Importance of Solar Decommissioning Bonds

Community solar projects are becoming increasingly common across the country, offering a practical solution for communities looking to embrace renewable energy. Smaller projects are typically standalone solar farms that generate electricity sufficient to power up to around 200 homes per day. A 10-megawatt solar farm, for instance, can achieve this level of output, contributing significantly to local energy needs.

As the popularity of community solar farms grows, so does the need for financial mechanisms to ensure these projects are decommissioned at the end of their expected 30-year lifespan.

Cost of Decommissioning a Solar Farm

Community solar developers have a few options to meet the financial guarantee requirement defined in their jurisdiction’s Decommissioning Agreement:

Deposit cash with the government entity in an amount equal to the entire liability obligation for a period of 30 years.
Obtain an irrevocable letter of credit from a bank.
Post a surety bond with the government entity, renewing annually until the solar project is decommissioned.

What is a Solar Decommissioning Bond?

A solar decommissioning bond serves as a financial guarantee that the solar developer will remove the equipment and infrastructure from the site and restore the land to its original condition when the project's lifespan comes to an end. There are three parties involved in a surety bond:

Obligee: Government entity requiring the bond
Principal: Solar developer obtaining the bond
Surety: Company issuing the bond

Benefits of Solar Decommissioning Bonds

There are several advantages to posting a surety bond with a city or county, including:

Frees up capital: Surety bonds require a smaller upfront cost compared to paying the entire project price with cash or multiple credit lines. This frees up valuable capital you can allocate to other areas of your business.
Gain investor buy-in: A surety bond acts as an independent verification of your qualifications and financial health. This can significantly improve investor confidence and make securing funding for future solar projects easier.
Protects the environment: Solar decommissioning bonds ensure the responsible removal of equipment and infrastructure at the project's end-of-life. This demonstrates your commitment to environmental sustainability and minimizes the project's long-term impact on the land.

Pro Tip: When you purchase a solar decommissioning bond with NNA Surety, you won’t need to provide collateral, and indemnification can be provided at the project level only. No financial history or credit check is required of the developer.

Community Solar Decommissioning Bonds – How to Qualify

To qualify for a solar decommissioning bond, the following documents are required:

Decommissioning Agreement
Removal Cost Estimate
Land Lease Agreement
Land Use Permit
LLC Agreement (of Asset)
Required Bond Form (from government entity)

Get Your Solar Decommissioning Bond

Integrating surety bonds into the community solar market represents a significant advancement in supporting renewable energy projects. Get your solar project off the ground today with NNA Surety.

To obtain more information about solar decommissioning bonds, please email info@nnasuretybonds.com or call us at (855) 575-1063.

Chris Sturdivant is the Vice President of Business Development for NNA Surety Bonds, and is a licensed insurance agent in all 50 states.

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