The trilemma: Decommission, extend, or repower?​

Decommissioning: A clean slate​

Decommissioning involves dismantling the site, removing turbines and infrastructure, and restoring the land to its original state. This option, while seemingly straightforward, carries significant costs and environmental considerations.

Recent forecasts from Zero Waste Scotland suggest that by 2050, decommissioning activities could generate up to 47,000 tonnes of blade material alone. This number alone underscores the importance of forward-thinking waste management strategies in the wind energy sector.

Wind farm life extension: maximizing existing assets​

Extending a wind farm’s operational life involves prolonging land rights and planning consents, often coupled with strategic upgrades to turbine components. This approach can offer a cost-effective means of maintaining energy production without the need for wholesale changes.

Repowering: Embracing technological advancements​

Repowering entails replacing existing turbines with newer, often larger, and more efficient models. This option capitalizes on technological advancements, potentially increasing energy output and overall farm efficiency. Industry organization Wind Europe has called for more repowering of wind farms, as it sees this as an opportunity yet to be fully exploited by the industry.  

Last year, and for the first time in Scotland, ScottishPower started the repowering process of the Hagshaw Hill wind farm in South Lanarkshire, which upon completion will have upgraded the 16MW wind farm to 79MW.

Legal considerations for wind farm life extension and repowering​

Land Rights: The foundation of extension​

Extending a wind farm’s lifespan often hinges on the provisions within the original project lease. Developers and asset owners may find themselves in one of three scenarios:

1. Exercising existing extension rights:
   Some leases contain clear provisions for extension, simplifying the process if terms are well-defined and workable.
2. Negotiating lease extensions:
   Where explicit provisions are absent, developers must enter negotiations with landowners. These discussions can be complex, reflecting the evolution of wind farm leases over the decades.
3. Crafting new agreements:
   In some cases, negotiating an entirely new lease or option agreement may be necessary, particularly when considering repowering projects that might require different terms.

Planning permissions: Navigating regulatory waters​

The path forward often depends on how the original planning permission was structured:
– If duration or turbine height restrictions are in the development description, a full planning application may be required.
– Restrictions within conditions may allow for a simpler variation process under Section 42 in Scotland or Section 73 in England and Wales.

For larger projects exceeding 50MW in Scotland, the Section 36 consent process through Scottish Ministers adds another layer of complexity.

Looking ahead, consent applications might be easier to obtain given that the current UK government is looking at reintroducing the two-tier system, removed in 2016, but with a threshold of 100MW. At present, all onshore wind projects in England are required to apply to the local authority for planning permission. If Labor successfully adopts its draft planning approach, projects above the 100MW threshold will be consented by Ministers through the NSIP regime (Nationally Significant Infrastructure Projects), whereas projects below will be handled by local authorities.

Technical and operational considerations​

Grid connections: Powering the future​

Repowering projects that increase capacity will necessitate new or upgraded grid connections. Given the current constraints on grid capacity, early engagement with network operators is crucial.

Even without capacity increases, changes to turbine equipment may require modifications to existing connection agreements.

Contract for Difference (CfD) support

Recent developments in the UK’s CfD scheme offer a glimmer of hope for repowering projects. The seventh allocation round, expected in 2025, may include eligibility for repowered onshore wind farms, subject to specific conditions such as maintaining or increasing capacity and aligning with CfD intervention principles. If this becomes the reality, repowering could get a well-deserved boost.   

Financial and market dynamics​

Power Purchase Agreements (PPAs)​

Existing PPAs may contain obligations that impact decommissioning or repowering plans. Developers must carefully review and potentially renegotiate these agreements to ensure compatibility with future project phases.

Economic viability​

The decision to extend, repower, or decommission ultimately hinges on economic factors. A 2021 analysis by Wikborg Rein highlighted that while repowering can offer significant benefits in terms of increased energy production and efficiency, it does often require a substantial capital investment. If it’s possible to do a partial repowering (not undertaking major infrastructure works) would likely offer the best return to developers. A full repowering would in many cases lower a return if infrastructural changes are required as opposed to merely replacing turbines.

