Big Corporations, Distributed Solar: Small Developers Weigh In

Corporations are one of the largest drivers of new clean energy projects in the United States. As major companies like Google, Meta, and Amazon race to meet their climate goals, renewable operations have come online at an unprecedented rate. The American Clean Power Association (ACP) reported in January that corporations purchased more clean energy in 2022 than any previous year, with technology companies contracting more than any other industry. Solar projects in particular dominate corporate purchasing, and more than half of these projects are off-site installations. This structure allows companies with 24/7 renewable energy goals to achieve the required scale for their needs.

As projects are completed, corporations face a major issue that plagues renewable development—the interconnection queue. Many people want to pursue clean energy, and with new Inflation Reduction Act incentives, such options are readily available. But with this project influx comes the long wait to connect to the power grid. A recent study indicated more than 2,000 gigawatts (GW) of renewable power and energy storage are currently seeking interconnection, with more projected. This backlog means that interconnection requests now take nearly four years to complete, and many projects don’t make it through the bottleneck. Partnered with growing backlogs and increased wait times, project withdrawal rates are also on the rise. 

Google’s Distributed Solar Solution

With these challenges, how are large companies meant to meet their goals? Google recently announced their potential solution: they plan to circumvent the backlog by building 500 megawatts (MW) of capacity spread across 80 small solar projects—termed ‘synthetic’ community solar. These distributed resources will then, ideally, be easier to connect, as projects less than 20 MW can often connect to lower-voltage, less clogged grids. EDP Renewables (EDPR) will build these projects in the 13 state region served by PJM Interconnection, and then provide energy bill credits to local subscribers in a structure akin to typical community solar. 

The projects also have an environmental justice (EJ) component and intend to support clean power for historically disadvantaged households. At least a third of the new projects will be sited in low- and moderate-income areas and tailored to each community’s particular needs. Successful execution could provide much-needed tax revenue, create new jobs, support broad economic development, and lower bills for high energy burden customers. These supports will be accessible to wide-scale EJ communities, including the more than 30 million households—and many Black, Indigenous, and people of color households—excluded from typical state- and utility-led community solar programs across the country.

Google will not directly use the ‘synthetic’ community solar, but will meet its climate goals by purchasing Impact Renewable Energy Certificates (ImpactRECs). These RECs are developed by EDPR and Google to certify the direct investments and environmental/social benefits of renewable projects in local energy communities. 

The Wave of the Future?

With queue waits not looking to shorten anytime soon, it seems that Google’s strategy could grow increasingly popular among similar-sized, climate-ambitious companies. But how do smaller renewable developers feel about this strategy? Is partnering with large corporations/working under a generation aggregator an attractive option? Leyline reached out to three small clean energy developers to get the inside perspective.

Q: As a smaller developer, would you be willing to partner with Google or a similar company to help them meet their clean energy goals? 

Overall, the developers met a general consensus that yes, they’d be willing to partner with a large company like Google on a similar project. However, rather than the project as announced—where a massive corporation is partnering with the larger IPP platform, EDPR— smaller companies may be less interested in getting into the front end of a deal. Interest may depend on the corporate partner’s market sector, partnerships, and relationships within the transmission organization, availability of energy buyers, and whether the developer already has 

mature, de-risked projects in their portfolio that align with a corporation’s desired goals and outcomes. It may make more sense as a smaller renewable energy company to sell specific, pre-existing projects to an aggregator that would become part of a Google-like deal, rather than initiate new construction. Overall, the choice would boil down to pretty normal decision points, on a developer-by-developer basis, weighing competitive advantages.

Q: Do you see any potential pitfalls to Google’s strategy? 

As one developer noted, small does not always equal easy. It is often possible that small projects are simpler to execute and can more widely spread the benefits of clean energy. But they still may deal with the same opposition as larger installations—pushback from a review body, not-in-my-backyard communities, or other resistance. In some ways it may also be more challenging to manage a great number of small projects versus one large initiative. These obstacles nevertheless are evaluated on a case-by-case basis; how Google and a larger developer like EDPR handle challenges will always be much different from a smaller solar company’s approach. 

Q: Would you be interested in participating in a product like the ImpactREC framework?

Answers in this area varied, as each developer has their own market niche. Overall, developers expressed common interest in supporting projects that positively impact the communities they serve. As renewables grow more prevalent, clean energy developers will interact in a broader variety of markets. The likelihood of participating with something like ImpactRECs only continues to grow with the economy.

One interviewee noted that such RECs could push certain projects over the edge to pencil—corporations may be incentivized to utilize RECs and attain a particular amount of renewable capacity, and may encourage completion from projects that would otherwise fail. 

Q: Do you think initiatives such as Google’s can deliver the community benefits they hope to achieve?

Those interviewed were generally unsure whether Google’s project will achieve its environmental and social justice goals, but one developer in particular was skeptical: “To me, this seems that most of the benefit will be good PR for Google. It’s very hard to make significant social changes when so many community disadvantages and burdens are tied to a larger economic system. And those executing the projects still hope to generate appropriate income—as a smaller developer, it’s hard to take on that sort of uncertainty when engaging in an initiative like this.” 

Q: Do you see this as the start of a trend, where large companies require clean energy and utilize smaller, distributed generation and successfully bypass interconnection queue backlogs? 

We have reached an age where ambitious climate goals are both necessary and normalized within large private companies, and they won’t be achieved solely through large projects. Most developers agreed that this will likely become more common—particularly if Google’s initiatives prove successful, others will want to be a part of the action. Novel development pathways will be inevitable as companies race to meet their targets.

Nevertheless, our interviewees found it hard to say if these projects will truly help shrink interconnection timelines or bypass any sort of queue. The Google partnership itself is really a product of market failure, and companies are being forced to think outside the box.  “What’s been proposed is really, most likely, more of an incremental solution to a challenge that feels something bigger than incremental. To that end, certain creative solutions could be successful, but it seems unlikely that queues will really significantly diminish short-term.” Nevertheless, most of the developers agreed that the initiative is a noble effort—companies of all sizes must continue to innovate in order to meet their clean energy goals. 

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