NREL’s Renewable Energy is a national laboratory of the U.S. Department of Energy, Office of...

NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

2H 2011 Summary

Developed by: Michael Mendelsohn Ryan Hubbell Strategic Energy Analysis Center

April 26, 2012

NREL’s Renewable Energy

Finance Tracking Initiative (REFTI)

National Renewable Energy Laboratory Innovation for Our Energy Future 2

Presentation, webinar recording, and aggregated

spreadsheet data will be made available at the

NREL RE Finance website:

http://financere.nrel.gov/refti

Housekeeping

http://financere.nrel.gov/

http://financere.nrel.gov/


• Ensuring respondent confidentiality is critical to NREL

• Data gathered through REFTI will only be used for: • Providing aggregate values for model inputs

• Reporting trends

• Participant-specific data will not be utilized or distributed in any way

• Please let us know if you have any concerns over

data provided through this webinar • Any concerns will be addresses prior to releasing slides to public

Confidentiality


• Data provided voluntarily through a questionnaire

and not validated by NREL

• 2H 2011 total respondents for Primary Questions

(#’s 3 – 7) were 12

• 1 Wind, 4 PV<1MW, 7 PV≥1MW

• Total respondents for Secondary Questions

(#’s 8 – 11) were between 24 - 28

• Unless otherwise specified, bin range answer

midpoints were used to calculate weighted averages

by technology

• Potential concerns:

• Duplicate data

• Misunderstanding questionnaire

• Small sample size

About the Data


Spreadsheet Format


• Characteristics of Survey Respondents

• Project Information (closed financing

during the period) • Financial structure, project-level debt & equity

• Power Purchase Agreement (PPA) structure

• Barriers and Incentives • Governmental incentive programs

• Barriers to project development

• Development “Soft” Costs (New)

• Bonus question (1603 Expiration)

Table of Contents

REFTI Questionnaire: Q1



Participation: Industry Representation

• 59 people entered 2H 2011 questionnaire • 813 respondents have reported data over the entire REFTI timeframe.

Equity Financier

2%

Debt Financier

3%Developer/Installer/Integrator

42%

Utility7%

Counsel / Consultant

9%

Energy Consumer7% Government /

Research / Advocacy

19%

Maufacturer /

Supplier / Distributor

8%

Other

3%

Respondent Industry Representation - 2H'11

Equity Financier4%

Debt Financier2%Developer/

Installer/Integrator

38%

Utility4%

Counsel / Consultant

15%

Energy Consumer5% Government /

Research / Advocacy

12%

Maufacturer /

Supplier / Distributor

6%

Other

14%

Aggregate Industry Representation (Q4'09 - 2H'11)


Current Projects 2H 2011

1

142

200

7

385

500

0

100

200

300

400

500

600

PV (< 1 MW) PV (≥ 1 MW) WindG

ross

MW

Capacity Financially Closed - 2H'11 Reported High/Low Range

3

22

1

9

73

30

10

20

30

40

50

60

70

80

PV (< 1 MW) PV (≥ 1 MW) Wind

Number of Projects Financially Closed - 2H'11High/Low Range


Project Development Reported to REFTI

• Since Q4 2009, REFTI has collected information on approximately 2,482 projects, representing around 10,160 MW (based on midpoint of bin ranges).

105

1735

559

9 20 6 16 12 18

4379

655

1197

550

37 26 53

17701488

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0

200

400

600

800

1000

1200

1400

1600

1800

MW

Ad

ded

# o

f P

roje

cts

Aggregate Results: Q4'09 - 2H'11

Projects Closed MW Capacity Added


Financial Structure

2H 2011 “Other” responses include: • Proprietary partnership structure between IB , owner/asset manager, developer

• Congressionally appropriated

• Institutional fixed-rate notes; commercial bank debt and equity partner with no flip.