Life extension, on the other hand, may provide a more cost-effective solution in the short term but could face diminishing returns as equipment ages, and

Environmental and community impact​

Whichever path developers choose, considerations extend beyond mere economics. Environmental impact assessments, community engagement, and local economic benefits all play crucial roles in shaping project outcomes.

The Wind Europe guidelines on decommissioning emphasize the importance of sustainable practices, including the recycling and repurposing of turbine components. As the industry moves forward, these considerations will likely become increasingly central to project planning and execution.

Charting the course ahead

As the UK’s wind energy sector stands at this juncture, developers face decisions that will shape the industry’s future. The choice between life extension, repowering, and decommissioning requires a nuanced understanding of legal, technical, and economic factors.

By carefully weighing these options and engaging proactively with stakeholders, developers can more easily navigate the landscape, ensuring the continued growth and sustainability of the UK’s renewable energy sector. 

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Bigger turbines are better – but also expensive​

Scaling up global wind turbine installations faces real-world challenges for developers. While increasing capacity is demanding larger and more effective turbines, the associated higher production costs, coupled with recent surges in commodity prices are forcing developers to choose smaller, less efficient towers to safeguard their margins. The average cost to build 1MW of wind turbine capacity has surged by 38% in the past two years, driven by a 93% increase in critical minerals since pre-COVID and volatile steel prices.

Could scrap metal result in lower prices?

The use of scrap metal in wind turbine manufacturing, exemplified by Siemens Gamesa’s GreenerTower and Vestas’ low-emission tower made from 100% steel scrap, offers a potential cost-saving avenue. As the cost of scrap metal generally undercuts that of virgin steel, and recycling saves 72% of the energy we need for primary production, these initiatives could lead to significant savings once commercial maturity and large-scale production are achieved, but even when we get to that point, uncertainty lingers about whether these efforts will lead to future reductions in wind turbine prices or if manufactures will absorb the cost-savings without passing them on to developers.

Wooden turbine towers to the rescue

Our modern-day wind turbines have historically relied on steel to withstand natural forces, until now. The Swedish company Modvion, founded in 2016 in Gothenburg, is challenging the norm by harnessing the potential of wood to create taller, cheaper, and more sustainable wind turbine towers. Made from spruce, small modules, each consisting of 144 layers of 3mm-thick LVL is the secret sauce that makes up the towers that can sufficiently support today’s wind turbines.  

“Wood and glue is the perfect combination, we’ve known that for hundreds of years. And because using wood is lighter [than steel] you can build taller turbines with less material.”
– David Olivegren, Founder and Board member

Once installed, the wooden tower structure not only outlives the mechanical parts but also has a negative climate impact, storing between 240-950 tons of CO2 per tower, depending on height and load. For a 105-meter-tall tower, about 200 sustainably farmed spruce trees are used to create enough LVL.

Five birds, one stone​

Developers and investors in the wind sector should pay attention to this innovative technology. Wooden turbine towers, according to Modvion, offer solutions to multiple challenges developers face:

Higher towers – Higher revenues:
Wooden towers minimize the need for expensive reinforcements or maintenance, making them more cost-efficient than steel, particularly for taller structures.

Lighter constructions:
Wood is lighter weight when compared to steel and reduces the tower’s overall weight by approximately 30%, leading to cost savings.

Easy transportation:
LVL modules enable easy on-site assembly, addressing transportation issues associated with towering wind structures, thus reducing costs. To this claim Modvion adds that that the reduced transportation costs are very project-specific, but generally speaking Modvion towers can be adapted to transport restraints, circumventing costly infrastructure remodeling that is done today. Crane optimization will benefit from the higher specific strength, allowing 30% higher tower segments to be lifted compared to steel.

No exposure to steel price fluctuations:
The absence of steel means immunity to the volatile fluctuations in steel prices, providing stability for developers.

Reduced CO2 emissions:
The life cycle emissions from a 110m tall tower of steel is approximately 1250 tons of CO2. The corresponding wooden turbine tower emits 90% less emissions, which means around 125 tons of carbon dioxide, and considering.

