would be to a new project being built. However, if the local community does not support the repowering of a site the owner's application for planning permission to do so may be rejected.
Project owners will reach their own conclusions in relation to the cost-benefit analysis of these alternatives and they may take a more holistic reassessment of a site's potential as part of this exercise and consider the addition of alternative equipment, such as battery storage, into the next phase of the project's life.
In most cases the leases for a wind farm or solar park do not contain provisions for the extension of a project's life beyond the term that was originally agreed when they were entered into. As such, the project's owner (in its capacity as the tenant's representative) will need to engage with the landlord (whom they may not have dealt with before if ownership of the superior title has changed), the landlord's mortgagee(s) and its own funders who will have security over the leases.
As noted above, the owner will need to apply for planning permission in order to repower a wind farm or solar park. This is because, unlike most planning permissions in England and Wales, planning permission for a wind farm or solar park includes a standard condition that means it expires after a fixed time period. Thereafter the project's infrastructure must be decommissioned and removed from the site. An owner who only seeks to extend the life of a project (with no change to the equipment on site) may be able to do so by postponing the expiry of planning permission through a variation to the conditions which govern expiry. If the owner fails to obtain such a variation then new planning permission will be required and he or she may face the same arguments from the local planning authority, and other interested parties, as the original developer faced when they first sought planning permission for the project.
For some projects, such as a wind farm built on a very windy site, it may be possible that the economics of repowering, on an initial assessment, are such that it would be worthwhile to replace the existing wind turbines with more powerful new models substantially before the end of their 20 year design life. In such cases there will be additional considerations to those mentioned above if: i) the project benefits from support under the renewables obligation support scheme or feed-in tariff regime; ii) the owner has signed up to a long-term off-take agreement or operation and maintenance agreement; and/or iii) there is project finance in place.
Any modification to the equipment on a site which has been accredited for a subsidy is likely to require modification to such accreditation as a minimum. Likewise, if long-term contracts are in place and require to be terminated before the end of their agreed term then compensation may be payable to the counterparties.
In the case of operating projects with outstanding debt, careful consideration of prepayment costs should be factored into the analysis when considering repowering prior to the repayment of any loans.
Many operating wind farms and solar parks will, in due course, benefit from life extension or repowering. However, the difference between success and failure could come down to starting the process of assessing what changes are required to the Project Documents early enough to ensure that the owner does not run out of time in getting replacements agreed before the existing contracts expire and the decommissioning obligations contained in the project's planning permission come into force.