April 12, 2016 CEFAC Energy Storage Presentation

Clean Energy Financing Advisory Council: Energy Storage

April 12, 2016


April 12, 2016

Ryan Carney & Brian Breckin

Today’s Program

• Welcome

• Program updates: CHEEF REEL and SGIP

• Mark Perutz, DBL Partners

• Amanda Li, Generate Capital

• Katherine Ryzhaya, Advanced Microgrid Solutions

• Robert Sanders, Clean Energy Group

• Panel Q&A 11:04 AM

• Break 11:35 AM

• Networking 11:40 AM-12:00 PM

Our Mission…

Accelerate the transition

to a sustainable world

powered by clean energy

We Are Experts In…

Emerging Technologies

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Renewable Energy

Our Services…

Management Technical

Assistance Workforce

Training

Clean Energy Financing Advisory Council (CEFAC)

CEFAC Partners

Thanks to our CEFAC Funders

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Go Green Financing

Financing Finder

• Searchable database of financing options

• Filtered by zip code & city

• Filtered by property type

• Financing is organized according to type (secured, unsecured, PACE, etc.)

• Vendor profile pages

Financing Concierge System (FCS) Tool

• Decision-making software to help consumers understand how they prioritize financing decisions

• Marketing report provides insight into what is important to them

• Data system cross references preferences against loan products in the database to rank order the loan products

My Action Plan

• Quick questions to customize a virtual assessment

• Personalized to reach your goals

• Informs the Finance Concierge


Mark Perutz Partner, DBL Partners

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US Energy Storage market is projected to grow substantially over the next 5 years with further growth expected beyond that: 2020-2030

Lithium Ion Battery chemistry currently dominates energy storage deployments

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Amanda Li Associate, Generate Capital

GENERATECAPITAL

Understanding Financing for Energy Storage

CEFAC Forum and Webinar April 2016

What is Project Finance?

If you googled it:

Project finance is the long-term financing of infrastructure and industrial projects

based upon the projected cash flows of the project rather than the balance sheets of

its sponsors.

What it breaks down to:

• Owning a real asset or lending against a real asset’s cash flows

• Investing in a developer’s projects - not in the developer (it’s not VC)

• Mitigating risk so that projected economics are actual economics

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Project financing enables customers to purchase infrastructure “as-a-

service” with zero upfront investment

Profit Distributions

FINANCE CO

(e.g., Generate)

Cash Investment

Monthly payments CUSTOMER

(e.g., Hotel X) Energy savings from

storage system

PROJECT COMPANY

Profit Distributions and Fees

BATTERY

Asset Management and DEVELOPER / O&M Services VENDOR

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There are four major types of risk to mitigate when

evaluating storage projects for project finance

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4

Regulatory Changes

Regulatory

Rebate Reliance

Product Performance

Technology

Warranty Coverage

Servicing

Operations

System Optimization

Customer Credit

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Energy storage is a growing market with opportunities for product maturity and scale

• Driven by government mandates and federal rulings, utilities and

ISOs/RTOs are increasing their procurement of storage and allowing

storage to participate in wholesale energy markets

• Competition among experienced technology OEMs drives down costs,

reduces technology risk and yields new business models

• Project finance drives standardization of products, contracts, and

operations and allows for developers to scale

• Software providers are enabling the optimization of system revenue

streams and degradation curves

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Project finance drove the solar and wind industry - and

has the opportunity to do the same for storage

New Investments in Clean Energy by Asset Class - Q1 2004 - Q3 2015 [$BN]

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About Generate Capital

WHO WE ARE Generate Capital, Inc. is a specialty finance company that builds, owns, operates, and finances infrastructure assets involving the world's critical resources: energy, water, agriculture and basic materials.

We believe the world's fourth industrial revolution -- a "resource revolution" -- is underway, where the world is

finding new, profitable ways to do more with less of our precious or constrained natural resources. Unlike

traditional capital sources, Generate Capital has the people, systems, and flexibility that make us the trusted

capital partner for technology manufacturers, project developers and contractors driving this resource

revolution.

