Considering developing a clean energy project? This overview will help you start thinking about the fundamentals

The Development Process

Step by Step

Site Selection

Resource potential: Can my desired technology produce significant energy at this site? 

Land control: Do I have ownership of the land, and if not, is it feasible to purchase/lease the land? 

Engineering and design: Is the location suitable for buildability? 

Permitting: What are the local, state, and federal requirements to develop a project at this location? 

Community benefit: Will the project positively impact the local community?

Resources: 

  • National Renewable Energy Laboratory utility-scale resource potential maps and data 
  • The Tribal Energy Atlas, a National Renewable Energy Laboratory distributed solar capacity factor interactive map on tribal lands 
  • DOE state-by-state siting and permitting requirements guide
  • U.S. Bureau of Indian Affairs Division of Energy and Mineral Development technical assistance for energy potential assessment, project planning, business development

Project Economics / Techno-Economic Analysis 

Cost: How much will it cost to develop, build, and operate the project? What is the levelized cost of energy (LCOE)? Also, important to think about the levelized cost of capacity (sometimes referred to as Levelized Fixed Costs). It is important to care about both the cost per MWh of generation and the cost per MW of adding new capacity for reliability purposes.

Offtake: Who is my target customer (local residents, commercial & industrial entities, wholesale markets) and how will the market value my product? Power Purchase Agreements (PPA) are common here.

Revenue analysis: How much can I expect my project to generate on a per MWh or kWh basis, and how does it compare to the LCOE? 

Resources: 

  • Natural Resources Defense Council LCOE calculator
  • U.S. Department of Energy, Office of Indian Energy Policy and Programs technical assistance program for clean energy project planning, including techno-economic analysis

Financing 

Federal funding: Are there federal programs that will assist in financing the project? 

State, local, and green bank funding: Does my state or local jurisdiction have clean energy incentives or green bank financing available? Also, check out the EPA’s Greenhouse Gas Reduction Fund.

Tax credits: Which tax credits will the project qualify for / are there application requirements?

Resources:

Construction & Operations

EPC contract: What Engineering, Procurement, & Construction (EPC) firm should I contract with? How can I design the contract to minimize risk liability from unforeseen events such as cost overruns and timeline delays?

O&M contract: Does my organization have the capacity to manage Operations & Maintenance (O&M) of the project? If not, who should I contract for O&M?

Resources: 

  • U.S. Bureau of Indian Affairs Division of Energy and Mineral Development technical assistance for securing contracts

Interconnection & Transmission

In front of the meter vs behind the meter:  Will this project connect to the local electric grid?

If yes: 1) What are the requirements and costs of interconnection? 2) Is there transmission available nearby for offtake delivery? 

If no: 1) What are the utility and regulatory requirements for behind the meter projects? 2) Does the user’s internal electrical system have the capacity to integrate my project’s generated energy? 

Resources:

Not finding the right fit?

Scroll for alternative project ownership models that could better fit your organization

Alternative Project Ownership Models

  • Rather than self-developing a project, tax-exempt entities can engage in Build-Transfer Agreements (BTAs), whereby they purchase a turnkey project that is ready to operate from a private developer. In this case, the developer would be responsible for completing the development process outlined above, including the permitting, interconnection, financing, and construction processes. Once the project is ready for operations, the tax-exempt entity would acquire ownership of the asset, granting it eligibility for direct pay. The entity would be responsible for either operating the asset or outsourcing the operations and maintenance work during the lifetime of the project.

  • Similar to BTAs, pre-Notice to Proceed (pre-NTP) acquisitions can allow tax-exempt entities to own an asset without having to self-develop the project. In a typical pre-NTP sale, a tax-exempt entity would purchase an asset that is shovel-ready, meaning the project has gone through all of the permitting and interconnection requirements and is ready for construction. The entity would then be responsible for the construction and operations phases of the project, while maintaining eligibility for direct pay.

  • In a tax equity partnership, a tax exempt entity would enter into a legal partnership with a private entity to co-own a project. Typically, the private entity would contribute capital for the development/construction/acquisition of a project and in return receive a portion of the tax credits and cash flow generated by the project. In March 2024, the U.S. Treasury Department and the U.S. The Internal Revenue Service issued a notice of proposed rulemaking that allows tax exempt entities in partnerships eligibility for direct pay under certain conditions. To learn more about this ownership model and the direct pay rules on partnerships, reach out to your local counsel.