With more investments going into PV than all other electricity generation technologies combined, the future continues to look bright for developers and investors involved in solar project development.
This guide takes a look at the solar project development process, from the initial assessments and design phase to regulatory requirements, financing options, construction, and maintenance.
Table of contents
Preliminary project assessments
Step one in the development process of developing utility-scale solar is to do the preliminary assessments, which involve identifying the best location for the project and assessing the feasibility.
Site selection
Finding the right location is essential for any solar project to achieve maximum efficiency and keeping costs low. A feasible location of photovoltaic (PV) systems must consider certain elements:
- Solar radiation: An ideal site should have an abundance of radiation, meaning it receives plenty of unrestricted sunlight throughout the day, but the area should not be too hot either, as solar panels work best between 15C and 35C. Hotter temperatures will cause the solar panels to degrade faster.
- Site accessibility: The location should be easily accessible for construction workers and their equipment, not to forget suitable conditions for the solar panels.
- Land topography: The location terrain should preferably be flat with no trees bordering the site to ensure optimal conditions during and after construction.
- Soil conditions: The structural design and construction costs can vary depending on how the soil on the site is. No one wants to work in a swamp.
- Grid connection: One of the most important things, if not the most important, of any project is the grid connection. Very few investors want to take a change on a project where the grid connection is uncertain or maybe very far away from being granted.
- Social impact: An increasingly important aspect to consider when developing a solar farm is to research the local dynamics and attitudes in the area, since more and more governments are requiring solar parks to be in harmony with the local surroundings and communities.
Project Feasibility
Unless you can’t live without extreme financial risk, a feasibility study is needed to review the economic viability of the project. This typically includes:
- A financial analysis: This includes evaluating the costs and benefits of the project to determine if the project will be financially viable.
- A technical analysis: This includes evaluating the site’s technical feasibility, including the electrical infrastructure, soil conditions, and topography, as also noted in the site selection.
- An environmental impact assessment (EIA): This part is to ensure the sustainability of PV projects by means of engaging in a process of evaluating and predicting the potential environmental effects and socio-economic impacts associated with the establishment, construction, and operation of a solar energy project
- A market analysis: Developing in a new market or a new municipality? Gaining a comprehensive understanding of the local incentives, fees, regulations, competition etc. is important. Evaluating these aspects is important to fully determine the overall site’s attractiveness.
Design and engineering
Great, the preliminary assessments have shown that the project is viable to develop. Then what? Then system design and engineering can start.
With the site’s physical and technical characteristics in mind, the following things should now be given more thought:
Component selection: The design of the solar project must consider the type of components used, including solar panels, inverters, and mounting and tracking systems. The selection of components is based on operational and budgetary requirements.
Solar panel orientation and tilt: The solar panel’s orientation and tilt are important factors in optimizing the system’s energy production. The optimal orientation and tilt of the panels are determined by considering the site’s conditions, including climate, shading, and latitude.
Electrical and structural design
The electrical and structural design of the solar project involves planning the electrical layout and plant sizing, including grid connection and integration.
The design should consider solar power quality considerations, such as harmonics and power factors, to ensure that the system meets grid interconnection requirements. The structural design should consider the wind and snow loads on the solar panels and other equipment.
Project permits and approvals
To get a utility-scale solar project fully on track, a series of permits and approvals must be obtained to continue. The local authorizations required typically include zoning approvals and land use permits.
Environmental permits
The location of a proposed solar project will determine how difficult it will be to attain a valid environmental permit with different countries having different regulations in place.
It’s important for developers to determine – as early as possible – whether they will be required to obtain such permits. This information should be available on local authority websites.
Figuring out whether you’ll require a permit means conducting an environmental impact assessment (EIA) which will evaluate the effects of the project on the surrounding wildlife and habitats – in some cases, a wildlife and habitat protection plan may need to be developed.
Grid connection & interconnection agreements
The grid connection and interconnection agreements are essential components of the solar project development process.
Utility coordination and technical requirements must be thoroughly understood to ensure that the project is compliant with the relevant regulations. Communication with utility companies should be started as soon as possible and finalized before construction begins.
Financing solar projects
There are several viable solar financing options open to developers, that we will introduce on a more overall level below. For a more comprehensive overview, you can read our article on how to finance your solar project.
PPAs are long-term agreements between the developer and an energy buyer, such as a private company or government entity.
These agreements involve the purchase of electricity generated at a fixed rate (often longer contracts of 10+ years). The more secure the agreement is, the greater the access to borrowing options because the developer’s income is guaranteed.
Debt financing is a popular option to fund a project, with lenders providing up to 80% of the capital. However, lenders are exposed to the entire downside of the project, making it crucial to understand how they perceive the risks involved.
Traditional debt metrics, such as repayment history and cash flow available for debt service, are typically used when the borrower is liable for repayments and has a prior history that can be assessed.
But for new developers, borrowing large tranches of debt to finance projects can be challenging without a track record or the desire to be held liable for large repayments.
