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Episode 24 – The Economic Development Implications of Solar Power

Site Selectors Guild
Episode 24 - The Economic Development Implications of Solar Power
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Rick Weddle: Welcome to “Site Selection Matters,” where we take a close look at the art and science of site selection decision-making. I’m your host, Rick Weddell, President of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision-makers to provide you with deep insight into the best and next practices in our profession.

In this episode, we have as our guest Will Hearn, Director of Site Selection and Real Estate for Origis Energy, one of the largest independent utility-scale solar developers in the United States. Today, Will talks with us about solar power generally, and the economic development implications of solar power more specifically. Join me as we welcome Will Hearn to “Site Selection Matters.” Will, energy and economic development go hand in hand. Without a reliable and cost-effective energy source, economic growth isn’t really possible. Take a minute, if you will, and help our listeners understand how growth in solar power is impacting economic development overall.

Will Hearn: Well, thank you, Rick, and thanks to the Guild for taking an interest in solar. I think there are many areas where the economic development community can engage and should take an interest in solar, and obviously, energy is a key underpinning for site selection and economic development. But just in terms of broad overview, I mean, solar as a generation resource is still a relatively small proportion of the overall energy generation in the U.S., but it is growing significantly. Coal plants are being retired, solar is very cost-effective, and I think one of the things to remember is, you know, one of the things that we’re really seeing interest in is companies themselves seeking sources of renewable energy. And I think that that aspect is becoming more of a site selection issue, is where can certain types of industries source and procure renewable energy on their own, and so solar is a big piece of that.

So just in terms of the broad perspective, that sort of where solar, I think, fits into some of the economic development questions that are out there today. I do think there are…you know, it’s funny whenever I sit down at table talk at the Site Selectors Guild conference, there’s rarely a table that I sit at where Origis is not taking an interest in securing assets for solar or where we may have solar resources currently generating energy. So, I think, in some ways, solar is new to the economic development world, but I would encourage all of the listeners to this podcast to take an interest in solar and learn more about it and understand how it fits into their economic development plans.

Rick: Very interesting. Will, let’s just hold that just a second, let’s dive a little deeper into the solar power business generally because you mentioned that it’s very cost-effective. How does the cost of today’s solar power systems compare to more traditional fossil fuel systems?

Will: Well, keep in mind, at Origis, we’re mainly utility-scale solar and distributed-system solar. So, you know, we’re not doing the residential housing. We’re talking about systems that power large megawatt systems for utility companies. So, you know, when I first got involved in solar, probably back in ’06, I mean, it wasn’t really something that we thought about, you know, measuring energy resources in the community, was looking at who was the provider? What was there? You know, what was their cost and what was their capacity?

And, you know, I think that that position has largely changed, but back in ’06, you know, there were standard kind of reports and studies done. There’s one I remember done by Deutsche Bank that sticks in my mind that said, you know, solar, back in ’06, they were predicting that solar would be at cost parity with more traditional fossil fuel sources by 2015, 2016 timeframe, and that’s pretty much been, you know, been held true. I mean, if you followed it, you know, there’s been a lot of costs have been rung out of the manufacturing process.

Many of the panels are sourced in Asia, some are built here. We purchased panels that are made in the USA, but certainly, the manufacturing costs have gotten much more streamlined. You know, the big story in solar is the efficiencies of the panels have gone up, making the power generation from some of these panels, you know, much, much more efficient, and we’re seeing those efficiencies double, continue to go up. So just I’d say the hallmark of the industry and the reason we’re seeing solar is just the costs have continued to come down.

I can tell you just a couple of years here at Origis where we’re used to… Basically in our business, the utility companies are paying for our power on a megawatt or per kilowatt-hour basis. And so, you know, those prices we’re bidding projects out have declined commensurately with what we’re seeing in the marketplace because the hallmark of the industry has been more competitive pricing, lower price, risk tolerances have come down, financing has come down, so it’s definitely been one of the long-term hallmarks of solar over the last decade.

Rick: You know, Will, cost is obviously a factor in this business, and you’ve talked…we’ll come back to that a little bit. It sounded almost like we have our own type of Moore’s law for solar with efficiencies doubling ever so often and it really creates its own opportunities. But it also to me seems that issues surrounding the effects of burning fossil fuels is also helping to drive demand for solar or renewable power sources both from individuals or from employees working in facilities, or even the larger firms, do you find that to be correct?