0

10

20

30

40

50

60

70

80

90

100

Balance Sheet Tax Equity Lease Other

Par

tici

pan

ts R

ep

ort

ing

Q4‘09 - 2H ’11 Other TechnologiesHydro

Biomass - Elec

Geothermal

Solar Thermal (non-elec)Solar - CSP

PV (≥ 1 MW)

PV (< 1 MW)

Wind


Solar Financial Structure - Trend

0%

20%

40%

60%

80%

100%

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Financial Structure - PV < 1MW

Other

Lease

Tax Equity

Balance Sheet

0%

20%

40%

60%

80%

100%

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Financial Structure - PV ≥ 1MW

Other

Lease

Tax Equity

Balance Sheet

• Balance Sheet financing dropped significantly from 91% to 25% for Small PV • “Other” reporting 50% in 2H 2011.

• “Other” increased to 43% in 2H 2011 for Large PV • Balance Sheet increased to 29% • Tax equity shrunk to 14%.

1H 2011 Approx Closed Capacity = 265 MW 2H 2011 Approx Closed Capacity = 263 MW

1H 2011 Approx Closed Capacity = 4.2 MW 2H 2011 Approx Closed Capacity = 2.7 MW

REFTI Questionnaire: 2H 2011 - Q4

National Renewable Energy Laboratory Innovation for Our Energy Future


Tax Equity Ratio vs. Expected Return

0

5

10

15

20

0

10

20

30

40

50

60

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Exp

ect

ed

Re

turn

(%)

Tax

Equ

ity

(%)

PV < 1MW

Tax Equity / Total Equity Expected Return on Tax Equity

0

5

10

15

20

0

20

40

60

80

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Exp

ect

ed

Re

turn

(%)

Tax

Equ

ity

(%)

PV ≥ 1MW

Tax Equity / Total Equity Expected Return on Tax Equity

•Both Tax Equity ratio and Expected Returns rebound from 1H 2011 drop-offs in 2H 2011 •Correlation evident between Equity ratio and returns.

•Large PV equity ratio eclipses prior period levels between 22 – 46% •Expected Returns trending slightly higher for Large PV •Correlation between Tax Equity beginning in Q3 2010 for Large PV


Expected Returns on Equity

•Wide expected Tax Equity return range reported for Large PV in 2H 2011 between 8 – 18% •Most all other technology Developer and Tax Equity trends undefined or flat.

n= 17 58 52 8 3 7 5

6

8

10

12

14

16

18

Wind PV (< 1 MW) PV (≥ 1 MW) Solar - CSP Geothermal Biomass -Elec

Hydro

Exp

ect

ed

Re

turn

(%)

Weighted Average (Q4'09-2H'11)

Developer Equity Expected Return Tax Equity Investor Expected Return

10

11

12

13

14

15

16

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Pe

rce

nt (

%)

PV ≥ 1MW Expected Returns

Tax Investor Developer

Developer

Tax Investor

• Average spread between Tax Equity and Developer returns is 240 BPS •Solar Developer return variance within 200 BPS, Tax Equity within 70 BPS.


Cost of Debt

0123456789

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Co

st o

f Deb

t (%

)

Avg. All-in Cost of Debt - Trend

All Technologies Moody's Baa Corp Bond Rate

Q4 2009 – 2H 2011 Quarter Weighted

Average Range

Wind 4.9 - 11 %

Small PV 4.5 – 7.6 %

All Technologies 5.7 – 8.0 %

2H 2011 Response Range

Large PV 4 – 8.5 %

0

2

4

6

8

10

0

10

20

30

40

50

60

70

80

Q409 Q110 Q210 Q310 Q410 1H11 2H11

De

bt,

Bo

nd

Rat

e (%

)

Deb

t to

Cap

ital

(%)

PV ≥ 1MW

Debt / Total Capital All-in Cost of Debt Baa Corp Bond Rate


Debt to Capital, DSCR, Tenor

• Most 2H 2011 respondents reported no debt utilization •Small PV debt ratio declining to zero debt reported in 2H 2011.

