Solar panel decommissioning is at an inflection point. Shifts in commodity prices and secondary markets, coupled with rising costs and inflation are calling traditional assumptions about decommissioning into question.
Between a massive oversupply of new panels, falling prices, and rising costs, solar decommissioning has become more expensive than many utilities and other solar owners initially planned for. Solar owners need to fully understand the costs associated with decommissioning and put realistic strategies in place.
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Market forces are demanding more realistic solar decommissioning plans
While the dramatic drop in the price of solar over the last decade has helped solar proliferate, it has also created challenges for solar owners ready to replace or recycle older panels. Existing decommissioning plans too often rest on assumptions that are no longer true.
First, the massive oversupply of new solar modules currently sitting in warehouses is a cost sink that utilities can no longer afford to ignore. The glut is spurring solar owners to repower existing panels, sell to secondary markets, or recycle their extra panels.
At the same time, prices of new solar modules continue to decline; they’re forecast to fall to as little as 10 cents per watt by the end of 2024. That’s squeezing the secondary market. With prices for new modules so low, the demand for used panels has slackened. “A lot of decommissioning plans rely on the fact that they get paid for used modules, and I see that slowly degrading,” says Dwight Clark, director of compliance and recycling technology at We Recycle Solar.
We Recycle Solar, which has a multi-pronged business that includes solar decommissioning and panel recycling, estimates that the average cost just to truck and handle panels being decommissioned is between five and seven cents per watt. That estimate doesn’t include actual recycling or reselling costs. Consequently, reselling used panels may generate little or no profit at all.
It’s not as though secondary markets for used solar panels have evaporated completely, Clark adds. “If they’re still good modules, there’s always a home for them somewhere in the worldwide market,” Clark said. The question, though, is whether the revenue that solar project owners anticipated in the decommissioning plan is anywhere near what’s realistic and whether the project owner can even access global secondary markets.
Rising labor costs and the negative effects of inflation are also upending revenue and cost estimates in decommissioning plans. Without a thoughtful decommissioning plan, the costs and lack of financial return may come as a nasty surprise for solar owners.
Decommissioning requires detailed plans and frequent updates
More rigorous planning will help solar owners understand the costs and potential return on investment for decommissioned solar panels. Clark recommends three key components, taking inspiration from outside the solar industry.
Drill into the details
Too often, Clark says, he sees decommissioning plans that make sweeping assumptions or fail to account for entire cost categories. Solar decommissioning plans need to consider all of the costs, from renting and transporting the equipment necessary to return the land to its former use to labor to fuel to packaging and shipping decommissioned panels. And, Clark warns, solar owners can’t assume that all of their decommissioned panels are going to be reusable. That’s not realistic. They need a plan and an associated cost estimate for how to handle panels that need to be disposed of.
Clark points to the U.S. Environmental Protection Agency’s Resource Conservation and Recovery Act (RCRA) Closure Cost Estimate as a realistic way to look at decommissioning. The granular level of detail required in plans to close hazardous waste treatment facilities can help solar owners improve the accuracy of their decommissioning plans
Update decommissioning plans to account for market changes
These recent solar industry trends emphasize something solar project owners should have already known: Decommissioning plans are only as good as the information they use. That information must be updated frequently to account for inevitable market changes.
“The proper way to do a decommissioning cost estimate is to write a work plan and say here’s what we’re specifically going to do, and here’s what each step costs. So, if you have to rent an excavator for two weeks at $1,500 a week, you’ll have to adjust if diesel prices increase by $1 in two years,” Clark says. “You should do the same for labor and transport and other costs. You need to really do a detailed work plan and a detailed cost estimate and then adjust it annually.”
Those updates should also include the changing cost of solar panels on the secondary market to avoid surprises down the line.
Plan to fund decommissioning plans
It’s not enough to develop an accurate and detailed cost estimate; it’s also vital to plan for funding it. That’s where solar project owners can turn to the broader utility industry for inspiration.
Best practices for reliable decommissioning costs are standard in the utility world and can guide solar owners in developing a plan. “Utilities are used to having permits and bonds for decommissioning other power assets. They know they’ll have to dig up dirt around an oil tank that’s being decommissioned,” Clark says. “They understand these things and they have well-developed environmental departments. These are things that many solar-only people just don’t grasp.”
Embracing a more rigorous and detailed approach to decommissioning solar power plants gives owners and investors clarity on costs and project ROI. It also ensures there are no financial surprises when it comes time to repower or shut down a plant. And for the industry, it’s an important and necessary step toward the maturity expected of a mainstream energy provider.
Learn more about We Recycle Solar by visiting their website, or check out how we help developers find the ideal investors for their solar projects.
