Financing Renewable Energy with CLEAN Programs December 6, 2011 Casey Johnston Renewable Energy Program Director ICLEI USA

Today’s Webinar Agenda: Welcome and Introductions Introduction to CLEAN Programs CLEAN Programs for US Cities Gainesville Feed in Tariff Program Introduction to Local Clean Program Guide Q&A - Webinar Participants Closing Goal: Ensure participants have a foundational understanding of what a CLEAN program is and what the Local Clean Program Guide offers local governments.

ICLEI’s Mission Our mission is to build, serve, and drive a movement of local governments to advance deep reductions in greenhouse gas emissions and achieve tangible improvements in local sustainability.

In 2010, the International City/County Management Association (ICMA) and ICLEI- Local Governments for Sustainability were competitively selected by DOE to conduct outreach to local governments across the United States, enabling them to replicate successful solar practices and quickly expand local adoption of solar energy. For more information visit Solar Outreach Partnership

Solar Powering Your Community: A Guide for Local Governments (2011) esources/guide_for_local_governments/ Relevant Tools and Resources Local CLEAN Program Guide coalition.org/local-action coalition.org/local-action Dsire Solar Policy Guide: A Resource for State Policy Makers icyguide/ icyguide/

The Local CLEAN Program Guide Free download: Structure of the Guide: Module 1: Overview & Key Considerations Module 2: Establishing CLEAN Contract Prices Module 3: Evaluating Avoided Costs Module 4: Determining Program Size & Cost Impact Module 5: Estimating CLEAN Economic Benefits Module 6: Designing CLEAN Policies & Procedures Module 7: Gaining Support for a CLEAN Program

Introductions Today’s Speakers Wilson Rickerson - Meister Consulting Group, CEO Pegeen Hanrahan - Community and Conservation Solutions, Principal Craig Lewis - Clean Coalition, Executive Director Bill Shepherd – Gainesville Regional Utility, Energy & Business Services Manager

What is a feed-in tariff? Four parts “feed” Utility must interconnect you (and you go to the front of the line) Utility must buy 100% of your power Utility must transmit or “dispatch” your power before fossil fuels You get a standard contract One part “tariff” A $/kWh price available to all comers CLEAN!

9 Countries with FITs in 2011 Source: REN21, Renewables 2010 Global Status Report Countries with regional FITs Countries with national FITs

GLOBAL INSTALLED CAPACITY BY INCENTIVE TYPE (%) Source: Bloomberg New Energy Finance Wind Solar 10

5.4% renewables in 1999 to 16.1% by % by 2020 target 38.6% actual projection (18.5% wind, 7% PV) 50% by % by % by 2050 The argument is between 80% renewable electricity and 100% renewable electricity 11 Market Growth in Germany

US Has Far Better Solar Resource than Germany Source: NREL

What does this have to do with cities? They started it… 1992: Aachen introduced 20- year PV FIT at $1.34/kWh (!) PV will grow: “if the operators of solar facilities were paid for the electricity they fed into the grid at a price that would cover their costs just as at any other power plant.”

Source: Rickerson, based on Solarenergie-Förderverein (1994)

The First Steps in the US? Gainesville, FL (32 MW) Sacramento, CA (100 MW) San Antonio, TX (5 MW) Marin County, CA (2 MW) NIPSCO, IN (30 MW) Consumers Energy, MI (5 MW) TOTAL: 166 MW

Are FITs right for your city? Are you served by a municipal utility? Create your own policy! Does your state have a FIT law? Position your municipality to go after it! Is your investor-owned utility looking to innovate? Partner up and create a new FIT! None of the above? There are other options…

CLEAN PROGRAMS FOR US CITIES AND GAINESVILLE’S FEED IN TARIFF DECEMBER, 2011 Pegeen Hanrahan, P.E.

Local Government Actions Local Governments manage:  Transportation  Infrastructure  Land use and zoning  Building codes  Landscaping  Waste management  Land conservation  Power generation

Gainesville Home to the University of Florida (Gators) Fifth largest university in the United States, 50,000+ Also home to Santa Fe College, 17,000+ Low tax base - rely heavily on municipal utility GRU Transfer $36.4 million per year from GRU to General Government

Gainesville City population of 130,000 More than 60 square miles 14th largest city in Florida County population of almost 250,000 and 930 square miles

Our Focus on Saving Energy, Increasing Renewables, Creating Jobs, Reducing Carbon Requires ambitious action, particularly given our population growth since Four key strategies:  Energy conservation  Energy supply  Transportation  Land use planning

US Mayors Climate Protection Agreement Signed by 78 Cities in Florida, 1054 Nationwide 23

Meeting Kyoto by 2013

A Three Pronged Approach 1. Maximize energy efficiency. Gainesville has been investing approx. $5.6 million per year in rebates and incentives for insulation, HVAC, lighting, roofing, water heating, and many other options. GRU matches business investment on a 1-for-1 basis, up to $100,000 per site. 2. Dramatically increase solar deployment, up to 32 MW by Shift from a power purchase contract with Progress, replace with 100 MW biomass plant using waste from forestry, urban tree trimming.

