Creating Your Renewable Energy Company’s Project Development Strategy
Cypress Creek Renewables Development Project in Harnett County, N.C.
In one of our blogs, we outlined what it takes to start your own renewable energy company. Matt McMonagle, the CEO and founder of NovoHydrogen, shared important advice on everything it takes to break into the business: from understanding your own temperament, to the importance of knowing the competitive landscape.
Once you start your own shop, what are the steps to executing project development at the local level? It’s one thing to know key points for getting started, but how do you operationalize them? This article provides a checklist for developing projects as you grow your business.
Find Your Markets
There are 50 states, but not everyone is as ripe for development as the next. It is not sustainable or realistic to spread development too far and too thin across all markets. Some state markets are already mature. Early clean energy policy incentivized development, and companies flocked to build projects. States in this category include California, Massachusetts, and Texas, among others. Other states have planned coal retirements, incentives for developers, a strong renewable energy portfolio standard, and property or sales tax exemption for clean energy projects. These locations may be a better focus for a new clean energy business.
One important resource: N.C. State University has a database entitled “The Database of State Incentives for Renewables.” All 50 states have financial incentives for renewable energy in the form of personal, corporate, sales or property tax incentives, rebates, grants, loans or bonds. The database outlines, state-by-state, these grants and tax cuts available for renewable energy and energy efficiency projects. It is an important resource to learn about all the incentives within different markets and may help developers decide which markets to target.
Identify the Optimal Development Site
Once the markets are identified, a project developer must find the optimal site that includes access to electric infrastructure, flat land, minimal environmental impacts and no endangered species issues. Ideally, this location will provide tax benefits to the local community, and the community will be supportive of the project. Each of these steps is briefly described below.
- Land Acquisition: Once a site is determined to be a quality location for a project, the developer can either purchase or lease the land from the landowner. Once that phase is completed, the project development process occurs.
- Interconnection Design and Application: The next step involves managing interconnection to the electric grid, which is crucial to a successful project, and yet remains one of the most critical, difficult and costly aspects of project development as grids become more congested. The Federal Energy Regulatory Commission recognized this issue and announced an Advanced Notice of Proposed Rulemaking, inviting the public to comment on potential changes to improve transmission planning and cost allocation as the nation transitions to a cleaner energy future.
- Site Environmental and Cultural Assessment: Projects require extensive studies to ensure the project has no negative impact on existing ecosystems, threatened/endangered species and cultural resources.
- Local and State Permits and Approvals: Finally, a daunting aspect of the development process is acquiring all required state and local approvals. At the local level, a significant amount of time is spent leading a project through zoning approvals that regulate setbacks, height limitations and aviation notification (i.e., solar glare is a hazard for airplanes).
Accessing Capital for Your Project
Financing clean energy projects can be challenging, because they have high upfront investment costs and much lower operating expenditures over time. Investment can take the form of equity or debt financing, but revenue from the project must be able to generate a return to the equity investors, or pay for interest and principal on the debt, transaction costs associated with developing and structuring the project, and operations and maintenance costs.
Access to low-cost financing can take more forms, and regardless of the type of developer and the stage of development, Leyline Renewable Capital has a financing instrument available for your project. For example, Leyline’s Development Capital supports developers who are well established and using approved technologies. We commit loans to projects that are already on the table and beginning to get underway – our job is to finance to the point of shovel-ready.
Leyline’s Bridge Capital helps developers complete a project and get it ready to sell. These initiatives are already almost complete, but one small piece remains before everything can be locked down. We bridge that gap for a certain period of time and take care of the remaining expenses before a sale. And Leyline’s Build Capital goes beyond development and provides support to get projects started. Maybe there’s no time to delay or a sale hasn’t come through, but the developer wants to get a jump start on construction.
Develop Decommissioning Plans
At the end of the project life, a decommissioning plan will be signed by both the party responsible for decommissioning and the landowner. This addresses deconstruction, removal and transport of any abandoned equipment or racking. Solar and energy storage projects are considered environmentally beneficial, but construction produces large amounts of cardboard, wood, scrap metal, scrap wire, and clearing and grading wastes. Much of this waste can be diverted from landfills to private recycling businesses with net costs approximating landfill disposal.
Ongoing Operation & Maintenance
Once a project is placed in service, it requires very little in terms of operations and maintenance to continue producing clean energy. However, ongoing maintenance, at minimum, requires upkeep with the grounds. Compared to other generation sources, the total cost and time invested in clean energy operations are very low.
Local opposition to renewable energy development remains a difficulty for siting projects in a reasonable timeframe across all markets. It is important to get communities on board with projects. Even though developers have tried to educate community members on clean energy technology and positive effects it has on communities, some efforts have been mixed. It is important to maintain good relationships with the landowners and the community, because they will live with any project.
At Leyline Renewable Capital, we worked as developers and understand all the steps to get a project interconnected, permitted and constructed. As lenders, we will work with you step by step to deploy clean energy projects. That’s why we are here, and we want to walk the journey with you.