Wind vs. Solar | A Contractor's Guide to Bonding

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Contractors seldom think of surety bonds as strategic tools, yet the right bonding program can determine whether a 100-MW solar farm or a 250-MW wind park reaches commercial operation—and whether it is responsibly removed decades later at the end of its useful life. Because renewable assets “live” far longer than the construction schedule, bonding obligations evolve over time. This article outlines the bonds most often required on utility-scale and large commercial and industrial projects (roughly 10 MW to 500 MW), with pointers on how contractors can stay ahead of the curve. For a broader overview of how surety bonds support renewable projects from development to decommissioning, see our guide on surety bonds in renewable energy projects.

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1. Development & Bid Stage

At this initial stage, the main purpose of bonding is to ensure that bidders are committed to entering into a contract with the project owner if selected as the winning bidder. This is achieved through bid bonds and interconnection deposits.

Bid Bonds for Renewable Energy Projects

Public‐sector procurements and many utility company RFPs typically demand a 5%–10% bid bond to discourage “low-ball then walk” tactics. Even in purely private power purchase agreements (PPAs), owners may require a modest proposal bond or letter of intent backed by a surety to reserve a position in the interconnection queue.

Interconnection Deposits Under FERC LGIA Rules

Under the Federal Energy Regulatory Commission’s (FERC’s) Large Generator Interconnection Agreement (LGIA) rules, developers post security equal to the cost of network upgrades—often seven figures for a single 138-kV tie-in. Although commonly structured as letters of credit, some utilities now accept surety bonds to free up developer liquidity.

2. Construction Stage

Once the notice-to-proceed is issued, familiar contract bonds come into play.

On multi-contract structures (for example, a separate turbine supply agreement (TSA) and a balance-of-plant (BOP) contract), owners often require each prime contractor to post its own bonds plus a wrap-around bond from the lead Engineering, Procurement, and Construction (EPC) entity. Surety companies scrutinize parent guarantees, liquidated-damages caps, weather contingencies, and tax-credit schedules before setting aggregate bonding limits. Specific bonds to be furnished at the construction stage are performance and payment bonds. Depending on the contractor’s role, a supply/component bond may also be required.

Performance Bonds—Guarantee that the contractor will complete the job on time and within specs. The bond amount is typically 100% of the EPC contract value.
Payment Bonds—Ensure that subcontractors and suppliers are paid according to contract terms. Again, the required bond amount is usually 100% of the contract price.
Supply/Component Bonds—Back the delivery of turbines, trackers, inverters, and other major system components. The amount of the bond is usually in the range of 10%-25% of the major equipment price.
Solar Power Performance Bonds—guaranteeing completion of commercial, industrial, and utility-scale solar projects to contractual standards. They function just like traditional performance bonds but are tailored to solar-specific risks such as interconnection delays, tracker deployment, inverter integration, and ITC compliance.

3. Early Operations

After mechanical completion, owners usually retain 5 %–10 % of the contract price until final acceptance. Releasing that cash early is possible if the contractor replaces it with a warranty or maintenance bond covering two to five years of latent defects. For O&M contractors entering long-term service agreements, a smaller performance security (1%–2% of annual service fees) may be required to guarantee availability metrics and corrective-maintenance response times.

4. Mid-Life Repowering

Repowering a 10-year-old wind farm with larger rotors or adding DC-coupled storage to a solar array triggers new permits and interconnection studies—and new bonding. Because foundations, roads, and collection systems remain, sureties often discount the bond amount, but the owner will still look for performance/payment protection on the incremental work and any extended warranties.

5. End-of-Life Decommissioning

Wind turbines and solar panels have a useful lifespan of about 20-35 years. Land leases, county ordinances, and lenders increasingly mandate decommissioning bonds to cover the cost of full removal and site restoration at the end of operations. Twenty-eight states now have statutory or administrative rules requiring decommissioning security for utility-scale solar, wind, or both—up from only nine a decade ago.

Independent engineering reviews reveal gross removal costs to be in the range of $30,000–$75,000 per installed MW for wind and $20,000–$40,000 per MW for solar, before salvage value. The Bureau of Land Management required a $71 million decommissioning bond for the 690-MW Gemini solar project on federal land in Nevada, or about $103,000 per MW, which illustrates the premium regulators place on pristine reclamation.

Some states (e.g., Virginia, Kansas) require a decommissioning bond before construction begins. Others (e.g., Minnesota) defer financial assurance for decommissioning until the project approaches the last 5-10 years of its power purchase agreement, then increase security every five years as salvage values decline. In both cases, indexing clauses tie the bond amount to the Producer Price Index or a third-party engineer’s cost update, protecting landowners from inflation.

Conclusion

A solar or wind project’s operational life may span a generation, but its bonding profile is anything but static. From bid security to performance, warranty, repower, and ultimately decommissioning, each milestone carries different risk allocations, legal triggers, and cash flow impacts

Contractors who treat bonding as a lifecycle discipline will negotiate better terms, free up more working capital, and position themselves as reliable partners for developers, investors, and host communities alike. In a market where tax credits, recycling mandates, and federal regulatory requirements are all in flux, a proactive bonding strategy provides a competitive edge for every mid- to large-scale renewable energy contractor.