Comparison of Annual Carbon Reduction Impacts by 2013 Biomass Power Plant 334, 219 Energy Conservation Programs 177,650 Traffic Light Synchronization 82,701 Acquiring Land and Development Rights 31,824 Repowering Natural Gas Plant 31,801 Combined Heat and Power Plant 22,557 Landfill Gas to Energy Plant 19,678 Solar Photovoltaic Electricity 7,682 LED Traffic Signals 2,967 Total 711,079 In Metric Tons CO 2

Public Utility, Public-Private Partnerships Key

Gainesville’s Renewables Revolution In 2009 Gainesville became the first city in the United States to adopt a feed-in-tariff (also called CLEAN) policy to encourage development of renewable energy Since then there have been hundreds of new solar installations, with a total installed capacity now approaching 9 MW, an increase of over 2600%. We have become a model for other municipal utilities and some states.

Gainesville Adopted the First True Feed-in-Tariff (CLEAN Program) in U.S. Feed-in Tariffs Best to Deal with Climate Change Say IPCC Working Group FITs Least Costly--Most Competitive Mechanism Says Climate Researchers November 8, 2011 The 135-page report by the Intergovernmental Panel on Climate Change, makes it clear that the overwhelming weight of academic studies conclude that feed-in tariffs--or fixed-price mechanisms-- perform better at delivering renewable energy quickly and equitably than quota systems, such as Renewable Portfolio Standards in the US or the Renewable Obligation in Britain. This is not the unsurprising conclusion from a surprising source: the IPCC's Working Group III on Renewables. 29

Solar investors finance, fund and build projects, feed energy into grid GRU adds solar costs to all retail customers’ fuel adjustments GRU pays solar investors fixed rate for energy produced for 20 years GRU provides 20 year fixed price contracts to solar investors

Why Solar? Customer survey of 400 residential customers Would you support or oppose GRU’s efforts to encourage solar energy investments in your community if it would add one dollar or less per month to all customers’ utility bills? Support: 75 percent Strong community environmental ethic Largest single source of energy on planet Great faith in continued advances in cost- effectiveness

How does our FIT work? Cap of 4 MW a year to manage rate impact, hit first year’s capacity limit two days prior to implementation date of March 1 Capacity queue filled through 2016 for 32 MW Backed by excellent credit of our public utility: “AA” rated by Moody’s, Fitch and S&P

Making Clean Local Energy Accessible Now 33 CLEAN-Gainesville Seeds a US Solar Revolution

Solar Benefits Not Just Environmental Job creation Energy independence Fuel diversity, reliability and security Democratizing the grid Civic pride and publicity Contributing toward a green industry economic development cluster Building our innovation reputation

Indirect Benefits New solar companies and business models came to Gainesville Capital infusion into community New solar-friendly zoning rules Solar print and radio advertising Dramatic improvement in $/watt o 2008 ~$8.00/watt o 2010 ~$6.50/watt o 2011 ~$5.30/watt o 2012 Less than $5/watt New market in leasing rooftops

Indirect Benefits Invited by the White House Office of Intergovernmental Relations to be on a Panel at the U.S. Center in the Bella Center in Copenhagen Named a Green Global Capital Challenge City by Carbon War Room Gainesville Chamber of Commerce has embraced green tech

Commission “Signing Day”

Feed in Tariffs Deliver Results Over 50% of Wind Worldwide Over 75% of Solar PV Worldwide Over 90% of Farm Biogas Worldwide Paul Gipe, Windworks.org

With No RPS, No Carbon Laws (YET….) We will meet Kyoto Standard by 2013 Fuel Mix 2013 (Reduced Overall Demand):  62.6% Coal (same production capacity)  10.4% Natural Gas (cut in half)  5.2% Nuclear (same)  0% Oil (eliminated)  22% Renewable Energy  0% Purchased Power (eliminated) Our costs are comparable to other like utilities….

