Evaluating Institutional On-site Clean Energy

Earlier this month, I attended EUCI’s Utilizing Clean Power Development Conference in Philadelphia.  The conference attracted a variety of large institutions (hospitals, municipalities, universities, etc.), developers, and financers to discuss the opportunity and challenges surrounding deployment of on-site renewable energy.  Institutional customers are being provided with multiple pathways and options for deploying a growing number of on-site renewable solutions, and in evaluating these solutions, institutions must consider a range of dynamic factors.

In this first post, I will discuss how institutions are evaluating on-site renewable energy with a few anecdotes from the conference. In the second post, I will go into more detail on the different options available for deploying on-site renewables, and some common challenges facing large institutional customers.  

A decision to invest in on-site renewable energy can be complicated.  Deploying renewable energy requires institutions to ask new questions, conduct detailed analysis, and develop a detailed action plan. They must carefully analyze the relative merits and drawbacks of different options, and be wary of jumping to conclusions.

When evaluating the technical feasibility of solutions, institutions are looking closely at their energy use profile to find solutions that best meet their needs. According to Jim Easterly of Black and Veatch, the roadmap for developing on-site renewable energy begins with an assessment of needs.  Determining how much, where, and when your organization uses energy is crucial — this helps determine what types of solutions may or may not be viable.  For example, solar photovoltaics are most attractive for sites that use large amounts of electricity during the middle of the day, when electricity rates are high. 

Site considerations, such as physical constraints and renewable resource quality, are important factors for which organizations often don’t account. Some organizations are quick to play favorites and select a solution before evaluating such factors.  James Freihaut from the DOE Clean Energy Application Center shared an experience working with a naval facility set on deploying wind, despite the site having very poor wind resources. 

Physical constraints at many sites also reduce the number of potential renewable energy solutions.  For example, many roofs were not built to handle the added weight of hosting a traditional solar photovoltaic array.  Installing solar may require such facilities to do major roof renovations, adding cost and reducing the feasibility of the project. Also, institutions must carefully consider constructability and maintainability. 

Governement incentives is another major variable.  The economic feasibility of on-site renewable energy is usually reliant on federal, state, and local incentives to reduce costs and bring payback periods to an acceptable level (typically around six to seven years).  Incentives also enable developers to offer PPA agreements at rates below utility electric rates.

The volatility of many incentive programs is adding complexity and making it a more difficult decision to invest in on-site renewables.  This is particularly true on the U.S. East Coast, where many solar renewable energy credit (SREC) markets, particularly in New Jersey, have experienced dramatic price decreases.  For example, a school in New Jersey evaluating solar in 2010 or early 2011 would have expected to sell SRECs at around $650/MWh. By the time the project was completed in 2012, the value of SRECs had plummeted to around $225/MWh.  

Permitting is another important variable for institutions.  Currently, permitting requirements for renewable solutions differ greatly, dependent on state and municipality.  When evaluating different solutions, institutions must work with local permitting and planning departments to determine necessary permits and avoid permitting issues. 

Candidate solutions can be evaluated and ranked relative to the factors described above — technical feasibility, cost and economic feasibility, resource quality, environmental issues, site conditions and other institutional factors. Organizations can use ranked solutions to develop a strategic action plan for deploying on-site renewable energy.

Ultimately, a decision to invest in on-site renewable energy must reflect the institution’s strategic goals, objectives, and expected outcomes.  Assuming a proposed solution fits with the organization’s strategic direction, careful evaluation of technical, economic, permitting, and other detailed factors when evaluating a proposed solution will help ensure a minimum of surprises, and that the installation performs as anticipated.