Expanding Financing for Solar PV - TBRPC · Expanding Financing for Solar PV . 2 . ... 5-Year Loan...
94
Expanding Financing for Solar PV
Transcript of Expanding Financing for Solar PV - TBRPC · Expanding Financing for Solar PV . 2 . ... 5-Year Loan...
Expanding Financing for Solar
PV
2
Solar Ready II: Regional Partners
3
Who Are We?
5
100 Consultants
7 offices worldwide
U.S. HQ in Boston
15 years
experience
Using global best
practices to inform local
decisions
Solar Ready: Technical Assistance
6
Training
Materials
One to One
Assistance
Resource
Toolkit
Regional
Workshops
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Agenda
Solar Technologies
8
Solar Hot Water Concentrated Solar Power Solar Photovoltaic (PV)
Solar Technologies
9
Solar Hot Water Concentrated Solar Power Solar Photovoltaic (PV)
Some Basic Terminology
Panel / Module
Cell
Some Basic Terminology
Array
e- e-
Some Basic Terminology
Capacity / Power
kilowatt (kW)
Production
Kilowatt-hour (kWh)
e-
Some Basic Terminology
Residence
5 kW
Office
50 – 500 kW
Factory
1 MW+
Utility
2 MW+
Solar Development in the US
In 2013, the US solar industry installed
131,000 new solar installations
94% were residential projects
of which
World Solar Market
Source: REN 21
Top 5 Countries Solar Operating Capacity (2013)
Germany
China
Italy
USA
Spain
Rest of World
Germany
26 %
USA
8.6%
Global Market & Module Prices
0
5
10
15
20
25
30
35
0
20
40
60
80
100
120
140
160
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
GW Installed Module cost ($/W)
GW $/W
US Solar Market
0
2000
4000
6000
8000
10000
12000
14000
20002001200220032004200520062007200820092010201120122013
US Installed PV Capacity (MW)
Falling PV Prices
Tracking the Sun VII: The Installed Cost of Photovoltaics in the US from 1998-2013 (LBNL);
Solar Energy Industries Association Solar Market Insight Q2 2014
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
Co
st p
er
Wat
t D
C
US Average Installed Cost for Behind-the-Meter PV
Price in 2013 is
almost half of
what it was in
2009
The Cost of Solar in the US
Source: NREL (http://www.nrel.gov/docs/fy14osti/60412.pdf)
LBNL (http://emp.lbl.gov/sites/all/files/lbnl-6350e.pdf)(http://www1.eere.energy.gov/solar/pdfs/sunshot_webinar_20130226.pdf )
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
US Solar Cost German Solar Cost
$ p
er
Watt
Comparison of US and German Solar Costs
Non-Hardware Cost
Hardware Cost
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
US Solar Cost German Solar Cost
$ p
er
Watt
Comparison of US and German Solar Costs
Column1
Non-Hardware Cost
Hardware Cost
The Cost of Solar in the US
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$ p
er
Wat
t
Other Paperwork
Permitting &Inspection
Financing Costs
Customer Acquisition
Installation Labor
Solar Soft Costs
Source: NREL (http://www.nrel.gov/docs/fy14osti/60412.pdf)
LBNL (http://emp.lbl.gov/sites/all/files/lbnl-6350e.pdf)(http://www1.eere.energy.gov/solar/pdfs/sunshot_webinar_20130226.pdf )
US Solar Resource
Source: National Renewable Energy Laboratory 21
Florida Solar Market
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012 2013
Me
gaw
atts
Cumulative Installed Capacity
US Solar Market
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
5,500.00
Cal
ifo
rnia
Ari
zon
aN
ew J
ers
ey
No
rth
Car
olin
aM
assa
chu
sett
sN
evad
aC
olo
rad
oH
awai
iN
ew M
exic
oN
ew Y
ork
Texa
sP
en
nsy
lvan
iaM
aryl
and
Flo
rid
aG
eorg
iaO
hio
Co
nn
ecti
cut
Ten
nes
see
De
law
are
Ore
gon
Ind
ian
aM
isso
uri
Lou
isia
na
Illin
ois
Ve
rmo
nt
Was
hin
gto
nW
isco
nsi
nM
ich
igan
Dis
tric
t o
f C
olu
mb
iaU
tah
Min
nes
ota
Vir
gin
iaN
ew H
amp
shir
eSo
uth
Car
olin
aK
en
tuck
yR
ho
de
Isla
nd
Mai
ne
Iow
aM
on
tan
aW
est
Vir
gin
iaA
lab
ama
Ark
ansa
sId
aho
Kan
sas
Mis
siss
ipp
iW
yom
ing
Okl
aho
ma
Neb
rask
aA
lask
aN
ort
h D
ako
taSo
uth
Dak
ota
Meg
aw
att
s
Installed Capacity (MW) 2013
1.13 % of
US Capacity
Source: U.S. Solar Market Trends 2013
Florida Solar Market
CleanTechnica. Top Solar Power States per capita vs. Top Policy Leaders. June 25, 2013.