• Wind and CSP DSCR trending up until 2011 •Large PV DSCR trending down since Q1 2010 •CSP Debt Term trending up to nearly 25 years in 1H 2011.

47 4751

40

90

70

44

60 60

0102030405060708090

100

Per

cen

t (%

)

Aggregate Debt to Capital Ratio(Q4'09 - 2H'11)

n= 19 44 47 8 4 2 7 5 4

n= 13 31 38 6 3 2 7 4 4

13 1218

12

20 22

129

14

0.0

0.5

1.0

1.5

2.0

0

5

10

15

20

25

Year

sAgggregate Debt Term and DSCR

(Q4'09 - 2H'11)

Debt Term DSCR


Installed Costs

•Large PV most consist quarter-by-quarter, downward trend •Small PV costs do not appear to be declining

In 2H 2011: •Small PV reported 4 – 7+ ($/W) estimated installed cost range •Large PV reported 3 – 6 ($/W).

0

1

2

3

4

5

6

7

Q409 Q110 Q210 Q310 Q410 1H11 2H11

$ /

Wat

tEst. Installed Costs - Trend

PV (< 1 MW) PV (≥ 1 MW) Solar - CSP All Technologies

3.3

5.3

4.4

3.7

2.7

4.34.6 4.6

2.3

0

1

2

3

4

5

6

$ /

Wat

t

Aggregate Installed Costs (Q4'09 - 2H'11)n= 18 80 61 13 12 4 7 5 4


LCOE vs. Retail Electricity Rates

• Small and large PV LCOE converge in Q4 2010 and 2H 2011 • Large PV converging on commercial retail rates

4

6

8

10

12

14

16

Q409 Q110 Q210 Q310 Q410 1H11 2H11

¢/kW

h

Avg Residential Electric Rate

Avg Commercial Electric Rate

LCOE (PV≥1 MW)

LCOE (PV<1 MW)

Electricity Rates Source: EIA


PPA Term, Price, Escalation Rate

• PPA terms reported for 2H 2011 were highest for small PV at 20 years • Both wind and large PV were around 17.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

5

10

15

20

25

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Esca

lati

on

(%)

Term

(y

rs)

Pri

ce (¢

/kW

h)

PV < 1MW

PPA Term Yr 1 PPA Price Price Escalation

n= 17 55 57 7 6 4 8 4 2

17.0 16.317.5 18.1

13.0

20.0

17.3

13.5

18.5

0

5

10

15

20

25

Year

s

Aggregate PPA Terms (Q4'09 - 2H'11)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

5

10

15

20

25

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Esca

lati

on

(%)

Term

s (y

rs)

Pri

ce (¢

/kW

h)

PV ≥ 1MW

PPA Term Yr 1 PPA Price Price Escalation


Installed Cost ($/W) vs. Year 1 PPA Price (¢/kWh)

• Estimated installed costs and Year 1 PPA prices are both trending down and appear to be somewhat correlated for Large PV.

• Year 1 PPA price trending down for Small PV, whereas estimated installed costs relatively flat • Divergence in trends evident in both Q4 2010 and 2H 2011.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7

8

9

10

11

12

13

14

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Est

Inst

alle

d C

ost

s ($

/W)

Yr 1

PPA

Pri

ce (¢

/kW

h)

PV ≥ 1 MW

Yr 1 PPA Price (¢/kWh) Est Installed Cost ($/W)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

6

7

8

9

10

11

12

13

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Est

Inst

alle

d C

ost

($/W

)

Yr 1

PPA

Pri

ce (¢

/kW

h)

PV < 1 MW

Yr 1 PPA Price (¢/kWh) Est Installed Cost ($/W)

REFTI Questionnaire: Q8 (secondary)



Depreciation Incentives Utilized – 2H 2011

• Nearly half of small PV are not using depreciation incentives • All large PV reporting utilization of depreciation incentive • Bonus MACRS is by far the most popular depreciation incentive.

