Decommissioning a solar park: who pays, how large the bond is and what it costs

Every prospectus states what a solar park feeds into the grid. What happens at the end is rarely in there, and if it is, it is a half sentence: dismantling is secured. Yet the decommissioning obligation is the one item in a direct investment that costs money from day one although it only falls due two or three decades later. The permit requires security, and that security has to be paid for every single year.

This article sets out the obligation: where it comes from, who owes it, how the authority determines its size, what it costs the operator over the operating life, how it works out in tax terms and what physically happens to the park at the end. It describes the legal framework, not a specific project.

Where does the obligation to dismantle a solar park come from?

From building law, but along two very different routes, and the difference decides later who demands the security. If the plant is privileged in the outer zone, for instance in the 200-metre strip along a motorway or a main railway line (§ 35 Abs. 1 Nr. 8 Buchst. b BauGB) or as a special solar installation next to a farm with no more than 25,000 square metres of footprint (Nr. 9), the decommissioning obligation is a condition of admissibility: the developer has to declare in writing that it will dismantle the plant once the use is permanently abandoned and remove the sealing of the ground (§ 35 Abs. 5 Satz 2 BauGB). The building authority is to secure compliance through a building charge under state law or in another way (Satz 3).

Most ground-mounted parks, however, are not privileged but built on the basis of a development plan. The obligation then does not sit in the statute but in the municipal contract under § 11 BauGB, and the security follows state law, which is very unevenly drafted. Saxony-Anhalt has an explicit provision requiring permits for ground-mounted plants to be made conditional on security (§ 71 Abs. 3 BauO LSA), while Baden-Württemberg, Bavaria and Rhineland-Palatinate only have general powers to demand security (§ 60 BauO BW, Art. 68 Abs. 4 BayBO, § 70 Abs. 1 Satz 5 LBauO RP). Where a specific provision is missing, the UBA report finds that demanding security as an ancillary condition to a building permit is hard to justify; in practice it is then agreed in the contract with the municipality.

For assessing an offer this means the question is not whether a decommissioning obligation exists, but in which document it sits. That determines who the creditor is, how long the security runs and on what conditions it is released. How permit, building law and land register interact at a site is covered in Grid connection, easement, building rights: how to tell whether a direct investment has truly secured its site.

Who owes the dismantling in a direct investment?

The operator of the plant, and in a direct investment that is the investor. Anyone who acquires a plant or a delimited part of one and runs it as their own commercial business takes on the written undertaking towards the authority or steps into the municipal contract along with the project. This is not a side issue of the contract documentation but the central question: a decommissioning obligation that goes unmentioned in the purchase agreement does not thereby disappear.

There is a second creditor as well. At the end of the lease the tenant owes the return of the land (§ 546 Abs. 1 BGB, applying to leases via § 581 Abs. 2 BGB), and landowners regularly take separate security for that. This private-law security does not help the authority, though: on the case law reviewed in the UBA report, security given to a third party such as the landowner is generally not to be accepted by the authority, because it cannot access it when it matters. The result is two securities side by side, and both cost money. The report explicitly recommends examining ways out of this double burden, for instance by having the public authority step into existing securities given to landowners.

Physically, dismantling is possible in the first place because the park remains movable property rather than becoming part of the land. In 2021 the Federal Court of Justice held for a ground-mounted photovoltaic plant that a construction consisting of a scaffold-like mounting with modules inserted into it is not a building within the meaning of § 94 BGB. Plant and land therefore stay separate, with all that follows: the plant belongs to the operator, the ground to the landowner, and at the end the one comes off the other. What happens if the operator or the provider fails in the meantime is covered in Provider or operator insolvency: what happens to your direct investment.

How large is the decommissioning security, and who sets it?

The authority or the municipality sets it, as a forecast. Whether and when operations end is not known at the time of the permit, and what dismantling will cost by then depends on labour, machinery, materials and disposal. The courts therefore do not require an exact calculation and allow estimates and flat rates; they do require an appropriate benchmark and a comprehensible presentation of the expected cost. The common approach is an amount in euros per megawatt of installed capacity plus an uplift for price increases up to the expected date of removal. Courts have accepted 1 percent a year, 2.5 percent a year for labour costs and a flat 40 percent over 20 years for that uplift; the middle figure comes from a case about a ground-mounted solar plant, the other two from wind energy cases.

