When the turbines stop turning: ND regulators mull ‘financial assurance’ to cover costs of wind turbine decommissioning
BISMARCK — For more than a decade, they have towered like workhorses over the prairie, their spinning blades catching the wind and converting it to electricity.
Now, for the first time, the North Dakota Public Service Commission is considering whether to require operators of the state’s oldest commercial wind turbines to provide some form of financial assurance to cover the costs of retiring the turbines when they reach the end of their lifespan.
The goal is to ensure that after a wind turbine has generated its last kilowatt, the owner has a plan — and the financial means — to restore the landscape to its original condition.
“It’s a really good idea, and there has to be something where if a company walks away, that the ability is there to put the land back the way it was,” PSC Chairman Brian Kalk said.
But not everyone thinks such financial guarantees are necessary, including NextEra Energy Resources, whose wind projects near Edgeley and Kulm are part of the PSC’s review of decommissioning plans.
NextEra spokesman Steven Stengel said in email interview that the company already has an obligation to landowners through wind turbine easements to restore their property if it discontinues operation of wind farms.
However, Stengel also noted that other jurisdictions have imposed such requirements on wind developers, “and we have complied with them.”
“It is important to understand that anything that increases the cost of owning and operating a wind farm has a negative effect on competition, especially if North Dakota is competing with neighboring states that do not require such guarantees,” he said.
Assurance ‘may’ be required
Unlike coal mine operators in North Dakota, wind farm operators aren’t required to submit an up-front bond to cover future land reclamation costs.
However, the North Dakota Administrative Code provides that after the 10th year of operation of a wind turbine, the PSC “may” require the turbine’s owner or operator to secure a performance bond, surety bond, letter of credit, corporate guarantee “or other form of financial assurance” to cover anticipated decommissioning costs.
Last September, the PSC sent notices requiring the owners of four wind projects to submit updated decommissioning plans within 30 days in order to determine whether the plans were adequate and if financial assurance is needed.
The three-member commission will meet Monday for a work session to discuss the plans.
“I do think that there’s a general consensus between the three of us that some type of financial assurance is going to be needed,” Kalk said.
Under the code, decommissioning must start within eight months and be completed within 18 months of a turbine reaching the end of its “useful life” — the point at which the turbine hasn’t generated electricity for a continuous period of 24 months.
The decommissioning process includes dismantling and removing the towers, turbine generators, transformers and overhead cables, removing the foundations to a depth of 3 feet, taking out access roads – unless the landowner asks in writing that they remain – and restoring and reseeding the topsoil.
The four wind projects under PSC review include Minnkota Power Cooperative’s Infinity Wind project, which established North Dakota’s first commercial wind turbine, a 230-foot-high toward along Interstate 94 six miles east of Valley City that began operating in January 2002. Minnkota’s second Infinity Wind turbine went online in July 2002 along U.S. Highway 2 three miles east of Petersburg.
In its response to the PSC in October, Minnkota estimated the cost to decommission each turbine at $68,700. The co-op also noted that it has been a stable company in North Dakota for many years, has power sales in excess of $300 million annually and has an investment grade rating exceeding the guidelines in the state code.
“Because of the above, we would suggest that no financial assurance be required of Minnkota,” stated the letter signed by Minnkota staff attorney Joel Larson.
Kalk said some operators have suggested it’s not necessary to post a bond for decommissioning because the salvage value of the turbines will offset the cost to take them down, but he doesn’t necessarily agree. He said his biggest concern is that a small operator may walk away from a project and not leave enough recoverable assets behind to cover the decommissioning costs.
“I think we probably learned some lessons back in the day with some of the oil stuff that if you don’t put the right provisions in place, the state can have quite a mess out there,” he said.
‘An ongoing discussion’
The lifespan of wind turbines varies, with a range of 25 to 35 years commonly discussed, said Jerry Lein, staff engineer for the PSC.
“The problem is, since they haven’t been around that long, they really don’t know how long they’re going to last,” he said.
Minnkota believes its two Infinity Wind turbines will last 20 years or longer, spokesman Kevin Fee said.
“All of our maintenance checks have looked good,” he said.
NextEra expects its wind turbines to operate for at least 30 years, “and with our stringent maintenance program, they are likely to operate much longer than that,” Stengel said.
The PSC is investigating the decommissioning plans for NextEra’s North Dakota Wind and North Dakota Wind II projects near Edgeley and Kulm, which combined have 41 1.5-megawatt turbines that were installed in 2003, when the company was known as FPL Energy. NextEra estimates the decommissioning cost per turbine at $82,567.
Also under review is the decommissioning plan for Basin Electric Power Cooperative’s Minot Wind Project, which consists of two 1.3-megawatt turbines installed in 2002 and three 1.5-megawatt turbines installed in 2009, and its Prairiewinds ND1 project, which has 77 1.5-megawatt turbines also installed in 2009.
Basin Electric provided a plan to the PSC for the combined projects in March 2010, estimating the decommissioning cost for the two oldest turbines at $75,720 each.
Minnkota, NextEra and Basin Electric all stated they would pay for the decommissioning costs using funds from internally generated cash flows.
As North Dakota’s wind farms begin to reach middle age, “This will be an ongoing discussion every year now,” Kalk said.