Solar Decommissioning Bonds

Learn everything you need to know about solar decommissioning bonds, and contact Surety Bond Professionals today to request a quote.

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What Are They?

Have you ever driven past an open meadow or field crowded with solar panels—acres of them sometimes? Installing such large scale solar energy systems is a major undertaking potentially involving clearing land, putting in an access road, building foundations, laying underground electrical wires, and more.

All of those improvements have to be removed to return the land to its original state when the solar installation has reached the end of its useful life and is shut down or decommissioned. And that can cost a lot of money. A solar decommissioning bond is a surety bond that a project owner will require the contractor to purchase before a solar “farm” is even installed to ensure that someone else foots the bill for decommissioning.

Who Needs Them?

The party requiring the purchase of a solar decommissioning bond—the obligee in the surety bond contract—is the party that owns or is responsible for the use of the land that the solar energy system occupies. This could be a private landowner who has leased the property to a utility company, or it could be a municipality, state, or federal government with oversight responsibility for public land. The U.S. Bureau of Land Management requires a surety bond whenever a private entity is given a grant to use public land or leases public land or is given a right-of-way (ROW) for the purpose of establishing a solar energy facility.

Without a solar decommissioning bond in place from the outset of the project, the private landowner or taxpayers might eventually be forced to pay the cost of restoring the land to its natural state. The bond makes any decommissioning costs the financial responsibility of the utility company, the principal in the surety bond contract.

How Do They Work?

The bond protects the obligee against financial loss associated with three different sources of risk. These three sources of risk are:

  • Environmental liabilities related to hazardous waste and hazardous substances
  • Removal and disposal of improvements and facilities
  • Reclaiming and restoring the land, including revegetation and soil stabilization

The required bond amount is established in the Plan of Development (POD) for the site, which includes a commissioning and site reclamation plan, and must be approved by the Bureau of Land Management.  The minimum bond amount is generally $10,000 per acre of land disturbance.

If the principal fails to decommission the solar installation and restore the land to its original condition, the obligee can file a claim (or multiple claims) against the decommissioning surety bond to obtain the money to pay to have a company or multiple companies do so. Even though the surety company may initially advance the money to pay a claim, the principal is legally responsible for paying decommissioning and reclamation costs and must reimburse the surety company under the terms of an executed indemnity agreement.

What Do They Cost?

The premium the principal will pay for a solar decommissioning bond is a small percentage of the total required bond amount. The surety company will determine the premium rate based on the specific liabilities covered as well as the principal’s personal credit score and business and personal financials. The better the principal’s financial situation, the lower the premium rate.

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If you have been told that you need to purchase a solar decommissioning bond, you should be dealing with a surety company that understands the solar energy industry and the complex requirements of the Bureau of Land Management. Contact Surety Bond Professionals today to get the bond you need at a great rate.

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The Surety Bond Professionals Team

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