Decommissioning wind turbines at the end of their economic lifespan (which is around 10 to 15 years, not the 25 years touted by the wind industry) is one of those phenomenally expensive exercises that the wind power outfit itself will never willingly pay for.
Already past their use-by date, thousands of these things around the world have just been left as rusting monuments to ‘green’ energy stupidity.
The standard corporate structures used by wind power outfits involve a parent company, usually structured as a holding company – NextTerror Ltd, say – with a subsidiary that takes on the name of the wind farm – Mount Misery Pty Ltd. The subsidiary is lumbered with all the current debts and other liabilities, which are loaded up in such a way as to exceed its assets (as long as the wind farm is operating, the parent sees that sufficient cash flushes through the subsidiary for it to remain technically solvent, at least in the short term).
In the event that a creditor pursues the subsidiary for any substantial claim, the parent (or related holding company) simply sits back and watches its subsidiary wind up in insolvency; leaving the creditor(s) without so much as a penny to pinch. Australia’s Infigen provided the model when it morphed out of the infamous “Babcock and Brown”.
One reason for setting up $2 subsidiaries a little or no real value is to avoid (by winding up in insolvency) liability to clean up the mess after the turbines wear out or the subsidies get cut, whichever occurs first.
While local governments and planning authorities often talk about obtaining what are called “decommissioning bonds”, whatever promises are made (if any), are given by the subsidiary (not the parent), which is designed to have no assets available to cover the cost of decommissioning. Which is the reason why there are thousands of wind turbines scattered all over California and Hawaii and elsewhere.
Now, while much of what appears above ground, might have some salvage value (apart from the blades which can’t be recycled and end up in landfill) the 400-600m³ of steel-reinforced concrete that sits below ground, that provides a base for one of these things, isn’t going anywhere, anytime soon.
The cost of removing the bases and recycling reinforced concrete will never be worth the value of what might be reclaimed; and no wind power outfit will ever cover the cost of dumping the concrete elsewhere. Accordingly, there will be millions of giant, circular lumps of concrete embedded in the countryside around the world, wherever these things have been speared. A thousand years from now, archaeologists will be left to wonder precisely what possessed our current generation.
David Middleton takes a look at the cost of decommissioning these things, by comparison with the costs of plugging up an oil well at the end of its useful life.
Cost Comparison: Decommissioning a Wind Turbine vs. Plugging & Abandoning an Oil Well
Watts Up With That?
29 August 2021
A recurring theme in comments sections of WUWT posts are arguments about the costs of decommissioning wind turbines vs the costs of plugging and abandoning oil wells; so I thought I would take a look at the numbers…
The Cost of Decommissioning Wind Turbines is Huge
Institute for Energy Research
1 November 2019
In Minnesota, Xcel Energy estimates conservatively that it will cost $532,000 (in 2019 dollars) to decommission each of its wind turbines—a total cost of $71 million to decommission the 134 turbines in operation at its Noble facility. Decommissioning the Palmer’s Creek Wind facility in Chippewa County, Minnesota, is estimated to cost $7,385,822 for decommissioning the 18 wind turbines operating at that site, for a cost of $410,000 per turbine. […]
Retiring worn-out wind turbines could cost billions that nobody has
Valley Morning Star
Feb 21, 2017
HARLINGEN – This is a story about death and resurrection, and as with all such stories, faith plays its part.
Texas is by far the leading wind energy producer in the United States, generating more than 20,000 megawatts of electricity each year. That is about one-fourth of the nation’s wind-energy production.
We can expect the Texas winds to blow forever, but the colossal turbines which capture the breeze and transform it into electricity will not turn forever. Like all mechanical things devised by man, no matter how clever, they eventually wear out.
But the question is, what will this mean to the landscape and future of the Rio Grande Valley and, in particular, the counties of Willacy and Cameron? […]
Wind turbine: The life and death
21 February 2017
The life span of a wind turbine, power companies say, is between 20 and 25 years. But in Europe, with a much longer history of wind power generation, the life of a turbine appears to be somewhat less.
“We don’t know with certainty the life spans of current turbines,” said Lisa Linowes, executive director of WindAction Group, a nonprofit which studies landowner rights and the impact of the wind energy industry. Its funding, according to its website, comes from environmentalists, energy experts and public donations and not the fossil fuel industry.
Linowes said most of the wind turbines operating within the United States have been put in place within the past 10 years. In Texas, most have become operational since 2005.
“So we’re coming in on 10 years of life and we’re seeing blades need to be replaced, cells need to be replaced, so it’s unlikely they’re going to get 20 years out of these turbines,” she said.
Estimates put the tear-down cost of a single modern wind turbine, which can rise from 250 to 500 feet above the ground, at $200,000. […]
In Texas, with virtually no regulatory oversight of wind farms, there is no requirement for wind companies to set aside any funds for decommissioning. […]
It appears that the cost to decommission a single wind turbine in the U.S. can range from $200,000 to $532,000.