For large-scale utility projects, equity financing may still be necessary even if the majority of the capital is funded by debt. The remaining 20-40% is typically filled through equity or shareholder loans.
Equity financing can come from the corporate owner or external sources, where a portion of the equity is issued in exchange for funding. Unlike loans, equity investors don’t require repayment but receive a share of the project’s profits over time.
While project owners maintain control, they give up a portion of ownership, allowing investors to benefit from any significant profits. This risk-reward incentive can encourage investors to take on the larger risks associated with early-stage renewable projects.
Project finance can revolutionize the development process for developers by isolating risks, unlocking higher borrowing potential, and speeding up the development process.
In essence, project finance involves placing the project in a Special Purpose Vehicle (SPV), where loan repayments are made solely from cash flows generated by the project. With simple solar project financing, the revenue risks are primarily off-taker/counterparty risks, reducing the chances of corporate activities introducing unpredictable complexities to calculations.
Additionally, the non-recourse structure generally associated with project finance means that the collateral is limited to SPV assets, reducing risks to the corporate owner’s other balance sheet items.
Developers should be aware of the government incentives and grants they are entitled to.
Depending on your location, regional authorities may have renewable energy targets that they need to hit and may have tax credits or rebate schemes in place. If available, this will contribute towards cost savings for the project.
Procurement process
Compiling a request for proposals is where this stage starts. An RPF is a formal bid document that outlines the PV requirements to service providers such as solar installation services, as well as the contract terms and the bidding process.
This can be a lengthy process taking anywhere from a few months to a year, involving several different parties from project leaders to lawyers, energy managers to site managers.
After the RFP has been administered, proposal meetings and site tours can be made. Well-defined criteria should be evaluated before supplier and contractor selections are made and contract negotiations are entered.
Construction and installation
With permits and financing secured, the construction and installation phase of a solar project can commence.
This phase is where the physical solar panels and equipment are installed on-site and connected to the power grid. It includes several key steps that require careful planning and execution.
The first step in the construction phase is site preparation. This involves clearing the land of any vegetation, debris, and other obstructions that could hinder construction work. It also includes performing geotechnical assessments to evaluate the site’s soil and terrain conditions. These assessments help ensure that the site is stable and suitable for the installation of solar panels.
Read more: Our guide on considerations when building a solar farm.
Once the site is cleared and prepared, critical infrastructure can be installed including solar panels, inverters, mounting systems, and other necessary components.
Solar panel installation requires careful planning and execution to ensure they are installed safely and effectively.
The numerous mounting systems will be installed on the ground or on a roof, depending on the design of the solar project.
The inverters are where the magic happens, converting DC electricity produced by the solar panels into consumable AC electricity that is then channeled into the grid.
So, you’ve installed the solar panels and inverters, now what? It’s time to connect them to the grid. To do this, DC cables from the panels are connected to the inverters, which are then linked to the grid using AC cables.
Transformers are installed to step up the voltage of the AC electricity produced by the inverters to match the voltage of the grid.
Once the above steps have been completed it’s time to inspect the setup, completing several quality control measures to ensure everything is working correctly. These measures include safety compliance, final inspections, and system performance testing.
System performance testing involves checking the output of the solar panels and verifying that the system is operating as intended.
These tests include confirmation of voltage levels and current output of the solar panels and inverters and checking the performance of the monitoring and control systems.
Safety compliance is also a crucial element of the construction and installation phase. This includes using protective gear, working with appropriate tools, and following safety guidelines and procedures.
A final inspection is carried out to ensure that the solar project is installed according to the required standards and regulations.
This inspection is performed by a qualified inspector who signs off on the installation, ensuring that it is safe and performs as expected.
Once the installation has passed the inspection, it is connected to the grid and is now operational.
Project operation and maintenance
Once the solar project is in operation, it’s important to maintain it ensuring continued performance and longevity. The operation & maintenance (O&M) phase is a critical stage of the project lifecycle that ensures the system operates as efficiently as possible throughout its lifespan.
Monitoring system performance
To maintain high efficiency of the solar park, it is important to monitor system performance namely, monitoring the energy output of the solar panels and the performance of the inverters.
Remote monitoring systems and performance data analysis can be used to identify any issues or defects with components. Analyzing performance data helps to identify areas where improvements can be made to increase efficiency.
Preventive maintenance
Preventive maintenance is an essential part of O&M. Regular maintenance checks, including automated monitoring and servicing, can help to maximize efficiency, reduce downtime, meet regulatory requirements, and extend the lifespan of equipment.
This can include checking for loose connections, inspecting cables and wiring, and cleaning the solar panels.
Reactive maintenance and repairs
Despite regular preventive maintenance, unexpected issues can still arise that require reactive maintenance and repairs.
Automated monitoring can provide troubleshooting and diagnostics that alert a project team of any malfunctions or inconsistencies. Plans should be in place for scenarios that demand reactive maintenance and repairs, and component replacements should be ready on-site to expedite repairs in the event of a component failure.
