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Public Private Partnerships for Financing Energy Efficiency and Renewable Energy Deployment

Public Private Partnerships for Financing Energy Efficiency and Renewable Energy Deployment. Boulder County Parks and Open Space Paul Schwabe Financial Analyst, NREL November 29, 2012. Why Policy Analysis?. Germany has ~ 5 times as much PV as the U.S. due to favorable policies.

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Public Private Partnerships for Financing Energy Efficiency and Renewable Energy Deployment

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  1. Public Private Partnerships for Financing Energy Efficiency and Renewable Energy Deployment Boulder County Parks and Open Space Paul Schwabe Financial Analyst, NREL November 29, 2012

  2. Why Policy Analysis? Germany has ~ 5 times as much PV as the U.S. due to favorable policies

  3. Financing Options

  4. Power Purchase Agreements

  5. Third Party Power Purchase Agreement The customer agrees to host the system and purchase the electricity Revenue from electricity sales $ “Host” of Renewable Energy Generation Equipment Renewable Energy Developer and Financial Partner Renewable electricity at fixed prices Various project finance structures Remaining electricity needs Worth ~50% of the cost of a solar system Local Utility Tax Benefits

  6. PPA Considerations to Weigh Challenges Benefits

  7. Power Purchase Agreement Examples / Analysis PPA Checklist for State and Local Governments • Example PPA at NREL (pictured): • 720 kW (1200 MWh) single-axis tracking, ~ 5 acres • 20 year PPA contract, 20 year easement • RECs sold to Xcel Energy for RPS solar set-aside (20 year contract) • PPA price equal to or less than utility electricity prices http://www.nrel.gov/docs/fy10osti/46668.pdf

  8. PPA Examples • City of San Diego • Denver International Airport • Military Facilities • Port of Oakland • Fresno State University • Fresno Yosemite Airport • City of Tucson • Boulder County • City of Boulder, CO • Various California School Districts • Montgomery County, MD • Morris County, New Jersey • Union County, New Jersey • City of San Francisco • • City of Arvada, CO • • County of Broomfield, CO • • City of Rifle, CO • • Various California State University campuses • • Denver Public Schools • • Various California water districts • • Los Angeles MTA • • NREL • • City of San Jose, CA • • Minneapolis, MN • • Sacramento • • University of Maryland • •Salt Lake County, UT • •Many Others....

  9. Qualified Energy Conservation Bonds

  10. Qualified Energy Conservation Bonds • How they work: • Federally subsidized bonds that allow governments and tribes to borrow money at very low costs and for long periods • Debt instrument - not a grant! • Can be used for a variety of EE/RE and green community programs Yolo County Case Study: http://www.nrel.gov/docs/fy11osti/49450.pdf

  11. QECB Mechanics and Subsidy Example Example: 5.5% taxable bond issue -3.0% QECB direct subsidy * =2.5% Net QECB interest rate $Bond Proceeds $Bond Principal $Bond Proceeds Qualified Project Qualified Issuer Taxable Bond Investor 5.5% Bond Interest QECB Allocation 3.0% QECB Subsidy U.S. Treasury * QECB subsidy rates fluctuate, see: https://www.treasurydirect.gov/GA-SL/SLGS/selectQTCDate.htm

  12. Bond + Capital Lease + PPA

  13. Hybrid Bond + Lease + PPA (Morris Model) Transactions Bond issuance Bond proceeds and RE ownership passed to developer through a lease-purchase Lease payments used to repay principal and interest to bondholders 1 2 2 3 3 4 1 2 3 4 Issuer purchases renewable electricity at reduced rates due to tax incentives (PPA) &low interest loan (bond)

  14. Hybrid Bond + Lease + PPA • Morris County, New Jersey • Aggregation: 3.2 MW from 19 facilities for 7 local governments • Credit quality: Bond Pricing with AAA County Guaranty: 4.46% • Savings: Expected to save $2M; • year 15 PPA price equal to today’s retail price Detailed Financing Information Available At: http://www.nrel.gov/docs/fy12osti/53622.pdf

  15. Other Resources

  16. Community Solar and Solarize Analyses • Community Solar • One PV System – Many Participants • Various ownership, and metering options http://www.nrel.gov/docs/fy11osti/49930.pdf • Community Purchase / “Solarize” • Many PV System – Many Participants • Concept of a group buy • http://www.nrel.gov/docs/fy12osti/54738.pdf

  17. NREL’s RE Project Finance Website http://financeRE.nrel.gov http://financeRE.nrel.gov • Feature Analyses: Unique NREL analysis about policies, innovations and market conditions that impact RE project financing User Login: registered users can comment, rate content • Flexible Search: by keyword, or by filters (single/multi-) by sector, tech, size, policy, financing structure, and/or content type • Blog Analyses: Credible, objective policy and market observations from NREL analysts National Renewable Energy Laboratory Innovation for Our Energy Future

  18. Simple LCOE Tools: Geo, Wind, PV • Cost of Renewable Energy Spreadsheet Tool (CREST) Model: • Designed to give PUCs & othersatool & methodology to quickly evaluate LCOE • Can handle simple or complex level of inputs (user’s choice) • Simple to operate – no macros • Outreach and interaction tool: • PUCs • Utilities • Other Stakeholders • Solar, geothermal and wind • Whitepaper: • “Renewable Energy Cost Modeling: • A Toolkit for Establishing Cost-Based Incentives in the United States” http://financere.nrel.gov/finance/content/CREST-model

  19. Contact Information: Paul Schwabe Energy Analyst, National Renewable Energy Laboratory V: 303-384-7468 E: paul.schwabe@nrel.gov Source: SunEdison and NREL. Alamosa Colorado. 8.2 MW

  20. Federal Tax Credits to Support Renewables • 1) 30% upfront Investment Tax Credit (ITC) • Eligibility: solar (PV & thermal), wind, municipal solid waste, biomass, geothermal (10%) • In service prior to Dec. 31st: 2016 (solar), 2012(wind), 2013 (others) • OR • 2) 2.2 cents/kWh Production Tax Credit • Eligibility: wind, municipal solid waste, biomass (& others) • In service prior to: December 31st, 2012 (wind) or 2013 (other)

  21. Federal – Modified Accelerated Cost Recovery System (MACRS) • What: Accelerated tax depreciation of owned assets • Who: Commercial and industrial businesses • Length: 5 year schedule • Can be claimed along with either ITC or PTC • Eligibility Includes: Solar (electric, heat, and thermal) Landfill gas Wind Geothermal (electric, heat pump, direct-use) Municipal solid waste Biomass Anaerobic digestion CHP/ cogen Microturbines

  22. Energy Savings Performance Contracting

  23. Energy Savings Performance Contracting (ESPC) ESPC is a no upfront contracting mechanism between a site customer and an energy service company (ESCO). Costs of energy conservation measures are incurred by ESCO and is repaid through energy and operations savings. Energy Service Company (ESCO) Site Customer Over 90 DOE Qualified ESCOs, including: ESPC Partnership For Full Listing: http://www1.eere.energy.gov/femp/financing/espcs_qualifiedescos.html

  24. ESPC’s Re-allocate Current and Future Energy Spending

  25. Energy Savings Performance Contracting (ESPC) Possible to bundle renewable energy with energy efficiency measures through ESPC 1-2 Year ROI 30+ Year ROI

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