The Inflation Reduction Act (IRA) is providing incentives for clean and renewable energy. Two types of tax credit options can be used by organizations looking to explore or completely move into solar and storage: the Production Tax Credit (PTC) and the Investment Tax Credit (ITC) for renewables.
As boards and executives in companies, like those in the petrochemical and mining industries, continue to adopt carbon reduction goals, operations personnel are finding themselves responsible for implementing projects to achieve them. While this new territory can be overwhelming, especially as solar developers come knocking, operators need to understand the value their sites already possess — and how that value can be leveraged to maximize returns.
The core work that solar developers provide is marrying three key aspects for site development: land, load and financing.
Land: Extensive acreage is needed for solar development, and petrochemical and mining companies may already have it in spades. Often refineries have unused land within the buffer zones between the plants and surrounding communities. Mining sites also typically have tailings, dams or sections of land that need to be reclaimed or redeveloped, offering considerable cost benefits if used beneficially for solar in lieu of returning to its natural condition.
Load: Identifying an end user, also known as an offtaker, for renewable energy is often the most complex function for the developer of a greenfield site. The interconnection process also can be time-consuming. And it may require significant investment to upgrade existing transmission or distribution infrastructure to connect a solar project and transmit electricity from the generation site to the end user. Behind-the-meter development, where the project produces no more energy than the load at the refinery or mining site, alleviates both these issues. Because the host site has a specific load to supply with renewable energy, coupled with available land, a behind-the-meter strategy can eliminate the need for interconnection and associated upgrade costs.
Financing: Securing the necessary capital — with the ability to monetize the investment tax credit — is another service developers often provide for a development fee. However, petrochemical and mining companies are often able to deploy capital and have sufficient tax appetites to alleviate the need for third-party financing of solar projects. This can maximize financial benefits and effectively lock in an electric rate on the portion of electricity generated on the site for the life of the project.
Using solar to achieve decarbonization goals can be cost-effective, particularly when the ITC or PTC are utilized. However, solar only produces electricity during daylight hours. Thus, the use of solar may help plants that operate 24 hours per day reduce the total energy consumption but may not reduce the power demand. The power demand affects the demand charge some utilities pass on to their customers. The demand charge can be 25% to 30% of a utility bill.
Battery Storage to Power Operations After Dark
To reduce the demand charge, solar and storage may be deployed. Organizations can increase on-site renewable energy by oversizing the photovoltaic system and using the additional generation to charge the battery, shifting that excess energy for discharge after sunset. Solar-plus-storage is also an intriguing option for organizations requiring off-grid operations or those that are interested in reducing their utility spend and increasing renewable energy usage. However, implementing solar and storage to provide 100% of a large facility’s energy needs can be cost-prohibitive or may require more land for the oversized solar system than is available.
While net zero is the goal, currently it is more likely a facility will need to supplement renewable generation with energy from the utility grid. In the future, developing renewable technologies such as hydrogen generation, fuel cells or small nuclear reactors may provide other options to achieve net zero.
With the tax incentives and innovative technology present, it is truly the right time to achieve decarbonization goals. An integrated design and construction company, such as Burns & McDonnell, can offer comprehensive services related to environmental studies, site development and permitting support, as well as engineering and construction to find the most cost-efficient way for you to achieve your decarbonization goals.
Working with an experienced, comprehensive engineer-procure-construct (EPC) team provides considerable advantages for the mining industry to manage complex and high-risk projects. Learn more about the benefits, risk reduction and cost-efficient options offered by an EPC company.
Editor’s note: This post was originally published Jan. 5, 2021, and has been updated for context and accuracy.