WHAT WE DO Generate Capital partners with project developers and solution providers to finance resource-related projects. We have developed a financing product enabling end customers to use their technologies in a pay-as-you-go

model we call Infrastructure-as-a-Service™. Our financing options provide our Partners easy access to capital,

which shortens sale cycles and enables higher sales volumes. Generate Capital offers shorter and longer-term

equity and debt capital.

BENEFITS TO

1.

Substantially increase revenue by using a ‘zero down’ offering to raise closing rates with end users and

PARTNERS

reduce the closing timeline.

2.

Having a true capital partner for growth

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Flexible financing solutions to meet evolving developer and customer needs over time

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Industry expertise enabling rapid feedback and efficient underwriting

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Extensive transaction experience provides standardized documents and processes which creates

streamlining and reduces costs

BENEFITS TO

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No upfront expense - Customer recognizes benefits (i.e., energy savings) over time, as they accrue, without

CUSTOMERS

making a large expenditure on an uncertain technology or pay-back proposition

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No Risk - Generate Capital and the solution provider take the risk on the economic benefits of the solution

CONTACT Jigar Shah [email protected]

http://www.generatecapital.com

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Katherine Ryzhaya Chief Commercial Officer, Advanced Microgrid Solutions

CEFAC WORKSHOP ENERGY STORAGE PROJECT FINANCING

Katherine Ryzhaya

April 12, 2016

01. MARKET OVERVIEW

WHO IS ADVANCED MICROGRID SOLUTIONS?

AMS INSTALLS ADVAN THAT LOWER ENERGY

AND PROVIDE CLEAN

TO ELECTRIC UTILITIES

• Owner and operator of onsite energy storage

• Purveyor of Storage-as-a-Service - zero upfront cost plus

guaranteed energy bill savings

• Developer of Hybrid Electric Building hardware/software platform

• Technology partnership with Tesla to procure 500 MWh of Powerpacks

FAST FACTS

• BEHIND THE METER (BTM) ENERGY STORAGE

DEPLOYMENTS INCREASED BY 405% IN 2015

• TOTAL ENERGY STORAGE DEPLOYMENTS WERE

UP 243% IN 2015 (UTILITY, C&I, RESIDENTIAL)

• TOTAL MWs DEPLOYED EXPECTED TO GROW

FROM 221 IN 2015 TO 1,662 BY 2020

ENERGY STORAGE GROWTH

EVOLUTION OF ENERGY STORAGE PROJECT FINANCE DOES THIS LOOK FAMILIAR?

• PAST o Heavily reliant on incentives

o Operating revenues depend exclusively on demand charge management

o Premium charged for relatively ill-understood technology (lithium ion)

o Cost of capital in the mid to high teens

• PRESENT

o Additional operating revenues from utility contracts

o Project economics still reliant on incentives but improving quickly

o Lithium ion batteries increasingly seen as safe and bankable, while other energy

storage technologies remain challenging to finance

o Cost of capital in the high single digits to mid teens

• FUTURE o Further monetization of the stacked benefits of storage

o Project economics stand on their own without incentives

o Additional energy storage technologies may become bankable as deployment grows (alternatively, Li-ion economies of scale may prevent significant penetration

by other technologies) o Cost of capital in the mid to high single digits

FINANCING BEHIND THE METER ENERGY STORAGE IMPORTANCE OF CASH FLOW CERTAINTY

• UTILITY CONTRACTS

o Fixed payments from high credit counterparties are low risk and thus

bankable (e.g., AMS’ capacity contract with SCE) o Numerous other utilities preparing behind the meter energy storage

procurements

• INCENTIVE CERTAINTY o SGIP has been essential in establishing CA as the leading behind-the-

meter energy storage market

o ITC extension should be a huge boon to storage (solar + storage)

• STANDARDIZED HOST AGREEMENTS

o 10+ year contracts o Fixed payments from host à increases percentage of capital stack that

can be contributed by debt, reducing the overall cost of capital

o Asset management and O&M agreements provide security that projects

will perform as promised o Termination provisions that don’t encumber utility contracts

INCREASING ENERGY STORAGE RETURNS MONETIZATION OF NEW PRODUCTS

OVER TIME IT WILL BE CRITICAL FOR MARKETS TO RECOGNIZE THE STACKED

BENEFITS OF ENERGY STORAGE

• HOST CUSTOMERS

o Time of use bill management

o Backup power

o Increased PV self-consumption à especially valuable as net metering rates decline