Will: Well, I think it’s gonna become more of a trend. We do have, you know, about half of the states in the country have these renewable portfolio standards to try and reduce their carbon footprint. And so, you know, we certainly take a look at a state’s regulatory policy and RPS prior to doing a market entry study, but I think definitely it’s out there. I think the more pressing issues currently have been, you know, I think natural gas prices as these coal plants have retired, is utilities have replaced coal with natural gas, and where they can, they are putting their toe in the water on solar, have been doing so for some time.

And so definitely the size of the solar rays that we’re putting up and the size of the lands that we’re trying to get under control have gone up significantly, so I think it’s definitely been an issue. I think in some states with RPS targets, it’s been more of an issue. And I definitely agree that, you know, whether you believe in climate change or not, that there are companies out there that want to take advantage of renewable energies in their annual reports to put a good foot forward, and so we definitely are seeing more and more of that.

And I think it’s more prevalent among those firms that are heavy energy users, the data centers, the Facebooks, the Googles, the large users. You know, we have, you know, a specialty business at Origis Energy that is just focused on doing bilateral agreements with companies, we call it our CNI business. So, we have a very active and experienced and very effective team that just does pursue PPA opportunities with corporations, and so we’re seeing more and more of that. And I think there’s a very interesting niche business growing around that.

Rick: You know, that’s fascinating. You know, Will, we’ve been in this business a long time and I can remember when a company would want to know what the electrical power was gonna cost, the energy is gonna cost, and they didn’t care where it came from, you know?

Will: That’s right.

Rick: It was, “I want to be able to plug it in and use it and I don’t care where it comes from,” or they did…or if it was, it was just a very small consideration. But today we do hear about, as you mentioned, some of these household name big companies that are making and driving their investments to be where they can have reusable solar systems or reusable energy in their facilities. From your point of view as a site location professional, how do you see that trend really impacting economic development and/or more specifically the location of facilities?

Will: That’s a great point when you were talking about, I remember the last time I was in Albuquerque with Gary Tonjes, who might be listening to this, and he was showing me the new…the layout for Facebook, I said, “Gary, there’s actually more solar on this than parking,” and it was by a long shot. So, I think, definitely, you know, like I go to these round table things at our conferences, and I sit down and talk to our attendees, and they’re all interested in already being asked more about how renewable energy can be secured and procured in their community.

The questions are being asked, and I do think it’s definitely impacting economic development, and I think it’s definitely impacting how Guild members will pitch and perform site selection projects, especially if they’re dealing with kind of new economy companies, some of the big data centers that are big energy users and maybe not the most efficient energy users.

And I think as the RFPs shift and Guild becomes more aware about how doing more with… I think there’s a lot more that both the site selectors and the economic development community can do with solar. I’ll leave it at that, but I will also add that I think there’s also a bit of an education to be done out there in the marketplace for solar. I mean, I would posit to you, Rick, that probably solar is…you know, you’ve been in this business a long time and you know that there’s always been this push to optimize and do things for rural economic development, right? And I would put it out there that I think solar is probably one of the biggest stories for rural America in the last five years because we’re not putting these utility-scale projects, you know, in downtown Atlanta.

Rick: Absolutely, because they take a lot of space to…

Will: It’s a lot of space with big plants. They’re unique deal structures, but I think there’s a little bit of a misconception out there among folks. We are also probably… You know, the other topic we spend a lot of time talking about the Guild is this big substitution of capital for labor that’s going on right now with companies becoming more capital intensive and incentives are still kind of job based. You know, solar is probably the worst example because we really create very few permanent jobs.

Rick: Indirectly, you probably…you feed them a lot of jobs.

Rick: And I would say, you know, there’s typically…we have significant construction impacts. We probably employ several hundred FTEs on a worksite for 2 years, 2 to 3 years for a 70, 80-megawatt project that might be 1500 to 2000 acres of land. And the big play for solar from an EDS standpoint is our capital investments are probably between $100 million and $150 million. So, these are not small capital investment projects, these are very rich projects in areas that don’t get a lot of capital investment. So, I think there’s the piece that we are capital-intensive, we don’t hire a lot of labor, but at the same point in time, we don’t use any utilities, we don’t need any water, we don’t need any sewer, we don’t put increased demands on school systems, we don’t necessarily put demands on roads in any way. So, I think there’s…just to present an interesting kind of picture of an economic impact framework for our listeners there.