Thank You! Contact: Pegeen Hanrahan, P.E mobile 41

Craig Lewis Executive Director Clean Coalition Local CLEAN Programs Driving Renewables and Economic Benefits at the Local Level

Clean Coalition – Mission and Advisors Mission Mission To implement policies and programs that transition the world to cost- effective clean energy now while delivering unparalleled economic benefits Board of Advisors Jeff Anderson ED, Clean Economy Network Josh Becker General Partner, New Cycle Capital Jeff Brothers CEO, Sol Orchard Jeffrey Byron Former Commissioner, California Energy Commission Rick DeGolia Executive Chairman, InVisM, Inc. Mark Fulton Managing Director, Global Head of Climate Change Investment Research, DB Climate Change Advisors, a member of the Deutsche Bank Group John Geesman Former Commissioner, California Energy Commission Patricia Glaza Principal, Arsenal Venture Partners L. Hunter Lovins President, Natural Capitalism Solutions Dan Kammen Chief Technical Specialist for Renewable Energy and Energy Efficiency, World Bank Fred Keeley Treasurer, Santa Cruz County, and Former Speaker pro Tempore of the California State Assembly Felix Kramer Founder, California Cars Initiative Governor Bill Ritter Director, Colorado State University’s Center for the New Energy Economy, and Former Colorado Governor Terry Tamminen Former Secretary of the California EPA and Special Advisor to CA Governor Arnold Schwarzenegger Jim Weldon CEO, Solar Junction R. James Woolsey Chairman, Woolsey Partners, and Former Director of the CIA Kurt Yeager ED, Galvin Electricity Initiative

Ultimate Clean Coalition Vision

What is Holding Renewables in U.S. Back? Technology solutions are ready Capital is swarming POLICY IS MISSING It is hopefully coming though, via: SB32 – statewide CLEAN Program in California DSIS / Rule 21 Interconnection Reform in California + FERC Local CLEAN Program Guide for local jurisdictions Policy needs to solve the top three barriers to project development: Procurement – getting contracts to sell energy to utilities Interconnection – getting projects interconnected to the distribution grid Financing – getting projects financed

U.S. Policy Gap for Clean Local Energy National policies focus on removing barriers for large-scale renewable power facilities and infrastructure. State and local net-metering policies promote small-scale renewables: Net-metering is designed to reduce a utility customer’s electric bills Net metering is not designed for owners of commercial and multi-tenant properties (where tenants pay the utility bills) Annual on-site energy often caps net-metering project sizes Investors and lenders find “revenue” from a utility customer’s energy savings from net-metering far less attractive than a true revenue stream from a utility

What Does Policy Need to Do? Focus on Wholesale Distributed Generation aka Wholesale DG or WDG Implement CLEAN Programs to overcome top three barriers to renewable energy project development Let private capital transform the energy industry Energy industry is like telecom industry 30 years ago Policy innovation needed to drive technology innovation and capital flows

Superior Value of Wholesale DG Solar Solar Markets: Germany vs California (RPS + CSI + other) Germany added 28 times more solar than California in Even though California’s solar resource is 70% better!!! Sources: CPUC, CEC, SEIA and German equivalents.

CLEAN Programs Defined (FITs + Interconnection) CLEAN Features: Standard and guaranteed contract between the utility and a renewable energy facility owner Predictable and streamlined distribution grid interconnection Predefined and financeable fixed rates for long durations CLEAN Benefits: Removes the top three barriers to renewable energy The vast majority of renewable energy deployed in the world has been driven by CLEAN Programs Allows any party to become a clean energy entrepreneur Attracts private capital, including vital new sources of equity Drives local employment and generates tax revenue at no cost to government

Making CLEAN Programs Easy Targeting communities and individual utilities with Local CLEAN Program Guide Targeting states with to-be-developed State CLEAN Program Guide Accessible to all via free download at Clean Coalition website

CLEAN Programs are Simple and Transparent CLEAN Programs remove barriers and reduce costs Typical German paperwork for one projectTypical California paperwork for one project Could be a 1kW-sized project, but maximum 1MW (via CSI program). Even more paperwork for California projects larger than 1MW (via RPS program). Could be a 1kW or 20MW-sized project, or bigger. Source: Gary Gerber, President of CalSEIA and Sun Light & Power, Jun09 CLEAN can easily reduce costs by 20% by preempting bureaucracy alone

CLEAN Gainesville Seeds a U.S. Solar Revolution Source: Gainesville Regional Utilities, April 2011

CLEAN California Campaign Partners – Join Us

Free download: Contact us: Structure of the Guide: Module 1: Overview & Key Considerations Module 2: Establishing CLEAN Contract Prices Module 3: Evaluating Avoided Costs Module 4: Determining Program Size & Cost Impact Module 5: Estimating CLEAN Economic Benefits Module 6: Designing CLEAN Program Policies & Procedures Module 7: Gaining Support for a CLEAN Program Download the Local CLEAN Program Guide

