Their kingdom for a bond; Insurance companies balk at long-term sureties for wind turbines | By Emily Clark | Wicked Local Plymouth | Posted May 06, 2013 | www.wickedlocal.com
PLYMOUTH – The name is bond – surety bond.
And bonds usually come with a dollar sign and multiple 0s.
For some projects, the town bylaws require surety bonds – money set aside to cover any cost to the town in the event a developer doesn’t finish a project or, in this case, if a wind turbine needs to be decommissioned. The stipulation is designed to allow the town to complete a project if the developer can’t or won’t.
Wind turbines, like the one at Camelot Park, have a 20-year lifespan, according to engineers. But Joe Balboni of Camelot Wind, the company that owns the Camelot Park turbine, says no insurance company will sign off on such a lengthy bond.
That was troubling news Wednesday for several members of the Zoning Board of Appeals, as they considered an alternative plan for setting aside cash as surety.
The proposal discussed would require an escrow account, as allowed by the town bylaw, to include an initial deposit of $5,000 with subsequent quarterly installment payments of $2,000, to reach $100,000 within 12 years.
Local attorney Bob Betters, representing Camelot Wind, noted that the 20-year life span of a turbine is the sticking point for insurance companies, and they just won’t approve a bond for such a lengthy period. His client has tried to no avail to obtain an insurance surety, he explained, so Camelot Wind is opting for a cash bond instead.
The Camelot Drive turbine was erected late last year and is the first industrial-size wind turbine to be erected in America’s Hometown.
ZBA member Ed Conroy, also an attorney, noted that the cost of decommissioning the turbine is actually $89,000 plus about $50,000 in projected salvage costs. But because these numbers are being provided by Atlantic Design Engineering President Simon Thomas, who owns Camelot Wind with Balboni, Conroy suggested an independent opinion on the price of decommissioning. Conroy also noted that inflation needs to be factored into the equation. Betters countered that the cash in the escrow account will accrue interest, which would likely cover inflation.
But the bylaw requires the surety cover 150 percent of the cost of decommissioning the turbine, ZBA Chairman Peter Conner added, so the board might not be able to approve the proposed $100,000. Conroy noted that 150 percent is approximately $133,500. Camelot Wind could simply extend the proposed installment period, Betters suggested.
ZBA members said they didn’t have a problem with the cash surety proposal, as long as it meets the requirements set forth in the bylaw. But the board did request an independent analysis of the cost of decommissioning the turbine, just to be sure the numbers are correct. Members also asked if Balboni could provide a letter or some statement from the insurance companies confirming their position against granting the bond.
URL to article: https://www.wind-watch.org/news/2013/05/07/their-kingdom-for-a-bond-insurance-companies-balk-at-long-term-sureties-for-wind-turbines/