The decommissioned wind turbines will have some salvage value. Some claim that the salvage value will exceed the decommissioning costs. Since most U.S. wind turbines were installed since 2005, there doesn’t appear to be a lot of data on actual salvage values realized. The Decommissioning Report in the 2008 application for the Buffalo Ridge II Wind Farm in South Dakota, projected an average decommissioning cost of $90,805 per wind turbine, with an average salvage value of $79,355 per wind turbine.
|Decommissioning estimate for the Project:|
|General Conditions||$ 1,433,620|
|Operation & Maintenance Buildings||$ 94,804|
|Substation Deconstruction||$ 64,349|
|Towers, Wind Turbine Deconstruction Access Road Preparation||$ 780,249|
|Blade Disposal||$ 2,030,463|
|Foundation Removal||$ 2,556,964|
|Site Restoration||$ 2,633,421|
|Tower Dismantle and Salvage Preparation||$ 6,387,298|
|Transmission Line and Pole Removal||$ 155,495|
|Total estimated decommissioning cost||$ 14,543,889|
|Total estimated decommissioning cost/turbine||$ 90,805|
|Salvage value/wind turbine||$ (79,355)|
|Total net decommissioning cost per wind turbine minus salvage value||$ 11,450|
The estimated future salvage value was ~87% of the estimated decommissioning cost in this permit application. Let’s apply this to the more recent decommissioning estimates.
|Decom. Cost||Salvage Val.||Net Cost|
|$ 200,000||$ (174,781)||$ 25,219|
|$ 532,000||$ (464,918)||$ 67,082|
Assuming a robust salvage value, the net decommissioning cost would range from $25,000 to $67,000 per wind turbine.
Since the cost of plugging and abandoning (P&A) oil wells can vary widely and most are responsibly P&A’ed by their operators, I will focus on “orphaned wells.”
Abandoned Wells – What happens to oil and gas wells when they are no longer productive?
Petroleum and the Environment, Part 7/24
American Geosciences Institute
E. Allison and B. Mandler
In 2017, there were one million active oil and gas wells in the United States.1 When a well reaches the end of its productive life, or if it fails to find economic quantities of oil or gas, the well operator is required by regulators to remove all equipment and plug the well to prevent leaks.2 Usually, cement is pumped into the well to fill at least the top and bottom portions of the well and any parts where oil, gas, or water may leak into or out of the well. This generally prevents contamination of groundwater and leaks at the surface. State or federal regulators define specific plugging procedures depending on the local conditions and risks, and may monitor the plugging operation.
However, there are many cases in which wells are not properly plugged before being abandoned, especially if the well operator goes bankrupt, leaving its wells “orphaned”.3 This is more common when oil prices fall rapidly, making many wells uneconomical, as in the 1980s oil glut, the 2008 financial crisis, and the 2014 downturn.
In the late 1980s, the U.S. Environmental Protection Agency estimated that 200,000 of 1.2 million abandoned wells may not have been properly plugged.4 Since then, tens of thousands of orphaned wells have been plugged by state and federal regulators, as well as some voluntary industry programs. These efforts are ongoing, and many orphaned wells have yet to be properly plugged. The exact number is not known: some 3.7 million wells have been drilled in the U.S. since 1859,6 and their history is not always well documented. Older wells, especially those drilled before the 1950s, are particularly likely to have been improperly abandoned and poorly documented.
Abandoned Well Plugging Campaigns
For several decades, states have increased enforcement of plugging and cleanup requirements. States generally require a performance bond or other financial assurance from the operator that a well will be plugged and the well site restored. However, bond amounts may not meet the plugging and cleanup expenses if an operator goes bankrupt.11 Most states therefore collect fees or a production surcharge from operators specifically for remediation of orphaned wells and associated surface equipment.12 For example, Pennsylvania adds an orphaned well surcharge to drilling permit application fees,14 while Texas adds a 5/8-cent Oil Field Cleanup surcharge to the state’s 4.6% oil production tax.15 The Oklahoma Energy Resources Board remediates abandoned well sites using voluntary industry contributions amounting to 0.1% of oil and gas sales. […]
Orphaned wells are a problem. It is mostly associated with very old, poorly documented wells. Wells can also be orphaned when the operators go bankrupt. States currently require some level of bonding and levy taxes and surcharges specifically to fund P&A work on orphaned wells. States also carry out ongoing P&A programs for orphaned wells. AGI sites specific numbers for state and federal P&A programs. Carbon Tracker, an AGW agitator group, claims that the cost to P&A an average orphaned well is nearly $150,000.
