1. 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. 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. 2 Why Policy Analysis? Germany has ~ 5 times as much PV as the U.S. due to favorable policies

3. 3 Financing Options Status quo: 100% of electricity from utility Direct Purchase 3rd party financed Purchase RECS

4. 4 Power Purchase Agreements

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

6. 6 PPA Considerations to Weigh May not beat current electricity rates Tough economics for small projects Higher transaction costs REC and project ownership requirements No Upfront Costs No O&M Benefit from tax incentives Lock-in energy price Path to ownership Challenges Benefits 6

7. 7 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 Power Purchase Agreement Examples / Analysis PPA Checklist for State and Local Governments http://www.nrel.gov/docs/fy10osti/46668.pdf

8. 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. 9 Qualified Energy Conservation Bonds

10. 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.pdfhttp://www.nrel.gov/docs/fy11osti/49450.pdf

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

12. 12 Bond + Capital Lease + PPA

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

14. 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. 15 Other Resources

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

17. National Renewable Energy Laboratory Innovation for Our Energy Future http://financeRE.nrel.gov NREL’s RE Project Finance Website http://financeRE.nrel.gov UserLogin:registeredusers cancomment,ratecontent 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 Feature Analyses: Unique NREL analysis about policies, innovations and market conditions that impact RE project financing

18. 18 18 Simple LCOE Tools: Geo, Wind, PV Cost of Renewable Energy Spreadsheet Tool (CREST) Model: Designed to give PUCs & others a tool & 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: o PUCs o Utilities o 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. 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. 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. 31 st : 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. 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: 21 Solar (electric, heat, and thermal) Landfill gas Wind Biomass Geothermal (electric, heat pump, direct-use) Municipal solid waste CHP/ cogen Anaerobic digestion Microturbines

22. 22 Energy Savings Performance Contracting

23. 23 Energy Savings Performance Contracting (ESPC) ESPC Partnership Energy Service Company (ESCO) Site Customer Over 90 DOE Qualified ESCOs, including: For Full Listing: http://www1.eere.energy.gov/femp/financing/espcs_qualifiedescos.htmlhttp://www1.eere.energy.gov/femp/financing/espcs_qualifiedescos.html 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.

24. 24 ESPC’s Re-allocate Current and Future Energy Spending24

25. 25 Energy Savings Performance Contracting (ESPC) 1-2 Year ROI30+ Year ROI Possible to bundle renewable energy with energy efficiency measures through ESPC