The cost challenge​

As previously discussed, the threat of narrowed profit margins looms over developers opting for taller steel-based towers, making cost a paramount factor. Modvion confidently asserts that its towers will not exceed the cost of traditional steel towers and, in the long run, will prove more economical. The degree of cost reduction hinges on the tower’s height – the taller the tower, the more pronounced the cost advantage over steel. To put it in perspective, Modvion has told us that a wooden tower could, over time, slash costs by 25% compared to traditional 150-meter towers.

Opposing views​

Dr. Maximilian Schnippering, Head of Sustainability at Siemens Gamesa, challenges the optimistic outlook on potential savings, citing logistical hurdles. In a recent statement to the BBC, he remarked, “More pieces are likely to mean more trucks, more people, and more time to complete the installation.” Despite this, Schnippering acknowledges the modular system as “an advantage” and sees wooden towers as a “nice complement” to steel towers.

While it might seem that Schnippering’s views are influenced by Siemens Gamesa’s competition with Vestas, a key investor in Modvion, the company actively collaborates with various OEMs to diversify its portfolio. Vestas remains a crucial partner, but Modvion is committed to expanding partnerships for broader industry impact.

Anticipating progress​

Despite being in its early stages, Modvion has accelerated its path to a global rollout with the successful completion of the ‘Wind of Change’ project. This marked the commercial delivery of a 105m tall tower with a 2MW turbine installed, demonstrating significant momentum.

The company’s ambitious ‘Raise Me Up’ project, set to commence in Q4 2023, aims to develop, test, and implement a 6MW tower for large onshore platforms, with a potential delivery date in 2025.

“Vestas is currently offering Modvion towers to a few, selected customers. As the first OEM implementing our component, they tell us that all wind farm developers in Sweden asks them when they can purchase Modvion towers. A great signal of course. As 60% of the German, Swedish, Finnish markets are already at total heights above 230m, the market pull for our solution is only strengthening”.​
Otto Lundman, CEO, Modvion

Modvion’s vision is to secure a 10% market share within the next decade, equating to 2,000 wooden turbine towers annually. While wooden towers may not dominate the landscape yet, they represent a promising addition to the wind energy sector’s evolution—a development that developers should closely monitor.

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Offshore wind in Europe takes off​

New offshore wind auctions have been announced in several markets, especially in Europe where it builds on a bumper pipeline set to be uncorked this decade.
However, 2024 will be the most packed year to date as auctions totaling more than 50 GW are planned for kick-off.

Europe keeps pace​

Europe will dominate the auction scene in the coming years, like it did in 2023. It will be particularly interesting to keep an eye on auctions in Germany and Denmark, both having recently phased out subsidies, as well as the UK where the coming AR6 CfD auction could restore confidence in the market.

The US looks to PPAs​

In the US, East Coast states are speeding up PPA auctions, including New York and New Jersey, as they react to recent turmoil with PPA deals. Meanwhile, Colombia is kicking off the first seabed auction in Latin America this December.

Asia-Pacific looks promising​

Lastly, in the Asia-Pacific region, front-running markets are continuing to progress with wind auction plans. South Korea’s 1.5 GW offtake auction was oversubscribed as six developers submitted bids totaling just over 2 GW. In Taiwan, the final rules for round 3.2 were decided with a bidding deadline set for April 2024.

About Aegir Insights​

Aegir Insights provides industry-leading intelligence powered by data science for offshore wind energy developers, governments, and financial institutions. If you want to know more about auction intelligence products, please reach out to the Head of Research, Maria Holm Bohsen, or visit their website https://aegirinsights.com/ for more info.

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Co-location and its benefits​

Given the numerous benefits of co-locating energy storage with solar or wind projects, it’s surprising that such schemes aren’t more common.

Co-locating allows power to be stored when the wind isn’t blowing or the sun isn’t shining. Additionally, co-located projects offer a price arbitrage opportunity, where power is bought during off-peak hours (when grid prices are lowest) and then stored for use during peak hours (when grid electricity prices are highest).

