2. 2 Padric Clancy Ben Elkin Maryam Mozafari Hannah Ray Jake Sadie Albert Yuen

3. Outline What is “Community Solar”? Financial incentives for community solar Modeling Results 3

4. Community solar 4 Community owned 77.7 W solar array in El Jebel, Colorado Community solar (WA SSB 6658): solar energy systems owned by local individuals, households, nonprofit organizations, or non-utility businesses that are placed on local government property

5. Potential Locations

6. Incentives Investor-owned (LLC)Non-profit (school bond?) Federal Investment tax credit30% of system costNo Accelerated depreciation5-yearNo State WA Solar production incentive (SSB 6658) $1.08/kWh for WA- made solar. $5000/yr max in OPALCO Sales tax exemptionYes OPALCO Member-owned renewable energy (MORE). 10,000 kWh/yr max per system $0.20/kWh for 10 years + $0.10 for 3 years 6

7. Modeling Input Parameters (fixed): Annual energy output (i.e. capacity factor) Capital cost Annual operation and maintenance cost Resale value of the system Variables: Washington vs. non-Washington Modules and Inverters Financing: LLC vs. Non-profit vs. Bond Installation year Installed cost ($/W) System size (kW)

8. Results ROE vs. Installation Year, Finance Structure & Equipment: 8 $/W: All WA = 7.5 WA Module = 6.2 Non-WA = 4.85 Term ends in 2020 System size = 4.95 kW All LLC Data shown reflects ITC Grant rather than Tax Credit

9. ROE vs. Size, Finance Structure, and Equipment: 9 $/W: All WA = 7.5 WA Module = 6.2 Non-WA = 4.85 Installation date is 2011

10. Federal Incentives Business Energy Investment Tax Credit (ITC) : 30% Tax Credit ITC in form of a Treasury Grant – Construction < 2011 Modified Accelerated Cost Recovery System (MACRS): 10 Only applicable to commercial entities

11. WA State Incentives Washington State SB6658: Production Based FIT (Residential, Utility or Community) $ 0.30 /kWh – non-WA $ 0.72 /kWh – WA solar panels $ 1.08 /kWh – WA inverter & solar panels Max Eligible Capacity = 75 kW On Government Property Total available fund = 5% of (0.5% of the utility’s operational revenue or $100,000, whichever is greater) = $5000/yr Ends June 2020 11

12. WA State Incentives Washington State Sales tax exemption: Through June 30, 2013 no sales tax on the sale of solar electric equipment for systems 10 kW or less. Systems over 10 kW are sales tax exempt through June 30, 2011. Between July 1, 2011 and June 30, 2013, solar PV systems that exceed 10 kW are subject to sales tax, but qualify for a refund of 75% of their applicable sales tax. Solar PV systems sold after June 30, 2013 are subject to full sales tax. 12

13. Local Utility Incentives OPALCO Member Owned Renewable Energy (MORE): Voluntary contribution towards green energy The interconnection year determines the rate for 10 years Additional $0.10/kWh bonus payment through June 30, 2014 Capped at 4,000 kWh/year (Residential) & 10,000 kWh/year (Commercial) 13 Interconnection YearEstablished rate /kWh Before July 2012 $0.20 2013$0.17 2014$0.14 2015$0.11

14. 14

15. 15

16. Recommendations Due to time sensitivity, the project is viable only if started before 2013 - ROE >10% An LLC finance/legal structure is necessary to take advantage of the federal ITC grant Installation is limited to 5kW or below, as return on equity decreases sharply with project sizes above this threshold 16

17. Legislation Assessment Equity: Discrimination against small utilities and cities as well as lower income entities (low tax appetite) Economic Inefficiency: Favoring the monopolist low efficient manufacturer (Silicon Energy) – Absence of competitive market Market Failure: Investors being able to cut each other out of the ‘pie’ What needs to change: Available fund (Increase) Policy Amendment Price of WA modules (Decrease) Competitive Market 17

18. 18 Special Thanks to: Chris Greacen

19. Profitable scenarios WA modules Equity return: 17% WA modules + WA inverter Equity return: 38% 19