1. PV Market Update and Creative Financial Structures Jason Coughlin National Renewable Energy Laboratory June 17, 2008 NYC Solar Summit 2008

2. US Solar Industry 2007 Year in Review 150 MW installed in 2007 (45% increase from 06) 12,700 sites connected to the grid in 2007 Average US residential system: 4.8 kW Average US commercial system: 69 kW 4th largest market after Germany, Japan, and Spain Source: Solar Energy Industry Association & Prometheus Institute http://www.seia.org/Year_in_Review_2007_lr.pdf

3. 200520062007 06-07 State California52718723% New Jersey5.51817-6% Nevada0.52.615477% Colorado0.20.9121233% New York1.42.74.463% Big projects in Nevada (15 MW) and Colorado (8 MW) impacted rankings Sources: Prometheus Institute, July 2007 as presented by Mark Sinclair of the Clean Energy States Alliance at the NARUC workshop on Nov. 14, 2007.http://www.narucmeetings.org/Presentations/Sinclair_2.pdfhttp://www.narucmeetings.org/Presentations/Sinclair_2.pdf Solar Energy Industry Association & Prometheus Institute http://www.seia.org/Year_in_Review_2007_lr.pdf Top 5 States for PV

4. Why? Renewable Portfolio Standard (ideally with a solar/DG carve out) Good incentives and commitment to renewables Above average cost of electricity

5. * Source: EIA Annual Energy Review 2007 Nonetheless, a long way to go.. 2.4% Electricity Generation: 2006

6. Federal ITC in jeopardy Solar Investment Tax Credit 30% of installed cost –$2,000 cap for residential PV Expires on 12/31/2008 Business ITC reverts back to 10% Residential ITC will expire Lots of legislation in Congress yet none has a clear path to approval

7. H.R. 6049 Renewable Energy and Job Creation Act Highlights of H.R. 6049 –Extend commercial ITC at 30% for 6 more years –Removes limitation on public utilities –Extend residential ITC at 30% for 6 years ($4,000 cap) White House views on 6049 –support the concept but not financing mechanism –senior advisers would recommend a veto Failed in the Senate last week

8. Potential impact if 30% ITC not renewed Navigant Consulting 1 –325MW of PV instead of 565 - 790MW –39,400 jobs will be lost in 2009 –$8 billion in investments will not happen GreenTech Media 2 –The greatest foreseeable threat to the PPA market in the U.S. is the expiration of federal Investment Tax Credit (ITC) provisions. Lessons from Wind Industry 1. Economic Impacts of Tax Credit Expiration. Navigant Consulting. February 2008. 2. Solar Power Services: How PPAs are changing the PV Value Chain. John Guice and John King. GreenTech Media. February 2008.

9. Impact of PTC volatility Source: Adapted from American Wind Energy Association ( http://www.awea.org/)

10. Creativity drives the market

11. Third Party PPA Models Host Government Commercial Residential Solar Developer SunEdison MMA Renewable Ventures Many others Investors Tax equity Debt Fixed price power for 15-20 years Purchase PV System output $$$ Return on Investment Debt Service Federal Government Tax benefits

12. “Berkeley Model” Property Tax Finance Model City borrows money to pay for the installation of residential PV systems upfront Repaid over 20 years as part of property tax bill Security for lenders and the city Transferable to next homeowner Lender (bond/loan) Berkeley Homeowner Finances system Property taxes Repays loan $$

13. Community Solar – “Virtual PV” City of Ellensburg, WA 1 –36 kW system (168 kW potential) –intermediate step between participation in a green power program and owning a complete system –proportional ownership of system SMUD SolarShares 2 –1 MW system –20 year PPA with enXco –focus on renters and occupants of multi-unit buildings 1. http://www.greentagsusa.org/renewables/ellensburg.shtm 2. http://www.smud.org/news/releases/08archive/04-17-08_solar_shares_contract.pdf

14. Residential Solar Leasing PV Vendor Lessor Homeowner Investors Lease Payments Lease PV system Investors/Lessor takes the tax benefits Goal: Utility savings ≥ Lease payment Minimize upfront investment Ownership options at end of lease term

15. Incorporating Solar into New Construction Solar communities Roof-integrated PV (BIPV) “PV Ready” –Pre-wired –Roof pitch –Roof Orientation

16. Oregon: Monetize tax credits Business Energy Tax Credit (BETC) State Income Tax Exemption –50% taken pro-rata over 5 years Pass Through Option –Governments and non-profits can sell their BETC School Entity that pays state tax BETC Upfront cash payment Reduces tax burden Installs PV system BETC $$ Source: Oregon Department of Energy. Pass-Through Option http://www.oregon.gov/ENERGY/CONS/BUS/tax/pass-through.shtml

17. Non-profit (PHC) Investor Partnership Non-profit (PHC) Partnership flip model with a non-profit organization Creates a structure to allow a non-profit to benefit from tax incentives Incorporates a PPA Largest PV system in Oregon (870 kW) Portland Habilitation Center (PHC) Source: The Oregonian: Tax breaks turn solar power into hard cash. Gail Kinsey Hill. March 16, 2008. www.phcnw.com/pages/documents/ARTOregonian031608-Taxbreaksturnsolarpower.pdf

18. Denver: PV and Affordable Housing Tax equity investor universe similar for solar and affordable housing Northeast Denver Housing Center and Groundwork Denver –Stapleton project –Whittier project Key Element: Train residents within the community as solar installers

19. DOE Solar America Cities 25 cities across the United States Financial and technical assistance 2-year program to develop comprehensive programs that incorporate PV and SHW into city planning

20. Conclusions 2007 was a good year for PV Momentum is jeopardized by expiring federal tax incentives Creativity is the key to getting PV projects installed

21. The U.S. Department of Energy’s National Renewable Energy Laboratory www.nrel.gov The U.S. Department of Energy’s National Renewable Energy Laboratory www.nrel.gov Golden, Colorado Contact Information Jason_Coughlin@nrel.gov 303-384-7434