Florida US
5.8 watts per person
39 watts per person
Solar Development in the US
In 2013, the US solar industry installed over
145,000 new solar installations
94% were residential projects
of which
Solar Job Growth
Source: SEIA Estimates (2006-2009), The Solar Foundation’s National Solar Jobs Census
2014 (2014), The Solar Foundation’s National Solar Jobs Census 2014 (2011-2014). 26
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
Solar Job Growth in the US
SEIA
Estimates
The Solar
Foundation
Solar Economic Growth
Source: SEIA/GTM Research – 2009/2010/2011/2012 Year in Review Report
http://www.seia.org/research-resources/us-solar-market-insight 27
$0
$2,000,000,000
$4,000,000,000
$6,000,000,000
$8,000,000,000
$10,000,000,000
$12,000,000,000
$14,000,000,000
$16,000,000,000
2006 2007 2008 2009 2010 2011 2012 2013
~40% CAGR
Benefits: Stabilize Energy Prices
Source: EIA Data
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 200 2000 2001 2002 2003 2004 2005 2006 2005 2006 2007 2008 2009 2010 2011 2012
Florida Residential Electricity Prices (cents/kWh)
Avoided Energy
Purchases
Avoided T&D Line Losses
Avoided Capacity
Purchases
Avoided T&D Investments
Fossil Fuel Price Impacts
Backup Power
Benefits: Valuable to Electric Grid
29
Value of Solar
Source: Rocky Mountain Institute 30
In many cases the value is greater than the retail
rate
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Agenda
Federal Investment Tax
Credit Accelerated Depreciation
Qualified Energy Conservation
Bond
State & Utility Renewable
Portfolio Standard
Net Metering Interconnection
Solar Access
A Policy Driven Market
State
&
Utility
The Current Financing
Landscape
Direct Ownership
Third-Party Ownership
$ $
Direct Ownership
Customer Utility
Direct Ownership: Benefits
Direct Ownership Third Party Ownership
Upfront Cost High
O&M Costs Yes
Electricity Costs None
Development Risk Yes
Performance Risk Yes
Difficulty Complex
Value to Customer Higher ROI for Customer
Availability Everywhere
$ e- $
Third Party Ownership
Customer Developer
e-
Power Purchase Agreement
Incentives
Third Party Ownership: Benefits
Direct Ownership Third Party Ownership
Upfront Cost High Low to None
O&M Costs Yes No
Electricity Costs None Predictable Payments
Development Risk Yes No
Performance Risk Yes No
Difficulty Complex Easy
Value to Customer Higher ROI for Customer Shared Benefits
Availability Everywhere Only in some states
Third Party Ownership
Source: GTM Research/ Solar Energy Industries Association, U.S. Solar Market Insight 2012 Year-in-
Review
& U.S. Solar Market Insight Q2 2014
0
10
20
30
40
50
60
70
80
90
100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
%
California
Arizona
Colorado
Massachusetts
New Jersey
New York
2011 2012 2013 2014
Apparently disallowed by state or otherwise restricted by legal barriers
Status unclear or unknown
Authorized by state or otherwise currently in use, at least in certain jurisdictions within in the state Puerto Rico
Third Party Ownership: State
Policy Third Party Ownership is not always
available
Third Party Ownership: Cost
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Third Party Ownership Direct Ownership with Debt
Weighted Average Cost of Capital
Third Party
Ownership can
be expensive
DOE WACC Targets
Source: National Renewable Energy Laboratory (NREL) 2013
DOE WACC Targets
Source: National Renewable Energy Laboratory (NREL) & Rocky Mountain Institute 2013
Over 20 years Loans can beat PPA
Source: EnergySage
LCOE of Loans vs. PPA
Source: NREL (2014)
$0.14 $0.15 $0.16
$0.20
$0.26
$-
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
5-Year Loan 10-Year Loan 20-Year Loan 20-Year PPA SDG&E Res.Tier 2/3
LCOE for Residential Solar PV based on Financing
San Diego
Res. Retail
Rate
Additional Local Benefits
Source: John Farrell, Institute for Local Self-Reliance
PPAs not allowed
Tangible personal property tax for third-
party owned systems?
– the exemption provided by H.B. 277 applies
only to real property improvements
Florida Barriers
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Agenda
Lending for Solar
different from lending for
or
Is lending for
?
Cost
+ Installed Cost
+ Maintenance
- Direct Incentive
Benefit
+ Avoided Energy Cost
+ Excess Generation
+ Performance
Incentive
Why Lend for Solar?
