Over 70% to 90% of early-stage projects fail and are never constructed, according to findings reported by Paces.
Over 70% to 90% of early-stage renewable energy projects fail to reach construction, said a whitepaper from Paces, a platform for renewable energy project development and de-risking.
Early-stage clean energy development is “inherently risky,” the report noted. Developers must advance projects across multiple dimensions simultaneously, securing site control, interconnection feasibility, permitting, and environmental and design constraints all while adhering to program rules and policies and staying within capital budgeting requirements.
“However, obtaining the information needed to make decisions across these dimensions is slow, tedious, and expensive,” said the whitepaper. “Public data is fragmented, unreliable, or missing entirely. As a result, the only way to reduce uncertainty is to push the project forward—spending time and capital just to acquire the information required to determine if it is worth continuing.”
Paces found that reducing the cost of acquiring reliable information and standardizing development risk could improve productivity, success rates and investor confidence. The company developed a standardized risk model to bring more early-stage projects to Notice to Proceed (NTP) stage.
The core principle of Pace’s risk assessment model is to reduce the most risk with the smallest budget as early in the development lifecycle as possible.
“Targeting high-risk, low-cost tasks early can accelerate confidence and reduce downstream delays,” said the whitepaper. “By concentrating spend on the milestones that remove the most uncertainty (which vary by site), projects can progress more efficiently toward NTP.”
According to Paces, the five primary risk categories for early-stage projects are:
- Site Control
- Interconnection
- Permitting
- Environmental
- Design
The report went on to classify four different project archetypes based on reporting from utility data analytics platform Arcada. The four archetypes are the most common recurring early-stage issues that can derail projects.
“By tailoring risk weights to the project’s archetype, developers can prioritize the most consequential milestones early and reduce wasted effort on low-probability paths to viability,” said Paces.
The four project archetypes defined by Paces are:
Environmental constraints
Sites near known environmental hazards or sensitive areas should allocate an early budget to field studies that assess constraints like wetlands, floodplains, or protected habitats to determine if the risks pose a fatal flaw. For example, developers can commission a full wetland delineation and report early, before committing Coordinated Electric System Interconnection Review (CESIR) funds, said Paces.
Permitting complexity and sentiment
In jurisdictions where public or political sentiment can slow or stop a project, community engagement is an important early step. For example, a developer can reduce this risk by meeting with town officials, fire departments and nearby residents to assess community sentiment before commissioning expensive studies, said Paces.
Design feasibility
Though a nearby substation could have available capacity, issues with line routing could derail a project. Developers should assess the cost and constructability of routing key infrastructure like tie lines and access roads, particularly where coordination with neighboring landowners or easements are needed.
Capacity viability
In regions where substations may appear to have limited capacity, but large volumes of projects are queued, developers may need to perform further studies. Queue data alone can be misleading, said the report, as many queued projects never proceed. The company recommends getting a preliminary review meeting with the utility as fast as possible to assess the likelihood that queued capacity is firm before committing to costly interconnection studies or land expenses.
“With high-quality geospatial data, a basic site design, and knowledge of the permitting and interconnection landscape, much of the ‘pre-development’ process can be front-loaded, identifying and reducing the majority of risk with a fraction of the time and effort typically required,” said Paces.
