Residential Solar Investment Program Discussion on Steps 3 and Beyond Solar Connecticut November 20, 2012

Agenda  Public Policy Goal  Program performance (Steps 1 and 2)  CCEF vs. CEFIA  8-month results  Step 3  Installed Cost Projections  Solarize Tier I Pricing  Willingness to Pay  CEFIA Goals – What are Installer Goals?  Incentive Portfolio –Rebate, PBI, Financing Programs, Capital Competition, Incentive Cap, Leverage Ratio, Race to the Solar Rooftop – Step 3 and Step 4, Energy Efficiency  Next Steps 2

Public Act Section 106 Residential Solar Investment Program  The Clean Energy Finance and Investment Authority established pursuant to section n of the general statutes, as amended by this act, shall structure and implement a residential solar investment program established pursuant to this section, which shall result in a minimum of thirty megawatts of new residential solar photovoltaic installations located in this state on or before December 31, 2022, the annual procurement of which shall be determined by the authority and the cost of which shall not exceed one-third of the total surcharge collected annually pursuant to said section n. REFERENCES 30 MW is equivalent to about 4,300 homes installing 7 kW systems. 3

Program Performance CCEF vs. CEFIA (as of November 16, 2012) 4 Increasing the amount of rooftop solar PV deployed per dollar of ratepayer funds at risk

Program Performance 8-Month Results (as of November 16, 2012)  Number of Projects – nearly 640 applications approved with over 420 projects in progress or completed in eight months  Installed Capacity – 4.5 MW of installed capacity  Installed Costs – decreased by almost 10% from Step 1 ($5.30/W) to Step 2 ($4.80/W)  Investment – about $21.8 million of investment with $7.5 million coming from CEFIA; achieving a leverage ratio of 2:1  Number of Contractors – more than 40 contractors have done a Step 2 project, however, the “Top 10” contractors for the most number of projects have completed over 70% of the installations 5

Residential Solar Investment Program Installed Cost Projections for 2013  Current Data – installed cost on average in Step 2 (not including Solarize) for the “Top 12” installers (i.e. 25% of all installers) that comprise 80% of the market in terms of installations is $4.65/W  Installer Survey – issued survey to Solar Connecticut members and received responses from 22 installers that $4.50/W on average is what costs will be in 2013  Module Supplier Survey – $4.25/W in 2013 as a result of company consolidations leading to liquidation and temporary over-supply. Expect module prices to rise in 2013, which is an expectation and desire expressed by solar manufacturers.  CEFIA Point of View – estimated an average installed cost of between $4.25/W to $4.50/W by the end of 2013 before looking at the data of the top solar installers and developing the installer and module supplier survey 6

Residential Solar Investment Program Solarize Connecticut – Tier I Price Ranges 7 Under Solarize, the Tier I bid prices were 15% lower ($4.17/W) than the current average installed costs ($5.00/W)

Residential Solar Investment Program Willingness to Pay (as of November 16, 2012) 8 Residential solar PV customers are willing to pay between $3.30/W and up to $4.20/W after incentives. So if installed costs are $4.50/W, then a $1.00 to $1.25/W subsidy shouldn’t adversely impact demand.

Residential Solar Investment Program CEFIA Goals – What are Installer Goals?  Sustainable Market Development – avoid the stop-start nature of incentives that were experienced in the past  Leverage – achieve a 3:1 (25%) leverage of non-ratepayer funds to ratepayer funds  Costs – support strategies that make solar PV affordable and accessible – prefer more projects at less profit margin than less projects at high profit margin  Financing – shift from subsidy programs over time to low-cost and long-term financing  Energy Efficiency – incorporate cost effective energy efficiency measures into solar PV projects 9

