The rapid deployment of onshore wind in Scotland over the past two decades (Scotland has more than 8GW of onshore wind capacity in place) has focused attention on the economic benefits to local economies, and particularly to landowners, however the limited life cycles of existing turbines (typically 25 years) will divert future attention towards the potential costs of restoration.
The on-shore wind development industry remains buoyant in Scotland and attractive rentals continue to be offered to landowners as bigger more efficient turbines are developed. It is important however to ensure that these potential benefits are not countered by accumulating hidden costs. We are not aware of any major windfarm in Scotland yet having been decommissioned but inevitably there will be sites that become less economic or where repowering is not achievable for planning or other reasons. These windfarms may be dismantled. Even when windfarms are repowered there is likely to be some element of restoration as the tendency is for a larger number of smaller turbines to be replaced by fewer turbines of greater capacity.
It is vital for landowners and other interested parties to consider now what provision has been made for restoration liabilities should a windfarm lease come to an end. This could happen before the natural end of a lease if a developer was, for example, to breach the terms of the lease or go into liquidation. The best policy for landowners is to insist on a robust restoration provision in the lease with the developer being bound to put in place a bond or other form of financial guarantee or fund in terms approved by the landowner, whether the restoration provision is a joint provision in favour of the planning authority and the landowner or not. In the early days of wind development industry (and planning authority) practice did not provide for this.
Developers are generally willing to provide restoration bonding or reinstatement accounts for larger wind development but often argue that it is for the planning authority to review these and for the landowner to simply accept what is negotiated with the planners. This applies not only to the amount of the bond/account sum but also to the detailed terms. Important questions to ask are:-
(i) Has the restoration provision been set at a level that truly reflects the potential cost of restoration? There is widespread acceptance that the costs of removing turbines and restoring will significantly exceed bonding levels for many wind developments in Scotland (by more than ten times in some cases!). In setting initial bonding levels figures have been adopted quite arbitrarily and seemingly without detailed consideration of local circumstances such as the precise extent of reinstatement works required by the relevant planning condition or the length of access routes involved.
(ii) Is the landowner a party to the restoration provision and what restrictions apply to the landowner’s ability to make a claim? Many developers seek to exclude landowner participation leaving the landowner dependent on third parties in the restoration process.
(iii) Is the life of the restoration provision sufficiently lengthy? Often bonds have a limited life and the landowner needs to ensure that the landowner has sufficient notice of the bond’s expiry so that action can be taken to secure restoration before the bond runs out.
(iv) Who determines when the restoration provision can be discharged – the planning authority, landowner or (preferably) both?
(v) Is there provision for regular review of bonding levels?
(vi) At future reviews of bonding levels is the potential scrap value of turbines to be deducted? Future benefits from scrap have been used by developers to justify holding bonding levels down yet there is no way to predict what scrap values will be in ten or twenty years’ time and no guarantee that landowners will have recourse to such assets which could potentially be secured to a third party.
Pressure is often applied to landowners to accept bond/restoration provisions which do not afford full protection to landowners and many developers will continue to argue that landowners need not concern themselves with restoration on the basis that the planning authority has statutory duties to ensure this is dealt with. However, the dangers of such an approach are all too apparent from a reading of the January 2014 independent review of regulation of opencast coal operations in East Ayrshire. The review identified major and persistent failings at a number of levels in the way restoration plans (and restoration bonds and restoration) were scrutinised, monitored and enforced. Bonding coverage was limited to £28.6 million but the restoration liabilities were estimated as being more than five times this level.
While the costs of windfarm restoration are unlikely to approach the levels mentioned above it is critical for any landowner or its advisors not to place reliance on restoration provisions negotiated by third parties. Every opportunity should be taken to review restoration bonding levels wherever the landowner has a right to do so (typically on a five yearly cycle) and steps should be taken to ensure that no critical dates are missed. Without such re-assessments being undertaken timeously significant liabilities could be in the pipeline.