Capturing the Private and Public Benefits of Pollinator-Friendly Solar

This article is the first of a three-part Clean Energy Finance Forum series on the potential of pollinator-friendly solar development in Minnesota and beyond. For more, see the Yale Center for Business and the Environment white papers on the land use benefits of the practice, and strategies for financing it.

Siting solar projects is often complicated by land use tensions and trade-offs. At seven acres of land per megawatt of generating capacity, solar has a sizable land footprint — one that is only expected to grow as solar and renewables meet a larger share of U.S. energy needs. As utility-scale solar development expands throughout the United States, with an expected land footprint of 3 million acres by 2030, there is growing interest in adopting land use best practices for new projects. Pollinator-friendly solar, which incorporates native grasses and wildflowers throughout a solar installation, is one approach to cultivating additional land use benefits from solar projects. The practice is increasingly common, especially in Minnesota, the first state to adopt a voluntary pollinator-friendly solar standard.

In two new Yale Center for Business and the Environment white papers, we explore the potential of this emerging practice in Minnesota and beyond.

Research has yet to produce a comprehensive cost-benefit analysis that assesses both private and social returns from pollinator-friendly solar, as compared to conventional solar or pre-existing agricultural land uses. To address this gap, our first report — “Maximizing Land Use Benefits From Utility-Scale Solar Development” — features a cost-benefit analysis of pollinator-friendly solar, conventional solar, and farming in Minnesota. To do the analysis, we developed a solar project finance model alongside a farm cash flow model. The model incorporates environmental externalities — including carbon emissions, soil erosion and groundwater recharge — associated with land devoted to both types of solar and farming.

Our analysis reveals that pollinator-friendly solar may generate private benefits to solar developers that justify its adoption without policy intervention. These benefits largely flow from higher energy output — derived from expected panel efficiency gains attributed to the cooler microclimate created by perennial plantings. A small added benefit accrues from the lower operations and maintenance costs over the project lifetime thanks to the reduced frequency of mowings for native plants as compared to turfgrass. However, we hypothesize that information and behavioral failures are currently preventing developers from adopting the practice. Thus, there may be a role for policy to spur the incorporation of pollinator-friendly practices in future solar development.

That role becomes more apparent when we evaluate the social benefits associated with these projects. As with conventional solar, a large social benefit of pollinator-friendly solar stems from the carbon emissions that solar energy production avoids. Pollinator-friendly solar also results in more groundwater recharge and a greater reduction in soil erosion than either conventional solar or farming — two additional ecosystem benefits. Lastly, pollinator-friendly solar contributes another sizable social benefit in the form of increased crop yields when projects are sited near pollinator-dependent farmland. In our model, improved crop yields result from projects co-located with farmland producing soy, but not corn (which is not pollinator-dependent). That benefit could be even greater if the adjacent crop were highly pollinator-dependent, as is the case for most specialty crops.

Our analysis reveals that pollinator-friendly solar may generate private benefits to solar developers that justify its adoption without policy intervention.

We argue that the added social benefits that pollinator-friendly solar contribute relative to conventional solar and farming warrant policy intervention. Governmental research and development funding could help support studies that are underway with a goal of providing more detail on the localized impacts of this practice. Research is needed to better understand the magnitude of the panel efficiency gains and potential private benefits, as well as the social benefits flowing from the ecosystem services that pollinator-friendly solar projects provide. Additionally, site-specific policies, which would drive maximal benefit from increased crop yields and ecosystem services, merit consideration. These policies could be targeted at either a solar developer or a farmer: states could provide extra incentive for developers to site their pollinator-friendly projects near specialty crop farms, or they could educate farmers and incentivize them to grow specialty crops if their land abuts a pollinator-friendly solar site.

The second white paper, “Mobilizing Finance for Land Conservation at the Energy-Land-Agriculture Nexus,” addresses the fact that, despite the real value pollinator-friendly solar offers for a range of stakeholders, it is currently unmonetized by the traditional market forces that drive solar project development. Without guidance on how to fully account for the value of ecosystem service generation, uptake of pollinator-friendly solar projects lags behind what stakeholders might want or expect.

This financing gap is symptomatic of a broader theme across environmental markets: ecosystem services, or “environmental externalities,” are challenging to internalize and are rarely monetized. Developing market mechanisms that value ecosystem services and unlock conservation finance could also bring unique sources of capital to pollinator-friendly solar development, helping to spur industry growth. In addition, the ecosystem service monetization strategies we review may have broader application for other types of conservation projects.

The report reviews pollinator-friendly solar development with a focus on progress in Minnesota, discusses the potential for ecosystem services valuation to incentivize pollinator-friendly solar projects, reviews the potential of an ecosystem services market in Minnesota to improve the efficiency of statewide conservation spending and promote pollinator-friendly solar development, and presents financial structures to advance land use best practices on solar sites.

Despite the real value pollinator-friendly solar offers for a range of stakeholders, it is currently unmonetized by the traditional market forces that drive solar project development.

Given the persistent challenges and uncertainties associated with ecosystem services modeling and valuation, we find that policy and market-based interventions are warranted to spur best-practice development as solar becomes more prominent. Pollinator-friendly solar projects have the potential to attract new types of investors and to integrate with and reinforce new and existing conservation finance markets. While a robust array of funding sources and programs exist to fund conservation projects that create ecosystem services, there remain opportunities to improve stakeholder coordination, lower barriers to entry for new participants, and promote more efficient monetization of environmental benefits.

The report argues that a more liquid and streamlined marketplace that unites conservation funders with a diverse array of potential projects could overcome many of the historic difficulties associated with valuing and financing land and water conservation efforts. Such a system would provide clarity and transparency by aggregating supply and demand and revealing various stakeholders’ willingness to pay for ecosystem services.

Pollinator-friendly solar projects are particularly well positioned to benefit from this kind of a market or auction for ecosystem services, as they already rely on unique, sophisticated financial structures that could be adapted to incorporate new revenue streams. Bringing novel sources of capital into these projects would help align investor, developer and asset owner incentives in favor of pollinator-friendly solar development, which may require a greater outlay of time and financial resources at the outset.

There is large potential for pollinator-friendly solar development to deliver ecosystem and agricultural benefits. Our research shows that pollinator-friendly solar yields benefits for a range of stakeholders, from developers to farmers to surrounding communities. In the near term, there are opportunities for research and education to generate a more robust understanding of the practice, and in the long-term, the environmental and social externalities could be monetized and captured by astute decision-makers. By valuing the ecosystem services generated throughout project lifetimes, pollinator-friendly solar projects would realize higher returns, spurring developers to prioritize these projects over traditional forms of solar development.

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