A Business Guide to Procuring Offsite Renewable Energy

Article by Constellation

Companies are quickly implementing carbon reduction goals, and one of the fastest growing options to achieve these goals has been to purchase long-term contracts for new build renewable energy projects. In the past five years, commercial and industrial customer purchases of offsite renewable energy projects have nearly doubled.¹

As this space continues to grow, it’s important to educate yourself on the process to ensure your renewable energy project is successful and meets your goals. Critical areas to focus on include developer selection, project development, operations, analysis, and contracting.

Developer Detail

One of the most important choices for your offsite renewable energy project is selecting the right developer, as this choice will play a key role in the project’s success and long-term viability. There are several considerations when evaluating a developer, including their experience in the renewable energy sector and their track record with factors that drive successful projects:

• Project engineering and design expertise: Ensuring well-designed systems operate optimally
• Land development capabilities: Choosing and securing ideal jobsites
• Knowledge of local market permitting: Ensuring a smooth approval process
• Interconnection experience: Understanding grid requirements
• Project financing track record: Securing adequate funding for the entire project
• Procurement relationships: Acquiring quality equipment
• Construction management expertise: Building projects on time and on budget

Finally, there is a need to evaluate the financial stability and resources of the developer to ensure they have the capacity to meet their long-term commitments to the project. Is your developer committed for the duration of the project, or do they have more of a ‘build and sell’ approach, and whether the project may be sold to another owner during some phase of the development cycle? Answers to questions like these will help determine a project’s long-term performance and management.

Project Development

Aside from price considerations, determining which project to choose requires in-depth analysis, and having access to industry expertise is strongly recommended. Key factors to evaluate include:

• Site control and land access: Securing land right for the ideal project location.
• Zoning constraints: Ensuring accommodation of the solar project under current zoning.
• Compliance with regulations: Obtaining proper zoning and environmental approvals.
• Permitting status: Receiving all required permits.
• Community engagement: Gaining local community support is critical for smooth execution.
• Equipment procurement: Identifying and selecting suppliers for quality modules and components.
• Project budgeting: Creating a detailed project budget with benchmarks for completion of the project phases along with a comprehensive financing plan.

Additionally, you should review the interconnection status to ensure the project can be connected to the grid, the module procurement, the supplier agreements and the Engineering, Procurement and Construction (EPC) contracts.

Project Operations

Project operations may be carried out by the long-term project owner or through a third-party O&M provider. Having a team that is experienced in monitoring asset performance, properly maintaining equipment, and responding effectively to issues is critical to ensuring the project delivers the expected sustainability benefits for the entire duration of the term of the power purchase agreement (PPA) with the developer. The National Renewable Energy Laboratory’s “Best Practices in Photovoltaic System Operations and Maintenance” guide recommends:

• Technician training: Training technicians on the specific system components to optimize maintenance
• Equipment inspection: Regularly inspecting equipment and cleaning PV modules when necessary
• Performance monitoring: Monitoring energy production data to quickly identify underperformance
• Preventative maintenance: Routine maintenance to maximize life cycle of the equipment
• Remote monitoring/control: Utilizing remote systems to efficiently resolve issues
• Corrective maintenance plan: Having a plan in place for equipment failures

Project Analysis

It is important to consider the projected financial performance of the project to ensure that it fits with your sustainability goals and budget. This does not just include the final price of the project as you will also need to evaluate how the energy will be priced on the market and the potential impact to your bottom line as you support a new build. The NREL report “Solar Power Purchase Agreement Checklist”^{3 6}recommends examining:

• Pricing structure: Determining if fixed, variable or bundled pricing works best financially
• Total lifetime costs: Calculating total lifetime costs divided by energy production
• Projected operating costs: Estimating expenses like insurance, maintenance and land leases
• Financing terms: Assessing impacts of the amount borrowed, tax incentives and interest rates
• Renewable Energy Certificate (REC) ownership: Determining if you or the developer retains the RECs, which represents the environmental attributes associated with the project’s generation
• Financial projections: Creating models of possible costs and savings over time

Contracting

Finalizing the PPA is often the most involved and complex step when procuring a renewable energy project. PPAs are complex legal documents, often over 100 pages, that require extensive negotiations between the buyer and developer. Key provisions like pricing structure, contract length, termination clauses, performance requirements, and credit terms need to be fully defined.

Clearly defining detailed technical specifications, roles, responsibilities, and financial arrangements are critical. The financial aspect should include negotiating and finalizing payment timing throughout the project lifecycle, penalty clauses and credit terms to manage risk. Finally, evaluating the credit of the developer (and the developer’s review of your credit) is also a critical requirement for contracting.

Working with an Experienced Provider

Sourcing and developing offsite renewable energy projects can be complex, costly, time-consuming, and requires extensive expertise about renewable energy and contracting agreements. However, working with a supplier like Constellation that is well-versed in wholesale and retail transactions  can significantly simplify the process for your business.

Constellation’s CORe+ products leverage our deep knowledge of the energy market and wholesale experience to comprehensively evaluate each of the key factors discussed above. Our team is constantly evaluating projects and agreements, enabling us to find the best projects for our retail transactions. Our CORe+ suite of products solve many of the pain points organizations face when attempting to navigate renewable project selection independently.

Constellation simplifies the process by:

• Rigorously analyzing the key factors to identify the best renewable energy projects
• Negotiating and executing the wholesale PPA so businesses sign a simplified retail agreement
• Providing load-following retail pricing to eliminate fixed-for-floating settlement risks in fixed price periods
• Bundling electricity, transmission, ancillary services, and other costs aside from delivery for simplified management
• Offering fixed price renewable electricity supply to meet budgeting goals

Constellation will be with you every step of the way, so you can focus on your core operations while we help you achieve your renewable energy objectives. Contact us today to get started.

1. https://cebuyers.org/deal-tracker/
2. Project development: https://www.nrel.gov/docs/fy20osti/75763.pdf
3. Project operations: https://www.seia.org/sites/default/files/67553.pdf
4. Project analysis: https://www.nrel.gov/docs/fy10osti/46668.pdf
5. Contracting: https://www.nrel.gov/docs/fy19osti/72133.pdf
6. https://www.nrel.gov/docs/fy10osti/46668.pdf