POWER April 2023 - 32

PROJECT MANAGEMENT
Working with EPC Contractors:
Guidance for Utilities Embarking
on Solar Development
Engineering, procurement, and construction (EPC) contractors deliver many
benefits to power projects. Besides the experience they bring that can help keep
schedules on track, they often have longstanding relationships with suppliers
that allow volume-based pricing discounts and priority sourcing of materials,
among other things.
Scott Canada
T
he U.S. Energy Information Administration
(EIA) says the U.S. is set to
add 63 GW of photovoltaic (PV) power
by the end of 2024. This is a huge stride
forward for renewable energy, as solar and
wind generation is expected to reach 16%
of the U.S. grid's supply this year. That's an
increase of 84% in just two years for solar
production alone. With the Inflation Reduction
Act (IRA) in place, the trajectory for
solar will most likely continue to soar and
the utilities that opt to build and own solar
plants will reap the rewards.
How to Take Advantage of the
Inflation Reduction Act
With President Biden's signature on the
IRA, the new legislation that dedicates
$369 billion to combating climate change
through investments in renewable energy,
building and owning utility-scale solar
projects just got more attractive to utilities
across the U.S.
While there will continue to be a need
for utilities to contract with solar developers
under power purchase agreements
(PPAs), the IRA incentivizes utilities to
explore the option of owning PV plants
themselves. That means working directly
with engineering, procurement, and construction
(EPC) contractors to design and
build solar projects that make the most
sense for their region, load profiles, and
regulatory environment (Figure 1).
One of the first choices utilities will
need to make for their solar projects is
whether the investment tax credit (ITC)
or the production tax credit (PTC) makes
more sense. Previously, owners of solar
assets were eligible only for the ITC,
which was calculated based on total project
cost. With passage of the IRA, owners
of solar projects now have the option
of choosing either the ITC or the PTC,
32
which is a 10-year stream of tax credits
calculated based on actual plant production.
Publicly owned, not-for-profit entities
such as municipal utilities and cooperatives
have the additional option of receiving
an amount equal to the ITC or PTC as
a direct payment from the U.S. Treasury,
rather than a tax credit.
Under the framework
of
the
IRA,
the ITC is equal to 30% of total qualifying
costs for projects that meet certain
requirements with respect to prevailing
wages and apprenticeship ratios,
with adders of 10% each for domestic
content and for siting the project in an
" energy community. " Alternatively, a utility
could opt to pursue the PTC at a rate
of 2.7 cents/kWh (provided the project
complies with certain prevailing wage
and apprenticeship requirements) with
adders of 0.3 cent/kWh for domestic
content minimums and another 0.3 cent/
kWh for siting in an " energy community. "
Additionally, the PTC is adjusted annually
for inflation and is not subject to the accounting
rules related to " normalization, "
which have historically prevented utilities
from efficiently utilizing the ITC.
" EPCs aren't able to prescribe what
makes the most financial sense for the
utility with respect to the election of ITC
or PTC, but they are able to help model
the inputs that utilities need to weigh
these two options. Additionally, EPCs can
develop labor, procurement, and scheduling
strategies that help utilities take maximum
advantage of available incentives.
And they can take the headaches away
from some of the complicated reporting
requirements, " said Chester Klotz, vice
president of renewable energy for McCarthy
Building Companies. " In the past,
developers have been able to more effectively
use the benefits of the ITC, but the
IRA has essentially changed the solar fawww.powermag.com
1.
McCarthy Building Companies mobilized
its workforce in September 2022 to construct
the Agave Solar Plant, a 150-MWac facility
located in Arlington, Arizona. The plant is expected
to be in service providing power to
Arizona Public Service Co. (APS) customers in
time for summer 2023. Courtesy: McCarthy
Building Companies
cility landscape, putting utilities on a more
level playing field financially. "
Understanding all the options available
under the IRA-and the necessary
reporting and compliance-requires
expertise that experienced and sophisticated
utility-scale EPCs are able to
provide. These EPCs will be able to optimize
a particular project's tax credits by
ensuring that Davis-Bacon Act prevailing
wages are paid to workers and that a sufficient
number of registered apprentices
are utilized.
At the Elm Branch and Briar Creek
solar projects outside Dallas, Texas, McCarthy
Building Companies' Renewable
Energy and Storage team worked with
Adaptive Construction Services (ACS)
to develop a U.S. Department of Labor-
approved apprenticeship program that
employed approximately 50 U.S. military
veterans (Figure 2), who built the combined
316-MW solar farms or completed
on-site training. The apprenticeship program
is now implemented on projects
that the firm builds around the country.
" With utility-scale solar construction
POWER | April 2023
http://www.powermag.com
POWER April 2023

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