Generate
s Savings
Generate
s
Revenue
Solar = Positive Cash Flow
$(35,000.00)
$(30,000.00)
$(25,000.00)
$(20,000.00)
$(15,000.00)
$(10,000.00)
$(5,000.00)
$-
$5,000.00
$10,000.00
$15,000.00
$20,000.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Year
Estimated Cumulative Cash Flow from a Hypothetical 5 kW Project
Cumulative Cash Flow (Retail Electricity)
Cumulative Cash Flow (PV Project w/ Debt)
Without Solar
With Solar
Growing Market Opportunity
Source: Solar Energy Industries Association
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Ins
tall
ed
Ca
pa
cti
y (
MW
)
US Annual PV Installation Capacity
131,000 new solar installations in
2013
94% were in the residential market
Total market size valued at $13.7
Billion
Customers Want Solar
Fewer than 5%
of the
6,500 banks in the US
are
actively financing solar PV
projects
New Lending Product Opportunity
Why Lend for Solar?
Source: GTM Research/ Solar Energy Industries Association, U.S. Solar Market Insight 2012 Year-in-
Review
0
10
20
30
40
50
60
70
80
90
100
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
Thir
d P
arty
Ow
ne
d R
esi
de
nti
al M
arke
t Sh
are
Percentage of New Residential Installations Owned by Third Party in CA, AZ, CO, and MA
California Arizona Colorado Massachusetts
Local lenders have the opportunity to
provide many of the benefits of third party
ownership with fewer drawbacks
Why Lend for Solar?
Direct Ownership Third Party Ownership
Upfront Cost High Low to None
O&M Costs Yes No
Electricity Costs None Predictable Payments
Development Risk Yes No
Performance Risk Yes No
Difficulty Complex Easy
Value to Customer Higher ROI Shared Benefits
Availability Everywhere Only in some states
Why Lend for Solar?
Direct Ownership Third Party Ownership
Upfront Cost High Low to None
O&M Costs Yes No
Electricity Costs None Predictable Payments
Development Risk Yes No
Performance Risk Yes No
Difficulty Complex Easy
Value to Customer Higher ROI Shared Benefits
Availability Everywhere Only in some states
Moderate
Moderate
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Agenda
Solar specific
Title I HUD
Home equity loan
Home equity line of credit
On-bill
PACE
Commercial loan
Loan Options
Process
Customer Acquisition
Loan Approval
and origination
Servicing Aggregation/Warehousing
Securitization
Installation
Operations and Maintenance
– Bundled within the loan (Mosaic, Dividend
Solar)
– Responsibility of system owner (Admirals,
PACE)
Value Chain for Solar Loans
Lack of historical performance and credit data
Regulatory treatment of solar loans
– Tax deduction if home equity loan
– PPA is off-balance sheet
Complications with the characterization of solar
assets as fixtures versus personal property
Rights of secured lender in foreclosure situations
Experience
Longer amortization schedules
Challenges to lending to Solar PV asset class
Source: NREL
Between October 2013 and October 2014 at
least nine new solar-specific loan
programs were announced and several more
have begun operations.
Admirals Bank; Digital Credit Union (with SunPower and
Sungage); Dividend Solar; Lightstream; Mosaic;
OneRoof Energy; SolarCity; Sungage Financial; WJ
Bradley (with SunEdison)
Examples
Source: NREL
The dollar amount of cost-
effective energy
improvements, plus cost of
report and inspections, or
The lesser of 5% of:
– The value of the property, or
– 115% of the median area
price of a single family
dwelling, or
– 150% of the conforming
Freddie Mac limit.
HUD Energy Efficient Mortgage
Maximum Loan Amount:
Single family house - $25,000.
Multifamily structure - an
average of $12,000 per living
unit, up to a total of $60,000.
Maximum Loan Term:
20 years.
Loan Security: Over $7,500 must
be secured by a mortgage or
deed of trust on the property.
