State, Municipal & Tribal Renewable Energy Financing

1. State, Municipal & Tribal Renewable Energy Financing Accessing Financing Opportunities for Government Renewable Energy Projects

2. Discussion Points • Definitions • Benefits of Renewable Energy • Financing Strategies • Examples • Beginning the Process

3. 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)

4. 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

5. Financing Strategies • Self-Fund • Regulatory Renewable Energy Requirements & Funding • Existing Bonding • Third Party Financing • Clean Energy Bonds • Financing “Suites”

6. Self Financing Strategies • Self-Fund • 1% for Solar – “ the Restructuring dividend” • Existing Government Financing

7. 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/.

8. 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

9. Existing Bond Funding • Industrial Revenue “Special Purpose” bonds • Municipal Bonds

10. 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

11. 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

12. 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)

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

14. 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

15. Special Considerations for Government & Tribal Entities • Do procurement protocols permit. • Lease or Ground lease mechanism. • Facilities Use Agreement for Tribal Entities.

16. 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

17. 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

18. 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

19. 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

20. 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

21. Selecting the Financing Approach

22. Convene the Technical Team • Financial Staff • Procurement Staff • Facilities Staff • Energy Manager • Technical Advisors

23. 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.

24. Resources & Documents Solar Financing Website: http://energy.sandia.gov/ SunEdison: http://sunedison.com RWE Schott: http://rweschottsolar.us Email Valerie Rauluk: vajra@vecat-inc.com