Rick: Will, are there different states doing different things to be more progressive or supportive of the solar energy industry? It strikes me that perhaps there are, or is it a foot race for everybody?

Will: Well, I mean, a lot of the states have been at it longer. You can think of the states with very strong radiation, like Arizona and California. I mean, these states have been at it a long time, but I think, you know, the big anchor point is, does the state have a renewable portfolio standard? You know, and if they do, there are gonna be opportunities there for solar and wind and others. And so, I mean, there are states doing things differently, most of what I’m seeing programs at the local level, there are actually areas that do have kind of plans in place for incentive programs for solar investment.

So, there are communities out there that see solar as…You know, I remember back when Georgia, under a former governor in a strategic industries task force, planned…set energy and renewable energy as a target industry, I think this was part of it, so I think there are states doing things. There’s been states that have been somewhat active in having programs in place for solar panel manufacturing firms to recruit that kind of investment, we’ve had some of that. And there have been a few projects here that have announced in the U.S., but I think there’s a lot more to do.

Rick: Let’s unpack kind of a vernacular term that you mentioned, you said renewable portfolio standard, take a minute and help our listeners understand what you mean by that.

Rick: Well, the RPS, as you said, the renewable portfolio standard, it’s a designated number by which…and time and term by which that state wants to have a certain amount of their energy and the state generated from renewable energy. It can be, you know, New York has a very aggressive RPS target. I think there’s about half of the states have RPS targets and it could be, “We want to be 20% by 2040,” kind of thing, that’s how they typically set those up.

Will: So, it becomes a goal or a target that you aspire to as you’re doing that?

Rick: Yeah, and it’s part driven by carbon footprint, carbon reduction plants at the state level, that kind of thing.

Rick: Fascinating and interesting. Your company, Origis Energy, is a big player in this space. Clearly, I think it’s an area, their space is seen as an area of future growth and development. Look in your crystal ball here for just a second and tell us a little bit about where do you see the solar energy industry headed in the coming years.

Will: Believe me, there’s a lot better folks at Origis that can read the tea leaves better than I can. Like, we’ve talked about a couple of them, I think renewable energy, solar specifically is gonna continue to become more efficient, less expensive, more accepted, it’s gonna be common. You’re gonna see more of them along the side of the road when you’re driving around, and you may see more rooftops. I think as we do this that we’re gonna see renewable energy, solar in particular, be a more ingrained part of the site selection process. As projects are vetted, as cost proposals are put together, as people do, you know, cost estimates on facilities, there’s gonna be a more enhanced need to do more with energy.

And I think you’ve seen that with some of our members and how they approach things, but I think there’s gonna be more to it. It’s also gonna require the economic development communities to become more skilled with renewable energy and solar. I’ve seen a few examples, it’s just fun what I run across because, you know, I enjoy the process of site selection, and doing solar is no different. I mean, we have some different criteria. You know, we need large tracks of land, preferably flat, limited wetlands, access to the grid, and those types of things. And there are some communities that I’ve seen that have tried to do pre-certification programs for solar, which I find interesting.

Rick: You know, Will, you’ve really given us a lot to think about today, what a great conversation, but that’s really all the time we have. So, let me say thanks to Will Hearn with Origis Energy for talking with us today on “Site Selection Matters.”

Will: Thank you, Rick. And hello to all my friends out in the listening world and look forward to seeing you in Atlanta in March.

Rick: Thanks for listening to this episode of “Site Selection Matters.” And a special thanks to Will Hearn for helping us get insight and better understand the economic development impact of solar power systems. What an informative discussion and one that leaves us with a lot to think about. This podcast episode presents my views and the views of my guests, and they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership. Again, I’m Rick Weddell, President of the Site Selectors Guild. We hope you’ll subscribe to “Site Selection Matters” podcasts on Apple Podcasts, Stitcher, Spotify, or wherever you listen to your podcasts. We look forward to bringing you some great discussions in the year ahead. Until next time, good day.