Let’s compare Carbon Tracker’s fantasy to the real world.
|Total P&A Liability||Wells||P&A/Well|
|Carbon Tracker||$ 117,000,000,000||783,000||$ 149,425|
|TX 1984-2008||$ 163,000,000||35,000||$ 4,657|
|TX 2017||$ 11,600,000||918||$ 12,636|
|OK since 1994||$ 100,000,000||15,000||$ 6,667|
|CA since 1977||$ 27,000,000||1,350||$ 20,000|
|BLM 1988-2009||$ 3,800,000||295||$ 12,881|
|Real World||$ 305,400,000||52,563||$ 5,810|
A presentation at the 13th Annual Ryder Scott Reserves Conference cited Texas Railroad Commission numbers for 2013-2017:
|2013||778||$ 20.9||$ 26,900|
|2014||563||$ 15.0||$ 26,600|
|2015||692||$ 10.7||$ 15,500|
|2016||544||$ 8.5||$ 15,700|
|Jan-June 2017||223||$ 2.4||$ 10,800|
|Real World||2,800||$ 57.5||$ 20,536|
$5,800 to $20,500 per well is just a bit less than $150k/well. But, P&A costs for individual wells can vary widely.
What happens to orphaned wells? At least four things can happen, only one of which involves taxpayer money.
Things that can happen to Orphaned Wells
- Plugged or brought back to production by current operator
- Brought back to production by a new operator
- Surface owner can plug well
- Railroad Commission plugs well
Where do states get the money to P&A orphaned wells?
Sources of Money used by RRC to fund orphan well plugging
13th Annual Ryder Scott Reserves Conference
- Recovered from responsible party
- Recovered from salvaged equipment
- Recovered from performance bonds, letters of credit, and cash deposits
- Taxes and fees paid by industry and public
The Rising Cost Of Cleaning Up After Oil And Gas
1 October 2015
Between 1997 and 2014, it cost the State of Wyoming $11 million in total to plug orphaned wells, and only $3 million was covered by bonds. The other $8 million came from the conservation tax fund—a state tax levied on oil and gas production that funds the regulatory agency that oversees the industry and pays for things like well plugging.
From 2007-2019, Texas oil & gas well operators paid the state over $149 billion in taxes and royalties on oil & gas production.
“Last year alone, the Texas oil and natural gas industry paid the equivalent of $38 million a day to fund our schools, roads, universities and first responders,” said Todd Staples, president of TXOGA. “More tax and royalty revenue from the oil and natural gas industry means our lawmakers have more to work with to meet the needs of our growing state.”
In fiscal year 2018, Texas school districts received $1.24 billion in property taxes from mineral properties producing oil and natural gas, pipelines, and gas utilities. Counties received $366.5 million in oil and natural gas mineral property taxes.
“In addition to taxes and royalties, Texas oil and natural gas companies are investing billions in advanced technologies that are protecting and improving our environment – proof that we can grow our economy, protect the environment and enhance our energy security at the same time,” Staples said. U.S. CO2 emissions are near 20-year lows and methane emissions from oil and natural gas systems are down 14 percent since 1990 – all while production has skyrocketed.
State royalties paid by the oil and natural gas industry in fiscal year 2018 increased 18 percent to a total of $2 billion, money that is used to capitalize the Permanent School Fund (PSF), which benefits the public schools of Texas, and the Permanent University Fund (PUF), which benefits public higher education in Texas. Oil and natural gas royalties constitute the only substantive new money deposited annually to the PSF and PUF, according to Staples.
“What’s remarkable to me is that the Texas Permanent School Fund, seldom recognized outside of Texas, leads the pack among ALL educational endowments in the country,” he said. “With a balance of $44 billion at the end of fiscal year 2018, the PSF is the largest educational endowment in the nation – bigger than Harvard University’s endowment worth $39.2 billion.”
What’s even more remarkable than the fossil fueled Texas Permanent School Fund being the largest educational endowment in the country? Over-educated idiots at the University of Texas in the Peoples Republic of Travis County are actually demanding that the UT System divest from fossil fuels. I schist you not.
In 2019, Texas oil & gas producers paid over $16 billion in taxes and royalties. This is how the state spent 25% of the revenue:
|Taxes & Royalties Paid||$ 16.28|
|School Districts||$ 1.54||9%|
|Permanent University Fund||$ 1.02||6%|
|Permanent School Fund||$ 1.11||7%|
|TX RRC P&A||$ 0.03||0.21%|
|TX RRC Pollution Clean Up||$ 0.00||0.01%|
In FY2019, the Texas Railroad Commission spent about $35 million on P&A work for orphaned wells and about $2 million on oil & gas related pollution abatement. This amounts to less than 0.3% of the taxes and royalty revenue the state generated from oil & gas production.
|FY2019||$ 34,942,911||1,710||$ 20,434|
The average P&A cost over recent years has been around $20,000 per well. Taxes and fees already paid by oil & gas producers comfortably cover these costs.
Comparisons of wind turbine decommissioning costs and oil well P&A work are somewhat “apples & oranges”. However, they both appear to fall into similar ranges. The main difference is that oil & gas producers generally pay far more in taxes, specifically designed to cover orphaned wells, than the actual abandonment costs. As nearly as I can tell, wind farm operators aren’t burdened with similar taxes.
The oil well abandonment section was largely reproduced from this post: Carbon Tracker Fantasy: “Cleanup of abandoned oil and gas wells could cost Texans $117 billion”
via STOP THESE THINGS
October 13, 2021 at 01:35AM