Venture Catalyst Inc. 20051 State, Municipal & Tribal Renewable Energy Financing Accessing Financing...

Venture Catalyst Inc. 2005 1

State, Municipal & Tribal Renewable Energy Financing

Accessing Financing Opportunities for Government Renewable Energy Projects


Discussion Points

• Definitions• Benefits of Renewable Energy• Financing Strategies• Examples• Beginning the Process


What is Renewable Energy?

• Energy resources that are constantly replenished in contrast to fossil fuel sources that have a finite supply. Examples are solar, wind, geothermal, hydro, and ocean (tide, wave & temperature differential). Solar energy can be in the form of photon or heat capture (photovoltaics/ solar thermal).

• Current Renewable Generation Share (2002)– National 9.1%, 2.3% non-hydro– Arizona 8.0%, 0.2% non-hydro – California 29.8%, 12.9% non-hydro(Energy Information Administration, Renewable Energy Outlook 2003 & Annual Energy Outlook 2005)


Benefits• Diversify Fuel Sources

• Reduction of pollution and liability exposure (coal, especially)

– Greenhouse Gas & Mercury Emissions

• Security/ Surety and on-site power generation

• Coal Imports & Transportation risks

• Aging Distribution Infrastructure (especially in “downtown”)

• Nonexistent Distribution Infrastructure

• Abundant Local Renewable Resources

• Local Economic Development


Financing Strategies

• Self-Fund

• Regulatory Renewable Energy Requirements & Funding

• Existing Bonding

• Third Party Financing

• Clean Energy Bonds

• Financing “Suites”


Self Financing Strategies

• Self-Fund

• 1% for Solar – “ the Restructuring dividend”

• Existing Government Financing


Regulatory Requirements & Funding for Renewable Energy

• State regulators of electric utilities in 25 states require minimum percentages of renewable energy

• Funding source available to meet requirement.• Funding is often made available to customers and

other renewable energy developers.• To see what is available in your state:

– Database of State Incentives for Renewable Energy http://www.ies.ncsu.edu/dsire/.

http://www.ies.ncsu.edu/dsire/


Green Tag Sales• The Sale of Renewable Energy Certificates (RECs)

• RECs are the renewable attributes unbundled from the energy produced from renewable energy systems

• Current Market Value of $155 to $185 million

• Current Price Range is wide: $.70 to $49 per Mh

• Fragmented Market, used for compliance and voluntary commitments

• As market matures and consolidates could be an additional source of financing


Existing Bond Funding

• Industrial Revenue “Special Purpose” bonds• Municipal Bonds


Third Party Financing

• Capital Cost Financed through a third party rather than customer or vendor financed

• Customer pays for energy produced by the renewable energy system and/ or shares the energy cost savings

• Third party is responsible for design, build, operations, maintenance and overall performance of system.

• Variations• Leasing

• Energy Savings Performance Contracts

• Independent Energy Producer Purchase Agreements


Clean Energy Bonds

• Clean Energy Bonds–Monetize tax aspects for non tax paying

entities (municipalities, tribes, coops, other nonprofits)

–Federal Energy Policy Act of 2005


Federal Investment Tax Credits

• 30% up to $2,000 per system residential• 30% no cap for commercial • Energy Policy Act of 2005• Begins 1/1/2006• Ends 12/31/2007 (but could be extended)


Accelerated Depreciation

• Five Year Accelerated Depreciation• Effective incentive (at 35% tax rate) of 12-15% of

capital costs


Financing “Suites”

• Combining the strategies

• Who coordinates?

• Internal coordination

• Third Party Financier

• integrates tax credits, accelerated depreciation, and other sources into a single financing package


Special Considerations for Government & Tribal Entities

• Do procurement protocols permit.• Lease or Ground lease mechanism.• Facilities Use Agreement for Tribal Entities.


Examples

· City of San Diego up to 5MW of PV

· City of Tucson, 5 municipal pools & Solar AC pilot · City of Long Beach

San Diego City Schools (1 MW)

Staples Distribution Facility, Rialto, California 280kW

Moscone Convention Center, San Francisco, California

US Postal Service, Sacramento, California, 593kW


Beginning the Process– all strategies

• Securing the Support of Elected Officials and Government Staff

• Identify potential projects/ sites (select)• Running the numbers• Select the Financing Approach• Convene the Technical Team• Identify & Assign Tasks


Securing the Support of Elected Officials and Government Staff

• Elected Officials– Advisory Bodies– Recognized Stakeholders– Relationship

• Staff– Advisory Bodies– Relationship

• Support– Preliminary– May need Resolution, Direction or Ordinance later


Identify potential projects/ sites• Identify select sites

– Comprehensive or Targeted Review• Physical Capacity

– Roof space (10 watts = 1 sf for PV, Solar Thermal, less)– Protected space (Ground Mounted)

• Loads– What load level and when?

» seasonally and daily– What kind of existing energy use ?

» Natural gas, Electricity• Intersecting the two


Running the numbers• Cash Flow Forecast 10 to 20 Years

– Capital Costs– Energy Production – Tax Credits and Incentives– Green Credit Sales/ Buy-downs– Projected Discount Rate– Operating Costs, maintenance, insurance, etc.– Current Price of Energy – Projected Energy Price Increases


Selecting the Financing Approach

Capital Requirements

Staff Responsibility

Document Development Scale Level

Self-Fund HIGH HIGH HIGH LOW to HIGHRegulatory Renewables MEDIUM HIGH HIGH LOW to HIGHThird Party Financing LOW MEDIUM MEDIUM HIGHClean Energy Bonds MEDIUM HIGH HIGH

MEDIUM to HIGH

Other Bonding MEDIUM HIGH HIGHMEDIUM to

HIGH

Financing SuitesMEDIUM to

LOW MEDIUM MEDIUMMEDIUM to

HIGH


Convene the Technical Team

• Financial Staff• Procurement Staff• Facilities Staff• Energy Manager• Technical Advisors


Identify & Assign Tasks

• Secure Sample Request for Proposals and/ or Quotations

• Revise RFP/ Q• Publish Request.• Establish Evaluation Committee.• Select Contractor & Establish Scope of Work.


Resources & Documents

Solar Financing Website:

http://energy.sandia.gov/SunEdison:

http://sunedison.comRWE Schott:

http://rweschottsolar.us

Email Valerie Rauluk: [email protected]

http://energy.sandia.gov/

http://sunedison.com/

http://rweschottsolar.us/

Venture Catalyst Inc. 20051 State, Municipal & Tribal Renewable Energy Financing Accessing Financing...

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