5.8 Renewables
In the case of renewable energy, AROs are most often associated with
a land lease. When an entity is leasing land from a landowner, the landowner often
requests an agreement that the land will be returned to its original condition at
the end of the lease. In addition, AROs can be required by certain towns or other
municipalities to meet permitting or other requirements for construction and
installation of the asset.
The cost estimate used to determine the ARO amount is typically
referred to as a decommissioning estimate. A decommissioning estimate will include
(1) all costs associated with decommissioning the asset and returning the land to
its original condition and (2) any proceeds from selling the decommissioned asset at
its scrap value. Because of the uncertainty in estimating the value of
decommissioned assets, the proceeds component of the decommissioning liability is
usually insignificant.
For a solar facility, the main costs associated with decommissioning
include those related to the removal of the solar panels, racking, and electrical
balance of system assets. Depending on the size and type of the project, there may
also be costs associated with the removal of a substation, an operation and
maintenance (O&M) building, and on-site access roads. Sometimes, costs
associated with the recycling or disposal of solar panels are incurred as a result
of the materials used in the panels’ construction, which is described on the EPA’s
Web site as follows:
Crystalline-silicon solar technology represents most of the solar panel market
share. This type of panel is constructed with an aluminum frame, glass, copper
wire, polymer layers and a backsheet, silicon solar cells, and a plastic
junction box. The polymer layers seal the panel from exposure to weather but can
make recycling and panel disassembling difficult, as high temperatures are often
required to loosen the adhesive.
For a wind facility, the main costs associated with decommissioning
are those related to the removal of the wind turbine generators (WTGs) and their
foundations. Typically, there are also costs associated with the removal of access
roads, wiring, substations, and O&M buildings. Most of the materials used to
construct wind turbines are relatively easy to recycle, as the American Clean Power
Association discusses in a fact sheet:
Wind turbines
are made up of many materials that have substantial salvage value at the end of
[the wind turbines’] operational life and are recyclable. In fact, 80–94% of a
wind turbine’s mass consists of easily recycled materials, such as steel/iron
(approximately 88% of a turbine’s mass), aluminum (approximately 0.7%), and
copper (approximately 2.7%). Other wind turbine components such as blades,
nacelle covers and rotor covers are made [up of] composite materials, mostly
fiberglass and carbon fiber, which, while non-toxic and safe, are more difficult
to process for other purposes. However, these components make up roughly only 8%
of a wind turbine’s total mass. [Footnotes omitted]
For a battery facility, the main costs associated with
decommissioning are those related to the removal of the battery and battery
containers. Depending on the size and type of project, there may also be costs
associated with the removal of a substation, an O&M building, and on-site access
roads. Given the materials used and the type of battery (e.g., lithium-ion, lead,
nickel), the appropriate and safest disposal methods must be determined. Often,
there are costs associated with the disposal or recycling process.
Most third-party engineering firms can complete a DCE, which can be
used to determine the amount of the ARO. The DCE is a cost estimate that can change
as a result of variations in labor costs, site conditions, and other factors when
the actual decommissioning activities occur. DCEs often fall within range. As the
date of extinguishment of the obligation approaches, the range of cost estimates of
the obligation will most likely narrow.
The Association for the Advancement of Cost Engineering
International’s (AACE’s) Recommended Practice 18R-97 delineates a range of accuracy for
cost estimates. Since DCEs are site-specific, they fall within Class 4 of the AACE’s
Cost Estimate Classification System. Class 4 estimates range from between 15 percent
and 30 percent lower than actual cost to between 20 percent and 50 percent higher
than actual cost.
Class 4 estimates are generally based on limited information and
consequently have fairly wide accuracy ranges. They are typically used for project
screening, determination of feasibility, concept evaluation, and preliminary budget
approval.