For communities with no formal control over the distribution grid: CLEAN Retail Contracts Program: Have control of retail electricity purchases only like in cities served by Investor-Owned Utilities: City offers standard retail Power Purchase Agreement (PPA) Predefined rates for energy delivered for a long duration Predefined sites for projects Developer installs and interconnects renewable facilities “behind the meter” to serve on-site load to predefined sites CLEAN Contracts Program: Have control over wholesale electricity purchases, but no control of local electricity grid, like in Community Choice Aggregation (CCA) jurisdictions: Same as a CLEAN Program, minus grid access procedures, which are still controlled by the underlying utility Hybrid CLEAN Programs

CLEAN Avoids Hidden Transmission Costs Source: CPUC IOU RPS Project Status, October 2011 Source: Clean Coalition

CLEAN Locks In Reasonable Electricity Rates CLEAN Programs result in cost savings as avoided costs increase: Avoided costs may include fossil fuel, new peaker plants, transmission costs Gainesville, FL increased solar by 2,000% with <1% ratepayer impact Sacramento, CA procured 100 MW renewables with no ratepayer impact ¢/kWh For this single 10 kW solar rooftop project in Colorado, avoided costs will rise above the CLEAN contract price within a few years

Economies-of-Scale Make Solar Cost-Effective CLEAN Rates required for PV rooftop projects up to 30kW. Assumptions include $3.50/W instaIled cost (20% higher than in Germany) + use of US federal tax benefits Source: John Farrell, ILSR, Jun2011:

CLEAN projects are “shovel-ready” and create local jobs now – no delays for transmission and associated environmental reviews and community opposition Renewable energy creates far more jobs than fossil fuels or nuclear CLEAN Maximizes Local Jobs Creation

Local Job Creation Local Capital Investment CLEAN Programs level the playing field, giving local residents and businesses the opportunity to reinvest capital in the community Local ownership of renewable energy increases the economic benefits to the community by 200% to 300% (Source: U.S. Government Accountability Office) Local Tax Revenues Local job creation and capital investment in the community creates new sources of local tax revenues CLEAN Maximizes Local Economic Benefits

Map of CLEAN Programs in the U.S. and Canada

Q&A and Discussion Comments and Questions Please type in the right hand side of your screen Direct questions to: “All Panelists”

The Conversation Continues…

Thank You! Casey Johnston

Back-up Slides

CLEAN Programs Ramping in the United States Local CLEAN Programs Gainesville (early 2009) Sacramento (early 2010) San Antonio (June 2010) Los Angeles (expected 2011) Fort Collins, CO (expected 2011) Palo Alto, CA (expected 2011) Local CLEAN Program Guide (2011) State CLEAN Programs Vermont enacted the first statewide program in mid-2009 Hawaii and Oregon enacted programs in 2010 Rhode Island enacted a program in the fall of 2011 Connecticut moving Governor-sponsored CLEAN legislation CLEAN California Campaign State CLEAN Program Guide (2012)

CLEAN Programs Unleash Wholesale DG CLEAN Programs provide Transparency, Longevity & Certainty (TLC)* to the Wholesale Distributed Generation market by removing the main barriers to the sale of clean local energy to utilities for local use. Procurement Barrier: Securing a contract to sell renewable energy involves high transaction costs and risks Solution: Standardized contract terms and rates for long duration Grid Access Barrier: Gaining access to the distribution grid is risky, expensive, and time-consuming Solution: Transparent and streamlined distribution grid interconnection process Financing Barrier: Risk associated with other noted barriers and lack of secure financial basis to attract investors and lenders Solution: Predictable cash flow stream from a low credit-risk source (the utility)

Germany Has Cheapest Solar in World (US$0.12/kWh) Most expensive German CLEAN rate is set for solar Germany’s weighted average solar rate is about US$0.30/kWh In Colorado, the equivalent rate would be less than $0.12/kWh Tax credits in US reduce the German rate by 40% Investment Tax Credit (ITC) and Accelerated Depreciation Solar resource is at least 50% better in Colorado, which reduces German rate by more than an additional one-third Effectively: 30 cents/kWh goes to 18 and then to less than 12 German PV rate of 30 cents is equivalent to less than 12 cents in Colorado

CLEAN California is about Economics CLEAN California = 3x job creation + $50 billion added private investment UC Berkeley study (Dan Kammen)

CLEAN Maximizes Local Economic Benefits CLEAN keeps energy dollars in the community: CLEAN Programs for California RPS vs. baseline approach: 3 times more jobs $50 billion additional private investment $1.7 billion additional state revenues Low burden on the community and the utility: Does not rely on subsidies or other government expenditures Can be easily implemented and administered by utility staff