Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.
Tom Hilton, senior energy specialist at Carter Jonas, discusses the issue of decommissioning a solar farm at the end of the lease.
Q. Our farm land is used for a variety of crops including carrots, potatoes, onions and parsnips. I am researching leasing some of the land for a solar farm.
Is it realistic that the land can be fully restored after the solar farm is decommissioned and therefore allow these crops to be grown again? Or would the contamination from construction and decommissioning make this unlikely? I want to ensure that the land is useable in the future.
A. Contrary to common misconceptions, solar still offers good opportunities to diversify income streams. There is much to consider other than the issues you’ve raised and I recommend you seek expert advice, particularly regarding the suitability of your land and the lease terms.
The short answer to your question is that it is possible for your land to be useable in the future, but you will need to include certain obligations in your agreement with the solar developer.
You can request that the land be reinstated to its previous condition with complete removal of all equipment. Alternatively, you can undertake the decommissioning yourself and scrap the leftover equipment to cover the costs, which may be an option to consider.
Typically, the equipment that would be left would be the solar panels and frames, cabling and electrical infrastructure. Ancillary infrastructure, such as footings and access tracks, would also need to be removed to restore any soils and vegetation and ultimately return the site to its pre-development condition.
There have not, to date, been enough decommissioned solar farm projects to make it possible to predict the extent of reinstatement and the quality (and therefore scrap value) of the materials left on site.
When we work with clients who have similar requirements, we would negotiate a reinstatement (decommissioning) bond for the land leased by the solar farm.
This bond adds financial security for the decommissioning plan at the end of the anticipated life of the project, and will have an updated salvage projection mechanism, reviewed periodically, as well as a reserve factor to help protect against changes in market values over the life of the project.
The bond can be formed in one of two ways. One is that it is paid by the developer in full at the start of the project, but the money is kept in a special account for the lifetime of the project and is only accessed at the end.
The second is that a percentage of the income from the project is put aside to cover the future decommissioning costs.
We would also require the developer to produce a “record of condition” prior to entering the site and starting construction. This would be agreed with you and provides evidence of the state of the land prior to development, so you can be content that it is reinstated to the same condition at the end of the period.
You should have nothing to worry about with the contamination – as soon as the infrastructure is cleared, you will be able to resume farming.
It’s worth noting as well that, again depending on the terms of the lease, you should be able to graze sheep around the panels to gain additional farming income – or potentially implement an environmental scheme between or around them.
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