• UTILITIES

o Capacity

o Distribution deferral

o Transmission deferral

• ENERGY MARKETS o Frequency regulation

o Voltage support

o Spinning / non-spinning reserves

o Energy arbitrage

POLICY FRAMEWORKS ARE BEING CREATED TO UNLOCK THESE NEW PRODUCTS

02. AMS OVERVIEW

STORAGE AS A SERVICE

AMS INSTALLS, OWNS AND OPERATES

ENERGY STORAGE SYSTEMS AT HOST

CUSTOMER SITES

HOST CUSTOMERS RECEIVE ENERGY

AND DEMAND CHARGE SAVINGS ON

THEIR BILLS IN ADDITION TO

OPERATIONAL EFFICIENCIES

AMS FINANCES THE SYSTEMS WITH A

COMBINATION OF SHARED SAVINGS,

UTILITY REVENUES AND INCENTIVES

HOST CUSTOMERS CAPTURE

ADDITIONAL BENEFITS INCLUDING

MULTI-RESOURCE INTEGRATION,

REDUCED GHG EMISSIONS, BACKUP

POWER CAPABILITIES AND ENHANCED DEMAND RESPONSE

Energy Services

Savings Fee

Host Customer

Own & Operate

Battery Storage AMS

Utility Contract

Utility

ECONOMIC MODEL

UP TO

1 DEMAND CHARGE REDUCTION

Forecasting software predicts demand

spikes and seamlessly switches

buildings from grid to battery power,

thereby avoiding large peak charges

40% REDUCTION IN

DEMAND COSTS

ENERGY COST SAVINGS

2 TIME OF USE RATE ARBITRAGE

Battery storage systems charge

overnight when the cost of grid power

is low and discharge during peak hours

when it’s more expensive, displacing

costly on-peak electricity

UP TO

15% REDUCTION IN

ENERGY COSTS

BATTERY

PERFORMANCE

MODEL

1000

1

800

600 2

400

200

0

-200

-400

-600

1 DEMAND CHARGE REDUCTION

2 LOAD SHIFTING

3 UTILITY SERVICES

3

100%

0% 0:00 2:00 4:00 6:00 8:00 10:00

Pre-AMS Elec (kW)

Battery State (%)

12:00 14:00 16:00 18:00 20:00 22:00

Post-AMS Elec (kW)

Battery In, Out (kW)

THE AMS ADVANTAGE WE INSTALL LARGE ENERGY STORAGE SYSTEMS THAT GENERATE

MEANINGFUL ENERGY BILL SAVINGS FOR HOST CUSTOMERS

AVERAGE

SYSTEM SIZE

FUNCTION

ANNUAL

SAVINGS

STORAGE PROVIDER A

18-36 kW

Peak Shaving

$500-$10,000

AMS

250-1,000 kW

Load Shifting &

Demand Reduction

$50,000-$200,000

PROJECT FINANCE

VENTURE INVESTORS PROJECT INVESTORS

DBL Engie Other

AMS

LLC1 LLC4

Equity

Investor

Utility

PPA

Debt

Investor

LLC1

Host

Other

Revenues LLC2 LLC3 Incentives

Contract

PROJECT ENTITIES

PROJECT REVENUES

CASE STUDY 01

IRVINE COMPANY

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26 commercial office buildings

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25% peak demand reduction

• 10 MW of firm, disptachable

capacity to the utility

• 8% reduction in energy costs

to the building owner

(~$900,000 annually)

• Zero emissions

• No distribution upgrades

CASE STUDY 02

INLAND EMPIRE

UTILITIES AGENCY

• 6 regional water recycling &

pumping facilities

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14% peak demand reduction

• Powered from the grid and onsite generation assets

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3.75 MW energy storage (AMS)

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3.5 MW solar

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1 MW wind

o

2.8 MW fuel cell

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5-10% reduction in annual energy costs(~$550,000)

ENERGY STORAGE, SOLAR PV AND SMART GRID TECHNOLOGIES EXPERIENCED INCREDIBLE GROWTH IN 2015, AND WE EXPECT THAT THEY

WILL PLAY AN INCREASINGLY IMPORTANT ROLE IN REACHING THE NATION’S

CLIMATE AND CLEAN ENERGY GOALS IN THE COMING YEARS.