So much for the theory. In practice, according to the interviews documented in the short report Climate Change 43/2025, the amount is often the result of a negotiation rather than of a disclosed calculation, because accepted benchmarks are missing. The outcome is a spread that cannot be explained by the technology of the project: where the amount is tied to capacity, it ranges from 5,000 euros to more than 40,000 euros per megawatt, and where it is derived from the built-up area it can be higher still in individual cases. The flat rates developed for wind energy cannot simply be transferred, the structures are too different. The report therefore recommends a nationally uniform expert methodology; until it exists, the amount remains a matter of negotiation.

The choice of instrument is clearer. § 232 BGB lists the deposit of money or securities, land charges and pledges; the guarantee appears in paragraph 2 only as a fallback. In practice it is nonetheless the norm, because it gives the municipality a payment claim against a bank rather than merely a right to realise metal and glass. A building charge or an easement is ruled out from the start: it secures the land, but it does not pay for dismantling.

What does the decommissioning security cost the investor?

A bank guarantee is not a one-off item but a recurring fee. The bank or surety insurer charges a guarantee commission on the guaranteed amount, every year, for the entire life of the plant. And because the amount either already contains the inflation uplift to the expected removal date or is adjusted as it goes, the fee is charged on a figure that tends to grow over the years. The calculation below places the two ends and the middle of the practice reported by the UBA side by side. All assumptions are stated in the caption; the amounts are reference points of an administrative practice, not a forecast for any particular project.

In this calculation the difference between the lower and the upper end is around 11,000 euros per megawatt over the operating life, and close to 15,000 euros with ongoing adjustment. For a ten-megawatt park that puts a six-figure amount at stake which has nothing to do with the quality of the site, the technology or the revenue model, and everything to do with the administrative practice of the relevant district. That is the real point about this cost item: it is external to the project and still entirely real.

There is a further effect that no model shows. A bank guarantee ties up a credit line and is carried as a contingent liability; it therefore costs not only a fee but also headroom. If it is provided through a cash deposit or a blocked account instead, capital is tied up that could be working elsewhere. Which cost items of a direct investment are otherwise easy to overlook is collected in Transparent costs: which fees a direct investment involves, and which ones are hidden.

Can the amount of the security be reduced?

Within limits, yes, and the lever sits with the developer before closing, not with the investor in year five. Three approaches are covered by the case law:

• Rebut the flat rate. Where there are indications in the individual case that costs will be lower, the authority may depart from the flat rate in the developer's favour; if that succeeds, the amount has to be recalculated. This requires a robust cost estimate of one's own, not an assertion.
• Change the instrument. Among the suitable instruments the authority has to pick the one that burdens the developer least while still covering the municipality in full. In 2023 the Administrative Court of Halle held a bank guarantee disproportionate for a ground-mounted plant where a land charge served the same securing interest. A land charge carries no recurring fee, and a savings model on a blocked account spreads the burden.
• Insist on equal treatment. Where an authority departs from its own consistent practice to the developer's detriment, it breaches the principle of equal treatment; the Higher Administrative Court of Magdeburg confirmed this for decommissioning securities in two decisions in 2024, there concerning wind turbines but on the same standard.

One argument regularly fails despite being the obvious one: the material value. In the UBA interviews it was argued that the value of steel, aluminium, copper and glass even exceeds the cost of dismantling. The courts still do not require it to be credited, for an understandable reason: ownership or a pledge only gives the authority a right of realisation, not a payment claim, and in an insolvency it would be left alone with the risk and effort of selling. For an investment calculation the scrap value therefore remains an opportunity at the end of the term, not an item that makes the guarantee smaller.

How does dismantling work out in tax terms?

That turns on a question many investors never ask: is profit determined by a balance sheet or as a surplus of receipts over expenses? Anyone preparing a balance sheet recognises a provision for the decommissioning obligation (§ 249 Abs. 1 Satz 1 HGB). For tax purposes two special rules dampen the effect considerably: the provision has to be accumulated in equal instalments over time (§ 6 Abs. 1 Nr. 3a Buchst. d EStG), and it has to be discounted at 5.5 percent (Buchst. e).

A short calculation of our own shows what that means. Assuming an expected dismantling cost of 20,000 euros per megawatt and an accumulation period of 25 years, 8,000 euros have accumulated after ten years, but discounted to the balance sheet date only around 3,600 euros of that appear on the balance sheet. The tax relief therefore arrives almost entirely in the final years of the term, by which time depreciation has long run out. Anyone expecting an early tax effect from the provision is miscalculating.

