During phase 3 of the distributed energy project implementation process, the agency validates the distributed energy project with feasibility studies, ensures that there are no major barriers to project implementation, and explores procurement options.

Step 1: Refine Initial Screening Results through Feasibility Studies

A feasibility study is recommended for projects identified in the initial screening. Feasibility studies provide a detailed economic analysis as well as technology and project financing recommendations. If alternative financing is not pursued, then the feasibility study provides required information to request funding through the appropriations and budgeting process.

While a preliminary screening is often conducted remotely, feasibility studies typically require a site visit from qualified experts and include:

• Identification of appropriate project locations, including roof assessments and land area review
• Verification of on-site renewable energy resource through on-site measurements
• Identification of electrical interconnection points with sufficient capacity
• Confirmation of utility policies for incentives, net metering, interconnection, and buyback of excess electricity
• Detailed economic modeling incorporating hourly energy load profiles and complex utility tariff rates.

The expert conducts a detailed technical and economic study, including environmental and other constraints, for each opportunity identified in the initial screening. At a minimum, economic feasibility is established by a detailed and credible life cycle cost analysis according to federal procedures (10 CFR 436).

National Institute of Standards and Technology Building Life Cycle Cost Programs provide economic assumptions (discount rate, general inflation rate, fuel escalation rates) and methods to ensure analyses performed are consistent and their results can be compared.

Step 2: Identify and Address Project Barriers

Distributed energy project barriers could be related to plant layout and configuration, old foundations and underground pipes, roof type and condition, soil type and condition, connection to electrical panels and switchgear, vulnerability to theft or vandalism, ongoing operations and maintenance, and storm water management.

Legal issues, such as existing contracts and agreements, laws and regulations, and other rights and obligations could potentially hold up a project. The agency must have the legal or regulatory authority to pursue a distributed energy project, and if the project involves a power purchase agreement, that arrangement must be legal in the state or jurisdiction (see the DSIRE website for third-party solar power purchase agreement policies). A utility interconnection agreement is an important contract that carries legal implications, such as liability. So, too, are the contracts to operate, maintain, and insure the project.

An agency may need to perform a compliance study to consider issues that might impede project implementation, such as compliance with laws including the National Environmental Policy Act, National Historic Preservation Act, and Federal Aviation Administration regulations related to glare hazards around airports.

An agency may have additional compliance issues to address, including the project's compatibility with its mission, future site plans, and agency policies. Compliance with cybersecurity requirements and other directives may affect the way a project is implemented.

Step 3: Select a Procurement Option

Once barriers are addressed, select the best way for your agency to finance a project.

For government-owned projects, procurement options include:

• Appropriations
• Energy savings performance contracts (ESPCs)
• ESPC ENABLE
• Utility energy service contracts.

For privately owned projects, procurement options include:

• Power purchase agreements
• ESPC energy sales agreements
• Real property arrangements.

The best procurement option depends on a variety of factors including agency authority and policy, state and utility policies, and technology type and size. The selected procurement option will influence whether or not tax credits can be monetized, if there will be financing costs, and sometimes the magnitude of capital costs.

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