These projects can also provide grid services like ‘dynamic containment,’ which involves catching and containing any deviations in energy frequency caused by events like the loss of a generator. Moreover, solar plus storage is particularly seen as a way to mitigate the risk of yield and profit compression (known as the ‘solar capture rate’), which refers to the continuous reduction in energy prices when the sun is shining and more solar assets enter the market.

Co-location increases investment returns​

Other benefits of co-location include an increase in the return on investment from renewable projects by reducing the capital outlay required – that is, fewer wind turbines or solar panels are needed to generate the same revenue.

Meanwhile, capital and operational costs can also be reduced by sharing existing infrastructure, land, and grid connections. Combining storage and generation assets also allows more effective utilization of connected grid capacity. As a consequence, the savviest investment funds are taking the step of retrofitting storage to their existing renewables projects. For example, last year it emerged that Next Energy Solar Fund would be retrofitting its 11MW North Norfolk solar farm with a 6MW/12MWh battery system.

Given the multiple benefits of co-location, why aren’t more wind and solar projects linked with storage systems? A key reason is that subsidies for wind and solar projects artificially reduced the high cost of projects and meant that there was less incentive for project developers to do everything possible to optimize the value of projects.

Are declining subsidies incentivizing co-location?​

Now policymakers are providing less by way of subsidy for renewable energy projects so there is a greater onus on project developers to find ways of making schemes more attractive to investors and an effective way of doing this is by co-locating wind and solar with storage. For example, data from the US Energy Information Administration shows that total renewable-related subsidies were about $15.5 billion for both FY 2010 and FY 2013, then dropped to $6.7 billion in FY 2016 (see graph below).

Indeed, even if project developers are not planning to co-locate storage with wind and solar projects at the outset, they are now being advised to ‘future-proof’ their project by ensuring leases, for example, allow for a battery facility in addition to the main generation facility. Developers are also being encouraged to structure planning applications in such a way that they cater to potential battery add-ons in the future as this will maximize the value of the asset.

Yet barriers to co-located wind and storage projects remain. While corporate power purchase agreements (PPAs) have been flagged as offering a potential route to market for co-located assets, there is concern that the greater flexibility offered by co-located assets will result in PPAs that involve much higher premiums – because the extra flexibility is priced in – and this could be off-putting for potential corporate customers.

Hybrid PPAs offer a solution​

One potential solution is the development of hybrid PPAs. There are concerns that negotiating a contract for a hybrid PPA will be more complicated than treating assets as standalone and setting up separate routes to market for each asset. However, the counterargument is that the ability of co-located sites to guarantee more output and meet both peak and baseload energy requirements will enable operators of co-located sites to get a better price for their energy output.

Yet, despite an element of uncertainty about the best way forward for co-located projects, they will be the norm in the future. The appeal to investors of such projects is beyond doubt – witness Intersect Power confirming the $3.1 billion financial close of one of the US’ largest ever solar-storage portfolios, which included the Oberon I and II projects in California, which total approximately 685 MWp of solar and around 1GWh of battery energy storage.

Meanwhile, earlier this year, Copenhagen Infrastructure Partners, on behalf of its Flagship Funds, entered into a partnership with Amberside Energy with a view to developing 2GW of solar and battery storage projects in the UK. Elsewhere, in January, NextEnergy Capital launched a new fund, NextPower V ESG (NPV ESG), which will invest in solar and energy storage assets in OECD [Organisation for Economic Co-operation and Development] countries. NPV ESG is targeting capital commitments of $1.5 billion with a $2 billion ceiling.

The rise of the ‘power couple’​

This is just the start. Co-located solar and storage, which has been dubbed by some market observers as the ‘power couple’, is set to take off. DNV has predicted that, within a decade, around one-fifth of all PV will be installed alongside dedicated storage, and by 2050, this will have risen to 50 percent of all PV. DNV says that, by mid-century, the total installed global solar capacity will amount to 9.5TW, with a further 5TW of solar + storage capacity.

With renewable energy developers less able to rely on government subsidies to make projects viable, and with investors looking to ‘future-proof’ renewables, co-location will be a key consideration when seeking to maximize the value of wind and solar assets.

