Why are Remote Offtake Policies Critical for Brownfield Solar Development?
By Corey Hindin, Senior Director of Business Development at AC Power
At AC Power, we are privileged to operate at the intersection of finance, policy, and environmental stewardship. Our unique position allows us to contribute to crucial shifts in the generation and usage of energy nationwide. Today, our spotlight falls on one specific policy area that is ripe for change: the implementation of remote offtake structures.
The Inflation Reduction Act (IRA) represents a robust leap toward our nation’s energy self-reliance and grid modernization. This legislation embodies the Federal Government's commitment to curbing our dependence on foreign energy sources while enhancing domestically-sourced renewable energy.
A central tenet of the IRA is the concept of "energy communities." According to the IRA, an energy community is defined as a geographic area that has been adversely affected by changes in the energy industry, whether due to the closure of coal mines, power plants, or other energy-related industries. These communities often face significant economic challenges as a result of these closures. By qualifying as energy communities, these areas are given priority for new energy projects, thereby enabling them to transition into hubs of renewable energy and creating new opportunities for economic growth and revitalization. Unfortunately, the IRA's full potential is being stalled in states like Pennsylvania, Ohio, and West Virginia, which each have large swaths of land that qualify as energy communities, due to restrictions in their current energy policies.
These states predominantly favor 'behind-the-meter' renewable energy projects—those which supply power directly to a specific user or establishment. While these projects hold value, the exclusive focus on them means we are under-utilizing the expansive potential of renewable energy. This scenario resembles a broad river of private capital, ready to flood into renewable energy projects but currently restricted to a trickle due to policy constraints.
This is where remote offtake structures, specifically Remote Net Metering and Community Solar, come into play. While we will undoubtedly post blogs on each of these and explain them in meticulous detail at a later date – the AC Power Editorial Board has big plans for future blogs, which will no doubt satisfy our readers’ voracious appetites for solar policy think-pieces – I’ll explain these at a high level. Both of these structures allow solar project owners to send the energy their systems generate directly into the grid (i.e. without serving any onsite electrical load) and generate energy bill credits that can be allocated to offset a customer’s energy bill within the same utility territory in which the project is located.
Under Remote Net Metering, typically one commercial or industrial energy user receives the full amount of the credits generated. Under Community Solar, hundreds of residential households will collectively receive the credits. These structures allow electricity customers who are unable to host a solar project (e.g. old or worn down roofs, apartment or multifamily co-op residents) to enjoy the benefits of solar – namely cheaper, cleaner energy.
These policy tools could trigger significant transformation for the electrical grid in areas with a large proportion of energy communities. They hold the potential to widen our energy policy channels, allowing an influx of investment into offsite renewable energy projects and unlocking the hidden potential of underutilized lands such as defunct coal mines, quarries, and other distressed areas. Often, these disturbed sites are not conveniently located near substantial electrical loads, making traditional 'behind-the-meter' projects impractical. Furthermore, the alternative of selling the energy back to the utility at the wholesale energy rate is typically uneconomic for projects interconnected into the local distribution system (i.e. commercial/industrial projects rather than utility-scale). Remote offtake structures solve this problem by allowing the generated energy to be credited offsite, hence enabling these sites to contribute meaningfully to our renewable energy infrastructure.
The initiation of solar development on these lands, as opposed to untouched farmland or forests, carries substantial benefits. Primarily, it transforms dormant, often environmentally compromised lands into vibrant hubs for clean energy. This transformation mitigates existing environmental challenges while simultaneously providing an economic stimulus to local communities through job creation and by attracting investment.
Secondly, such an approach aids in the preservation of critical natural and agricultural resources. Developing solar projects on usable land often involves cutting down trees and encroaching upon viable farmland, both of which have negative implications. Trees are crucial carbon sinks that help mitigate climate change, and farmland is needed for our vital agricultural sector. By prioritizing solar development on previously utilized land, we can avoid these pitfalls, ensuring the conservation of these valuable resources for future generations.
Thirdly, these off-take structures pave the way for private investment in the renewable energy sectors of these states. This policy revision presents a compelling incentive for businesses and individuals to inject their capital into renewable energy, thus stimulating economic activity and fostering a more resilient energy sector. However, without a shift in policy, it's likely that capital will continue to flow primarily into modernizing the grids of states like New York and California. These states have thriving renewable energy markets and progressive policies that have been attracting investment for over a decade. A change in policy would help balance this, directing more capital towards the energy communities in new states, whose economies have historically been largely based on fossil fuels.
The IRA presents a wholly unique opportunity for emerging markets. Assuming project owners can bill offtakers at commercial or residential rates, project economics can attract investment largely from the enhanced economics from the energy communities' bonus credit. In other words, states with a large available area of energy communities do not need additional incentive programs, solar RPS carveouts, or other state-level subsidies to “fill the gap” necessary to create viable solar economics – implementing remote offtake structures will help unlock the full potential of newly available federal incentives, which will be sufficient to drive an influx of capital into these states, and in turn the job creation and other economic benefits that come with it.
The case for adopting remote offtake structures is clear. They present a practical, policy-based solution to the barriers currently impeding development in these states. However, these benefits necessitate proactive action from state legislatures. We find ourselves on the brink of a unique, once-in-a-generation opportunity to reshape our energy infrastructure. But if states fail to expedite legislation enabling remote offtake structures, they risk forfeiting this unparalleled opportunity.
Therefore, we make an earnest appeal to all states to capitalize on what the IRA offers. By catalyzing a new wave of private investment in renewable energy and transforming underused, environmentally burdened lands into clean energy beacons, we can realize the IRA's vision. This is not merely about a cleaner, more sustainable future, but it's about bolstering our national energy independence and modernizing our grid.