DAVID DANIELSON

US DEPARTMENT OF ENERGY


Robert Sanders Senior Finance Director, Clean Energy Group

Who We Are

http://www.cleanegroup.org/

http://www.resilient-power.org/



Resilient Power Project • Increase public/private investment in clean, resilient power systems • Engage city officials to develop resilient power policies/programs • Protect low-income and vulnerable communities • Focus on affordable housing and critical public facilities • Advocate for state and federal supportive policies and programs • Technical assistance for pre-development costs to help agencies/project

developers get deals done • See www.resilient-power.org for reports, newsletters, webinar recordings




Value of Solar

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Value of Battery Storage

Customer Value: Peak Shaving

Peak reduced from 100 kW to 65kW = 35 kW reduction

@ $10/kW = $4,200 annual savings

@ $20/kW = $8,400 annual savings

Utility/Grid Value

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Energy Storage Early Adopters

• Energy storage companies have largely targeted C&I customers to reduce utility bills (not for resilience).

• It’s important to bend the technology trend for solar+storage systems to also meet public needs, such as affordable housing and other essential services in low-income communities.

http://www.cleanegroup.org/assets/






Resilient Power Projects – Housing

• TA Fund: grants pay for 3rd party TA to determine project feasibility, design resilient solar+storage systems

• Demonstrate viability of clean energy + storage in affordable housing

• Working with project developers in CA, NYC, Chicago, DC, Newark, Austin

• Via Verde (Bronx) – could be 1st solar+storage project for resilient power applied to affordable housing

Resilient Power Projects – Community Facilities

• Demonstrate viability of clean energy + storage in critical community facilities

– MA DOER – 3 rounds of state funding for the deployment of municipal-led systems in its Community Clean Energy Resiliency Initiative (CCERI).

– 28 critical facilities - including schools/shelters, communications centers, first responder facilities and hospitals - will have resilient power.

• Working with municipalities to develop resilient power plan for critical facilities

• Municipal solar+storage project planning underway in San Francisco, Baltimore, Salt Lake City, Los Angeles, Duluth, DC

Resilience for Free - Findings

• Analysis of project economics in different markets

• Findings:

• Solar+storage can reduce operating costs

• Financing can be repaid with electricity market revenues

• Energy storage can improve economics of stand-alone solar

• In certain markets, resilient solar+storage can be developed at little to no net cost over the life of the project

– Essentially resilience for free

• Similar analysis is now being done for CA affordable housing

How Solar+Storage Projects are Financed Today

• Utilities - direct ownership or third-party ownership under long term contract for services (rate based) – Green Mountain Power - 4 MW of battery storage, 2.5 MW

of solar PV, provides resilient power to a school community emergency shelter

– PSE&G – Hopewell Valley High School (community emergency shelter)

• Large energy services companies - access to capital markets targeting specific sectors – (Schneider Electric, municipal water/sewer treatment

facilities, MUSH)

• New solar+storage companies - using project finance funds, venture capital & private equity – Green Charge Networks, Stem, AF Mensah

How Solar+Storage Projects are Financed Today

• State incentives for demonstration projects – MA DOER

– MD Energy Administration

• Federal tax credits – ITCs

– For affordable housing, can be combined with LIHTCs to fully fund projects

• Bond financing for municipal projects, schools, large nonprofit institutions

• Solar+storage systems are increasingly structured with third-party ownership and leased to customers.

Integrated Approach is Needed

• Getting the market rules right is a big facilitator for project financing. – Important to be able to stack

multiple cost savings and revenue streams

• Investment in resilient power in community projects won’t get traction without an adequate policy & regulatory framework, access to experienced technical services, data collection & analysis, and information sharing

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Contact Information

Robert Sanders Senior Finance Director Clean Energy Group [email protected] Phone: (215) 870-3257

mailto:[email protected]


Question & Answer


Thank You!

Networking Round Robin

1. Name

2. Job Title & Organization

3. What is hindering your efforts to advance clean energy?

4. What do you need to increase your contribution to clean energy?

April 12, 2016 CEFAC Energy Storage Presentation

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Transcript of April 12, 2016 CEFAC Energy Storage Presentation