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 its 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 decommissioning estimate, which
can be used to determine the amount of the ARO.
The decommissioning estimate 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.
Decommissioning cost estimates 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 decommissioning cost estimates 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.