A landmark ruling sets precedent for 35 years of useful lifetime of PV plants

A landmark ruling by the International Centre for Settlement of Investment Disputes last year recognizes for the first time the useful life of solar PV plants to be 35 years.

The useful life of an asset is defined as the period of time, or total amount of activity, for which the asset will be economically feasible for use with no significant additional investment. In other words, it is the period that the business asset will be in service and used to earn revenues.

Álvaro Payán, Director General of ATA Renewables, who is one of the authors of the key technical report considered in the ruling said that “some minor investment will definitely be needed to reach a 35 years lifetime, however, this investment will not be significant compared with the initial installation costs or with the profit that the installation can generate in excess those extra years for such a minor investment.

The ruling is expected to be the first of many acknowledging that the useful life of PV solar assets, provided that proper operation and maintenance activities are in place, may extend up to 35 years or longer. It is expected to positively affect the PV solar industry across the value chain, with Banks and Financial Institutions gaining comfort with the lower technological risk and higher value of the assets

Solar PV developers worldwide have also legal precedent to back up, revisit and adjust their modelling to the 35-year lifecycle. At a time where the cost of PV electricity is coming down constantly, this ruling could have a significative knock-on effect on competitiveness of the projects, resulting in lower rates for consumers.

The exact wording of the ruling notes that “From the evidence provided, the Tribunal considers it more appropriate to accept the assumption advanced by Brattle [technical experts in this court case], that the PV plants could operate for 35 years in the scenario based on a study about PV plants published by the EC, ECO 3’s Plant’s 25-year land lease agreement, which included two 5-year extensions and supports Claimants’ expectation of a 35-year useful life for the plants and conclusions reached by ATA about Claimants’ PV Plants’ useful life of 35 years.

Payán believes that this ruling is an important step to recognize something that engineers working in the PV solar industry have known for years. “We believe that the solar PV plant useful lifetime can be estimated at 35 years or beyond, possibly even up to 40 years. We continue working towards demonstrating this fact, and we are positive time will prove us correct. Still, design, technical and maintenance features among others can severely affect the useful lifetime of solar PV projects. Therefore, each project needs to be considered and assessed separately to determine their useful lifetime.

Source: ATA Insights