Want to read more about storage? Read Ben’s article on the 4 alternatives to lithium-ion batteries that are currently exciting investors, or Tamarindo’s Energy Storage Report Intelligence Briefing.

About the author

Ben Cook is the Insights Director at Tamarindo. Tamarindo delivers insights, connections, and communications for the global energy transition. He heads up Tamarindo’s Energy Storage Report. An experienced editor and journalist, he has worked as a writer and contributor for national newspapers, including The Guardian and The Times. He also spent six years as the Madrid-based editor of a legal magazine and website and previously worked as chief editor for a Paris-based legal and financial ratings agency. He has also previously worked as chief editor for a Milan-headquartered legal publisher.

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The Aid Decree​

On July 14, the Senate renewed its confidence in the Government by definitively approving, in the text dismissed by the Chamber, the bill for the conversion, with modifications, of the Decree-Law no. 50 of 17 May 2022, published in the Official Gazette on 15 July 2022 general series – no. 164 (also known as the “ Aid Decree ”).

This is a measure aimed at adopting measures to combat the systemic effects caused by the Ukrainian crisis, in particular with regard to national energy policies, business productivity, and investment attraction.

With regard to the energy sector, with a view to encouraging the production of energy from renewable sources, articles 6 and 7 of the Aid Decree introduced rules for further simplification of the authorization procedures for the construction and operation of plants powered by renewable sources.

Speeding up identification of suitable areas​

Article 6, paragraph 1 of the Aid Decree – in amending article 20, paragraph 4 of Legislative Decree No. 199 of 8 November 2021 (the ” Legislative Decree 199/2021 “) – aims to speed up the process of identifying surfaces and areas suitable for the installation of renewable energy plants, giving the Department for Regional Affairs and Autonomies the possibility of exercising state substitute power in the event of failure by the Regions to adopt laws aimed at delineating suitable areas within the deadline provided for by the legislation in force.

The provision also affects Article 20, paragraph 8 of Legislative Decree 199/2021, extending the number of areas that can be classified by law as suitable for the construction and operation of renewable plants pending the identification of suitable areas by of the Regions.

Specifically, in light of the changes introduced as a result of Article 6 of the Aid Decree:

Exceptions to the ordinary authorization procedure​

It should be remembered that Article 22 of Legislative Decree 199/2021, with reference to the construction and operation of plants for the production of energy from renewable sources in suitable areas, has introduced some exceptions to the ordinary authorization procedure. Specifically, with reference to these projects:

• The competent authority in landscape matters expresses itself with a mandatory non-binding opinion and once the deadline for the expression of the non-binding opinion has expired, the competent administration in any case provides for the authorization application;
• the terms of the authorization procedures for installations in suitable areas are reduced by one-third.

More on exemptions​

Article 6 of the Aid Decree has explicitly extended the scope of these exceptions, stating that they apply to electrical infrastructures connecting renewable energy plants and to those necessary for developing the national transmission grid, provided they are strictly functional to increasing energy production from renewable sources.

The decree also adopts incentive measures, specifically in paragraphs 2 quarter and quinques, to encourage new projects and interventions that promote social, economic, and productive development in municipalities with areas under concession for geothermal energy production. Starting January 1, 2023, holders of concessions for constructing and managing these plants, under Legislative Decree no. 287 of December 29, 2003, and law no. 99 of July 23, 2009, must pay a contribution of €0.05 for each kilowatt hour of electricity produced by the corresponding geothermal plant. Within ninety days of the Aid Decree’s entry into force, the Minister of Economic Development will issue a decree.

The decree also introduces further simplifications for tourist and spa facilities. For 24 months from the conversion law’s entry into force, these facilities can implement new photovoltaic projects with ground-mounted modules up to 1,000 kWp using the administrative DILA (sworn declaration of start of works) regime. These projects must be aimed at using self-produced energy for the needs of the facilities, located outside historical centers, and not under protection according to Legislative Decree 42/2004 (see Article 6, paragraph 2 septies of the Aid Decree).