Title 1 Home Improvement Loan
For single family homes
Up to $25k for terms of
15 (or in some cases 30)
years
Interest rates between
5-7% and secured by
mortgage or deed
11 participating lenders
Available through
5/4/2015
HUD FHA PowerSaver
Secured
Up to $25,000
Up to 20 year term
Fixed rate 4.95% - 9.95%
Secured by 1st or 2nd
position lien
Unsecured
Admirals Bank
Up to $15,000
Up to 10 year term
Fixed rate 9.99% - 11.99%
Bridge loan
Panel manufacturer
partnered with
Admirals
Up to $60,000 dollars
for 5-20 year terms
Preferred interest
rates from Admirals
Bundled with 25-year
performance
guarantee and
warranty
SunPower Loan Program
Crowdfunding
provider
Up to 20 year terms
with no money down
Integrates ITC into
loan payment
Bundled with
Enphase O&M
package
Interest rates vary
Nationwide online
portal
Mosaic Home Solar Loan Program
All access solar
provider
– Previously lease-only
SolarSelect Platform
– Lease
– PPA
– Loan options
Not all programs
nationwide
– Based on West Coast
OneRoofEnergy SolarSelect
Division of Suntrust
Unsecured home
improvement loans
for energy projects
Up to $100,000
Terms up to 7 years
Rates from 4.99-
9.24%
Some loans available
for small business
Nationwide
Lightstream Home Improvement Loan
Online credit provider
Unsecured home
improvement loans
for range of credit
scores
Rates begin at 3.99%
6-144 month terms
No income verification
for up to $25,000
GreenSky Home Improvement Loan
Up to $50,000 dollars
Separate no interest
loan for tax credit
Second full-term loan
$100 million dollar
facility for residential
solar
Nationwide for
members
Digital Federal Credit Union
Enables institutional
investors to access
residential solar market
– Climate Bonds Initiative
Direct lending service
No money down
Rates begin at 6.5%
Bundled with 15-year
production guarantee,
warranties and monitoring
Nationwide online intake
platform
Empower Loan
4.5% over 30 years
Customer takes the 30%
federal tax credit
Monthly payment based on
amount of energy the system
produces
Offered in Arizona,
California, Colorado,
Connecticut, Hawaii,
Massachusetts, New York
and New Jersey
SolarCity MyPower Loan
The local government finances the up-front
costs of the energy investment, which is
repaid through a special property tax
assessment.
Property Assessed Clean Energy
Source: Department of Energy
Property Assessed Clean Energy
Property owner
pays assessment
through property
tax bill
(up to 20 years)
Proceeds from
revenue bond or
other financing
provided to
property owner
to pay for energy
project
Property owners
voluntarily sign-
up for financing
and make energy
improvements
City creates type
of land-secured
financing district
or similar legal
mechanism
Source: Department of Energy
Advantages Over Conventional Loan:
Longer term
Repayment transfers with ownership
Low interest rates
Interest is tax deductible
Lower transaction costs
Property Assessed Clean Energy
Property Assessed Clean Energy
Source: DSIRE
www.dsireusa.org / April 2013.
29 states, + Washington DC,
authorize PACE (27
states have passed
legislation and HI
permits it based on
existing law).
Limitations of residential
PACE financing
Source: pacenow.org
Source: pacenow.org
This report is designed for
local government officials in
getting a PACE program
established in their region.
rael.berkley.edu
PACE: Resources
Source: Renewable and Appropriate Energy Laboratory, University of California, Berkley
Resource PACE How to Guide for Local Governments
QECBs are similar to Build America Bonds
(BABs)
Interest on QECBs is taxable but the
federal government offers a direct cash
subsidy to the bond issuer to subsidize the
interest costs.
– Subsidy of 70% of the Qualified Tax Credit
Bond Rate
Qualified Energy Conservation
Bonds
Reduce energy consumption in publically
owned building by at least 20%
Implement green community programs
Rural development
Renewable energy facilities (wind, solar,
biomass)
For certain mass commuting projects
Local governments and municipalities with
100,000 or more in population
Qualified Energy Conservation
Bonds
$
QECB
Qualified Energy Conservation Bond
US Treasury Local Gov
Bond Holders
Project
QECB
$
Qualified Energy
Conservation Bond
+ 2.3%
net
interest
cost
+ 3.7%
6%
annual
coupon
Los Angeles Dept. of Water and Power –
wind and solar project expansion and
development
Boulder, CO – QECBs for commercial
PACE
San Diego and Richmond, CA – streetlight
replacement
North Carolina Agricultural Finance
Authority – loans for solar projects on
agricultural land
Examples
Monthly updates
to QECB
utilization and
case studies
Learn More
Resource EPC QECB Guide
A guide for local
governments seeking to
engage financial
institutions.
www.solaroutreach.org
Resource Local Lending for Solar PV
Learn More
Learn More
Analysis and overview of
banking and lending
opportunities for US Solar
PV market.
Resource NREL Analysis
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Agenda
Master Limited
Partnerships
Real Estate
Investment Trusts
(REITs)
Solar Securitization
Securitization Library:
https://financere.nrel.go
v/finance/content/securit
ization-library
SAPC Analysis
NREL Solar Access to Public Capital
(SAPC) working group
– Developed standard residential lease
and commercial power purchase
agreement (PPA) contracts
– Working Group
• PV project development standards
• Unofficial ratings guidance for rating agencies
• Collecting performance and credit data
– Technical Reports and Analysis
https://financere.nrel.gov/finance/solar_sec
uritization_public_capital_finance
NREL Solar Access to Public Capital Working Group
Open Source
Performance and
Reliability Clearinghouse
http://www.sunspec.org/o
sparc/
a nationwide network of
solar PV power plants
that report daily in order
to answer the question of
how solar PV performs
over the long term
oSPARC
