Solutions for Financing Local Government PV Projects September Nick Hylla, Executive Director Midwest Renewable Energy Association

Transcription

1 Solutions for Financing Local Government PV Projects September 2017 Nick Hylla, Executive Director Midwest Renewable Energy Association

2 MREA Overview Founded in c3 non-profit RE education and demonstration 3,000+ members

3 US Solar Additions Source: SEIA Solar Market Insight. 2017

4 Step 1: Organize In 2016, More Solar and Wind Were Installed in the US than any other Electricity Source.

5

6 WHICH LOOKS BETTER & WHY? Option 1 Source:

7 WHICH LOOKS BETTER & WHY? Option 2 Source:

8 WHICH LOOKS BETTER & WHY? Option 3 Source:

9 WHICH LOOKS BETTER & WHY? Option 4 Source:

10 WHICH LOOKS BETTER & WHY? Option 1 Option 2 Option 3 Option 4 Source:

11 GENERAL PROCESS FOR SOLAR ACTION CONSIDER YOUR OBJECTIVES, GOALS AND MOTIVATIONS ENERGY ANALYSIS Verify utility rate plans, net metering policies, both kwh and kw rates, and consumption profile (min 12 mos) SITE ASSESSMENTS Identify potential sites, locations, and system design objectives Prepare system sizing and energy production capacity modeling Prepare a site assessment report outlining the site potentials FINANCIAL MODELING & ANALYSIS Integrate system size, localized system cost assumptions Analyze system costs, incentives, O&M costs, energy production, financing costs, escalation assumptions, and projected cash-flow analysis Prepare an economic and financial analysis to identify best procurement options PROCUREMENT OF SERVICES Issue RFP to solicit project proposals, evaluation, and contractor selection SYSTEM INSTALLATION AND OPERATION Install system per design specifications and monitor energy production over life of system

12 DRIVING OBJECTIVES Reduce energy consumption Hedge against escalating future energy costs Energy production to reduce future operational costs Demonstrating commitment to sustainability policies Strong community support for lead by example model

13 ECONOMIC GOALS Does your community have capital or grant funds available? Is debt financing an option? Do you prefer a no-upfront cash model? Does your community have access to community solar garden subscriptions? Is there a ROI, or simple-payback objective?

14 MOTIVATIONS TO ACT Does your community have a sustainability policy? Is there an energy consumption reduction target? Is there a greenhouse gas emission reduction goal? How far along is the community in meeting its goals? Does it simply make economic sense to do so?

15 UTILITY RATE & CONSUMPTION ANALYSIS Implement energy efficiency solutions before or in conjunction with solar PV development Compile minimum 12 months of utility records organization and potential sites Engage utility to ensure understanding of utility rate plans and impact to rates if solar is added at properties Understand local net metering tariffs & interconnection requirements Understand kwh and kw and influence on utility costs

16 SITE ASSESSMENTS Identify potential sites, locations, and system design barriers Validate each sites current rate plans, consumption and costs Estimate system sizing and energy production capacity Validate site production capacities using modeling software Prepare a site assessment report summarizing findings

17 FINANCIAL MODELING Integrate system size, localized system cost assumptions Analyze system costs, incentives, O&M costs, energy production, financing costs, escalation assumptions, and projected cash-flow analysis Prepare an economic and financial analysis to identify best procurement options Running the value of money scenarios

18 PROCUREMENT SERVICES Establish reliable assumptions Understand the limits to each financing option before selecting path to pursue Partner with qualified technical and financial advisors Identify qualified vendors prior to issuing solicitation Options: Design-Bid-Build, Design-Build, Request for Information, Request for Proposal

19 AVAILABILITY OF CAPITAL Capital improvement funds State appropriation dollars Green Revolving Loan fund Donations Grants or incentives available dsireusa.org

20 DEBT FINANCING OPTIONS General Obligation Bonds Revenue Bonds Clean Energy Resources Bonds (CREBS) Capital Leases Non-appropriation Lease Energy Savings Performance Contracts (ESPC)

21 THIRD-PARTY FINANCING Lack of capital funds Lack of interest in borrowing Want to leverage ITC and depreciation partnering with tax-equity investor Options: Third-Party Financing, Power Purchase Agreements (PPA), pre-paid PPA, Solar Lease, Lease Back