Finally, Article 6 of the Aid Decree requires the Ministry of Culture, within sixty days of the conversion law’s entry into force, to establish uniform criteria for evaluating renewable energy plant projects. This aims to streamline proceedings and ensure that any negative assessments are well-founded, reflecting stringent and proven needs for cultural or landscape protection, in line with the specific characteristics of different territories.

Article 7​

Article 7 of the Aid Decree introduces significant innovations, simplifying procedures for authorizing plants that produce electricity from renewable sources.

These changes primarily affect projects that require an Environmental Impact Assessment (EIA) under state jurisdiction.

Specifically, the decree establishes that in the authorization procedures for renewable energy plants, if the project requires an EIA at the state level, the Council of Ministers’ resolutions will replace the EIA provision for all purposes, even in cases of conflicting assessments by the relevant environmental authorities.

The Presidents of the concerned Regions and Autonomous Provinces participate in the Council of Ministers’ meetings to express the position of their administration and the non-state administrations involved in the authorization process, but they do not have voting rights.

The Council of Ministers’ resolutions are then incorporated into the single authorization procedure, which the competent administration must conclude within sixty days. If the Council of Ministers decides to issue the EIA provision and the sixty-day period passes without action, the authorization is automatically deemed issued.

More on Article 7​

Furthermore, article 7 of the Aid Decree intervenes in various ways on the authorization procedures connected to the construction and operation of renewable plants, providing that:

• for the construction of plants other than those fueled by biomass, including biogas plants and plants for the production of biomethane of new construction, and for photovoltaic plants, the proponent, when submitting the application for authorization, can request the declaration of public utility and the affixing of the preordained constraint to the expropriation of the areas affected by the construction of the plant and related works.
• the simplified authorization procedure (PAS) for the construction and operation of photovoltaic systems up to 20 MW located in quarries or lots of quarries not susceptible to further exploitation may also concern the location in “portions of quarries”, it being understood that the same they must not be susceptible to further exploitation.
• with regard to ceased quarries and mines, not recovered or abandoned or in conditions of environmental degradation considered suitable areas pursuant to the law for the installation of plants for the production of electricity from renewable sources, portions of quarries and mines not susceptible to further exploitation.
• with regard to the standard that subjects to PAS the installation of photovoltaic systems with a power of up to 10 MW in floating mode on the water mirror of reservoirs and reservoirs, including water reservoirs in disused quarries, the plants in question can be placed also in the water reservoirs in the quarries in operation (see the modification of article 9 – ter of the Energy Decree).

Furthermore, it is appropriate to point out that with the provisions referred to in Article 7 – bis of the Aid Decree, the deadline for the start of work for the interventions carried out under a qualification issued under Article 12 of the Legislative Decree n. 387 of 29 December 2003 is set for three years from the issue of the relative qualification.

The Aid Decree therefore follows the path already outlined by the Simplifications Decree and the Energy Decree, demonstrating a unitary, albeit fragmented, intention of the legislator towards promoting the consumption of energy from renewable sources.

About the author

Italian-qualified lawyer, Tommaso has fifteen years of extensive experience in domestic, cross-border border, and multi- jurisdiction mergers and acquisitions, joint ventures, corporate finance, and private equity transactions involving both listed and privately held companies. He has particular expertise in transactions in highly regulated activities as well as in the infrastructure sector and, in particular, in the energy, transport, water, and waste sectors. His experience also includes assistance in favor of developers and lenders in relation to development projects in the energy sector, with particular reference to renewable energy assets (solar, biomass, wind, hydrogen) and transport infrastructure (electricity and gas transport, electricity and gas distribution, gas storage and LNG plants). He has extensive experience in the negotiation and drafting of M&A contracts, facility agreements, EPC, O&M, PPA contracts, and supply contracts in the public and private sectors. Tommaso has an LL.M Master’s Degree in Business & Corporate Law at City Birmingham University and has more than 15 years of experience in primary international law firms in London, Milan, and Dubai. Tommaso is an Italian native speaker and is fluent in English and Spanish

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