On top of that comes a feature that hits solar parks in particular. In 2014 the Federal Fiscal Court held that an extended period of use has to be used for the provision where the lease underlying the removal obligation is continued beyond the original end of the contract. Site leases for solar parks are built exactly that way: a base term plus staggered extension options. If an option is exercised, the same expense is spread over more years, and the excess part of the provision has to be released through profit. The tax relief then shifts even further towards the end.

And the more common case: many direct investments are run on a cash-basis calculation under § 4 Abs. 3 Satz 1 EStG. There are no provisions there. The dismantling cost then only takes effect in the year it is paid, under the outflow principle of § 11 Abs. 2 EStG, which is precisely the year in which the plant no longer earns revenue to set it against. A commercial business only becomes obliged to keep books above a total turnover of more than 800,000 euros or a profit of more than 80,000 euros in the financial year, and even then only from the start of the financial year following the tax office's notification (§ 141 Abs. 1 und 2 AO). The guarantee fee is independent of all this: it is a running business expense and takes effect in the year it is paid.

What happens to modules, steel and cable at the end?

At the end a solar park is not hazardous waste but largely a clean store of materials. For the modules the German electrical equipment act applies: Anlage 1 ElektroG lists them under category 4, large appliances, and for that category § 22 Abs. 1 ElektroG requires at least 85 percent recovery and 80 percent preparation for re-use and recycling. Mounting structures, transformer stations and cabling fall under general waste law; steel, aluminium and copper are tradable commodities.

The line that the manufacturer will take the modules back anyway is only half true, and the half that is not true is the more interesting one for investors. Manufacturers have to provide a reasonable means of return for commercial waste equipment (§ 19 Abs. 1 Satz 1 ElektroG) and in principle bear the disposal cost (Abs. 3 Satz 1). But there is expressly no obligation on the end user to hand the equipment over to the manufacturer (Abs. 1 Satz 2). For historical waste equipment the commercial end user bears the disposal cost (Abs. 3 Sätze 2 und 3), and in the commercial sphere the parties may agree otherwise on who pays (Abs. 3 Satz 4). Anyone who does not hand the modules over has to have them treated and recovered to the statutory standards themselves (Abs. 2 Satz 2).

In practice this means that whether any proceeds reach the operator at the end, or whether a third party pockets them, is a matter of contract rather than of statute. Whoever organises the recovery keeps the material value and carries the treatment duty. Whoever awards the dismantling to the EPC contractor or the operations manager should read who owns the scrap proceeds. Which components are replaced during the operating life anyway and therefore come up for recovery earlier is covered in Module degradation and inverter replacement: what ages in a solar park and what it means for returns.

Which questions should you ask the provider?

How a provider handles dismantling is a good indicator of diligence, because it cannot be dressed up with yield forecasts. These questions belong in every conversation, and each of them should be answered with a document:

• On what basis is the plant permitted: privileged under § 35 BauGB or via a development plan? And in which document does the decommissioning obligation sit?
• How large is the security demanded, in what form was it provided, and how is it related to the capacity of the plant?
• Does the security run towards the municipality, towards the landowner or towards both? In other words, is there one or are there two?
• Is the secured amount adjusted over the term, and on what benchmark?
• What guarantee commission has been agreed, who pays it, and is it in the model as an annual item?
• Is the dismantling cost itself in the calculation, or does the model simply end at zero in the last revenue year?
• Who owns the material proceeds at the end, and is the recovery of the modules governed by contract?
• Is the security transferred if the investment is sold on, and on what conditions does the municipality release it?

If several of these questions produce reassurance rather than a document, that is a finding in itself. What else diligence can be read from is collected in How to tell a trustworthy provider of energy direct investments.

How we assess dismantling in our project review

We read the decommissioning obligation in the original rather than in the prospectus: the permit with its ancillary conditions, the municipal contract, the lease, the guarantee deed. From those we take three figures into our own model: the secured amount, the annual guarantee commission and the dismantling cost assumed in the calculation. If one of them is missing we include it with a conservative assumption of our own and label it as an assumption rather than leaving the gap open. A project stands out to us when the security is well below the range seen in practice and dismantling is at the same time not costed at all: the model then carries two risks that hide one another. Anyone who would like a specific offer reviewed is welcome to bring it to a no-obligation initial conversation.

How the dismantling question fits into the larger decision at the end of the term, between continued operation, repowering and removal, is covered in A solar park after 20 years: continued operation, repowering or decommissioning?. What a sale or a wind-up triggers in tax terms is set out in After the IAB: How the ongoing returns and the sale of a direct investment are taxed.