7

Responses

14

Responses

MACRS14%

Bonus MACRS

43%None43%

PV (< 1MW)

Straight Line7%

MACRS36%

Bonus MACRS

57%

PV (≥ 1MW)

0 5 10 15

Wind

PV (< 1 MW)

PV (≥ 1 MW)

Response Count

Straight Line

MACRS

Bonus MACRS

None


Federal Incentives Utilized

0% 20% 40% 60% 80% 100%

Wind

PV (< 1 MW)

PV (≥ 1 MW)

Solar - CSP

Solar Thermal (non-elec)

Geothermal

Biomass - Elec

Biomass - Non-elec

Hydro

Other & Unspecified

Aggregate Federal Incentives Utilized (Q4'09 - 2H'11)

PTC ITC Cash Grant Other None

•Cash grant most popular among all technologies (47%) •PTC is being utilized more (12%), ITC less (31%) in 2H 2011 •64% of Large PV utilized the Cash grant in 2H 2011

PTC16%

ITC

12%Cash

Grant60%

None12%

Wind

PTC

37%

ITC13%

Cash Grant25%

None

25%

Geothermal


Federal Incentives

• Federal Incentives were Extremely or Very Important for 84% of all 2011 respondents.

0

5

10

15

20

25

Federal Incentives Importance - 2011

None

Slightly

Moderately

Very

Extremely


State Incentives

• State incentives reverse decline in importance with 70% citing Extreme Importance to project development in 2H 2011.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Importance of State Incentives to Project Development - Trend

None

Slightly

Moderately

Very

Extremely


Largest Barriers to Development - Trend

•Small PV and CSP: Project Economics issues declining to 0 in 2H 2011 •Large PV: declining PPA Negotiation barriers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q409 Q110 Q210 Q310 Q410 1H11 2H11

Largest Barrier to Development - Trend

None

Other (pls explain)

Accessing Government Programs

Finding Tax Equity Investor

Transmission interconnection / tariff

Technological hurdles

Environmental permitting

Negotiating PPA / Creditworthiness of power purchaser

Raising Debt

Poor Project Economics

n= 65 69 118 70 94 53 28


Consequences of Development Barriers

0 2 4 6 8 10 12 14

Wind

PV (< 1 MW)

PV (≥ 1 MW)

Geothermal

Biomass - Elec

Hydro

Respondents Reporting

Development Barrier Consequences - 2011

None

Delayed project(s) ≤ 1 year

Delayed project(s) > 1 year

• 64% of all respondents over REFTI period (Q4 2009 – 2011) reported Project Delay as the greatest consequence of development barriers • No projects were reported to be abandoned in 2011 as compared to previous periods in 2010 where up to 25% reported being abandoned.


Combined “Soft Costs” – 2H 2011

0.51.3 1.7

3.01.5

2.5

3.30.9

3.0

3.50.5

0.5

2.2

2.5

2.5

0.5

0.5

3.7

3.5

1.5

0.5

0.5

1.8

3.0

1.5

0

2

4

6

8

10

12

14

16

Wind PV (< 1 MW) PV (≥ 1 MW) Geothermal Biomass -

Elec

Pe

rce

nt

of T

ota

l Pro

ject

Co

sts

Construction Insurance

Interest During Construction

Debt Set-up Fees

Engineering

Fees

Legal Fees


REFTI Questionnaire: Bonus Question

27 respondents

18% 26%

11%

15%19%

11%

Will 1603 expiration impact your business?

Yes, by small amount (< 25% drop in kW installed)

Yes, by large amount (25%-50% drop in kW installed)

Yes, by very large amount (> 50% drop in kW installed, requires project sale / abandonment)

No negative impact / positive impact

Not Sure

Not applicable


REFTI results and presentations available at:

http://financere.nrel.gov/finance/REFTI

Michael Mendelsohn

[email protected]

303-384-7363

Ryan Hubbell

[email protected]

303-275-3792

THANK YOU

http://financere.nrel.gov/finance/REFTI

mailto:[email protected]

mailto:[email protected]

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