Residential Solar Investment Program Proposed Step 3 Incentive Portfolio  Rebate – between $1.00/W to $1.50/W (≤5 kW at $1.50/W STC ; 5 to 10 kW at $0.75/W STC )  PBI – between $200/MWh to $250/MWh  Financing – launch programs to support local installers starting in January 2013 o Note – all CEFIA supported financing programs will draw incentives from the rebate bucket versus the PBI bucket  Capital Competition – starts with $1MM of debt capital at 2% interest for 20-year period (issue an RFP to determine what installer can deliver the most installed capacity with no subsidy). This capital doesn’t come out of Section 106 subsidies and may be just as sizable in terms of CEFIA funds made available. 10

Residential Solar Investment Program Step 3 Incentive Portfolio (continued)  Incentive Cap – in order to protect leverage of limited ratepayer capital, no project will receive incentives that are greater than 30% of the total installed cost of a system  Leverage Ratio – target of 25.0% from 33.3%  Energy Efficiency – incorporate measures beyond HES into solar PV projects. CEFIA is looking to sell RECs through a long-term agreement (i.e. 10 years) with a buyer at a fixed price from residential solar PV projects. CEFIA is looking at providing the present value of those RECs to the homeowner in the form of a coupon for energy efficiency (i.e. weatherization) 11

Race to the Solar Rooftop Commitment to Your Businesses  Step 2 – committed and delivering 5.6 MW of residential rooftop solar PV – 2.8 MW for rebate (≤5 kW at $2.275/W STC ; and 5 to 10 kW at $1.075/W STC – $1.68/W average) and 2.8 MW for PBI ($300/MWh)  Step 3 – seeking approval to deliver 7.6 MW of residential rooftop solar PV – 3.8 MW for rebate (target of $1.00 to $1.50/W STC ) and 3.8 MW for PBI (target of $200-$250/MWh)  Step 4 – looking to propose 10.0 MW of residential rooftop solar PV – 5.0 MW for rebate (TBD) and 5.0 MW for PBI (TBD) 12

Financing Programs Commitment to Your Businesses 13 Financing Program Indicative Interest Rate or Lease Rate TermFICO Projected Number of Projects (through end of 2014) Release Date Solar PV Lease* $90- $100/month 20 years640+1,551March 2013 Solar Loan**6.99% 7.99% 15 years 20 years January 2013 Credit Union Loan*** ≤4.49% ≤4.99% ≤5.99% ≤6.99% 5 years 7 years 10 years 12 years >20% <80% ,346 January 2013 Solar Thermal Hot Water Lease**** $45- $50/month 20 years March 2013 * Assumes a 7 kW system at $4.50/W and $7.00/month for O&M. Energy price escalator of 2.9% per year. ** Interest rates can be 9.99% and 10.99% if the household doesn’t use 80% of the value of the ITC to repay the loan after 18 months *** Supports “clean energy” technologies, including renewable energy (i.e. solar PV, SHWS, GSHP, etc.), energy efficiency (i.e. insulation, HVAC equipment, etc.), fuel conversion, and transportation (i.e. EV recharger). Note, it does not include small wind. **** Assumes 12 MMBtu system at $930/MMBtu and $6.25/month for O&M. Energy price escalator of 2.9% per year. Note – all financing programs are subject to CEFIA Board of Directors approval.

Residential Solar Investment Program Step 3 Requirements  Disciplinary Action – process for how CEFIA deals with disciplinary action on contractors who are breaking rules  Marketing Standards – requirement for contractors to follow appropriate marketing standards (i.e. reasonable energy price escalation rates, ITC impacts on payback, etc.)  Others – x 14

Next Steps  DEEP Commissioner – met with Dan Esty on November 7 (complete)  Deployment Committee Chair – call with Reed Hundt on November 16 th (complete)  Solar Connecticut – meet with the “Top 10” installers the week of November 19 th  DEEP Staff – brief staff the week of November 26 th  Deployment Committee – discuss with the Deployment Committee on November 30 th  Board of Directors – recommend for approval by the Board of Directors on December 21 st  DEEP – formal written approval of incentive on December 21 st 15

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