22 MREA s NEW SOLAR FINANCE MODELING TOOL WEBSITE ADDRESS USER INPUTS System Finance Type Tax Status System Size, Cost, and Production Incentives Upfront Cash Incentives SRECS Production Based Incentives Operating & Return Assumptions Insurance Operating & Maintenance Panel Degradation Inflation Tax Assumptions Federal Tax Rate ITC Depreciation Basis Depreciation Basis Bonus Depreciation

23 FINANCIAL MODEL - 145kW ROOF MOUNT Location Local Unit of Government Building in the Twin Cities System Size Annual Energy Production Cost/Watt Utility Rates & Escalators Xcel Energy Utility Rate Value of Energy Production Financing Cost MREA ran (4) Financial Model Simulations 145 kw 201,998 kwh $2.05/watt General Service $.079/kWh Direct Ownership Debt Financing Third-Party Agreement 20 Year Term Third-Party Agreement 20 Year Term w/7 Year Flip System Performance Cash-Flow Projections The MREA financial models projections are based upon reasonable expectations of system performance, energy production assumptions, and other variables. Disclaimer: Municipalities are advised to verify all system performance cash-flow projections presented by MREA, or other solar developers with their tax account and municipal finance advisors.

24 145kW Roof-Mounted Direct Ownership

25 145kW Roof-Mounted Debt Financed

26 145kW Roof-Mounted 20 Year Third-Party

27 145kW Roof-Mounted 20 Yr w/7 Yr Flip - TPF

28 145kW Roof-Mounted Financial Comparison INPUTS Direct Ownership Debt Financed 20 Yr TFP 20 Yr TFP w/7 Yr Flip System Size 145kW 145kW 145kW 145kW System Term 30 Years 30 Years 20 Years 20 Years Electricity Rate ($/kwh) $.079/kWh $.079/kWh $.079/kWh $.079/kWh Electricity Rate Escalator (%) 3 % 3 % 3 % 3 % Debt Finance Amount ($) ($180,000) Debt Term (Years) 10 Years Debt Interest Rate (%) 3.25 % PPA Term (Years) 20 Years 20 Years PPA Rate ($/kwh) $ 0.08/kWh $0.08/kWh PPA Escalator (%) 1.5 % 1.5 % PPA Buyout (Year) Year 7 SUMMARY OF ECONOMICS Initial Capital Cost ($) ($297,250) ($127,250) Avoided Electricity Costs ($) $ 695,861 $ 695,861 $ 576,578 $ 576,578 Operating Expenses ($) ($157,045) ($151,162) ($ 77,998) Debt Payments ($) ($203,733) PPA Payments ($) ($443,752) ($145,660) PPA Buyout ($) ($125,045) Total Lifetime Benefits ($) $ 241,567 $ 203,733 $ 132,826 $ 67,131 Total Costs/Payments ($454,295) ($482,145) ($443,752) ($348,693) RETURNS Lifetime IRR ($) 7.17 % 3.17% Lifetime NPV ($) $90,524 ($38,675) $73,223 $96,389 Lifetime LCOE ($/kwh) $ $ $ $ 0.091

29 MREA Technical Assistance: Origination, Development & Financing Solar Project Development Steps Origination Development Financing Engineering, Procurement & Construction (EPC) Operations & Maintenance (O&M) MREA Assistance 29

30 MREA Technical Assistance Offerings SITE ASSESSMENTS Siting, location, and system optimization analysis Verification of utility rate plans, rates and consumption analysis System sizing and energy production capacity modeling Production of a Site Assessment report FINANCIAL MODELING & ANALYSIS Integrates system size, localized system cost assumptions Analyzes system costs, incentives, O&M costs, energy production, financing costs, escalation assumptions, and projected cash-flow analysis Presentation of financial analysis and recommended procurement strategies PROCUREMENT SERVICES & ASSISTANCE Offer template RFP and other contract documents for independent project development Assist with RFP development, solicit, and evaluation through contractor selection process GROUP BUY ASSISTANCE Assist communities with marketing outreach, contractor selection, site aggregation, and procurement

31 Solar Finance Resource Inquiries Eric Rehm, Jane Cowan, Nick Hylla Midwest Renewable Energy Association MREA Solar Finance Simulator MREA PV Technical Assistance Service