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 prevent 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 projects 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). The Building Life Cycle Cost Programs provide economic assumptions (discount rate, general inflation rate, fuel escalation rates) and methods so that everyone does the analysis the same way and the results can be compared.
Step 2: Identify and Address Project Barriers
Distributed energy project barriers could include plant layout and configuration, old foundations and underground pipes, roof type and condition, soil type and condition, connection to electrical panels and switchgear, theft or vandalism vulnerability, ongoing operations and maintenance, and storm water management.
Another thing to consider legal issues such as existing contracts and agreements, laws and regulations, and other rights and obligations that could 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 for third-party solar PPA 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 a compliance study to consider issues that might impede project implementation, such as compliance with laws such as National Environmental Policy Act (NEPA), National Historic Preservation Act (NHPA), and Federal Aviation Administration (FAA) regulations related to glare hazards around airports.
An agency may have additional compliance issues to address, including compatibility with its mission, future site plans, and agency policies. Compliance with cybersecurity 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:
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 procurement option will influence whether or not tax credits can be monetized, if there will be financing costs, and sometimes capital costs.