1. Powering Green: An Overview of Issues in Generating Solar Power on Buildings and Sites The material provided herein is for informational purposes only and is not intended as legal advice or counsel.

2. 2 Please help yourself to food and drinks Please let us know if the room temperature is too hot or cold Bathrooms are located past the reception desk on the right Please turn OFF your cell phones Please complete and return surveys at the end of the seminar

3. Powering Green Chris Stevenson, Esq.

4. 4 Powering Green Renewable Energy Class I - solar technologies, PV technologies, wind, fuel cells, geothermal, wave or tidal, and methane from landfills or biomass Class II - resource recovery facility or hydropower facility

5. 5 Powering Green Market Growth/Potential Solar PV growing 45% annually Installations of solar PV doubling every 2 years - expected to continue until at least 2020 According to USDOE, the electricity needs of entire U.S. could theoretically be met by a PV array within an area 100 mi. x 100 mi. (10,000 sq. mi.), which is equivalent to just under 0.3% of land area of U.S.

6. 6 Powering Green Market Growth/Potential (cont.) Estimated that U.S. has 8,620 sq. mi. of building area (roofs and facades) suitable for generating solar power Estimated that one-half of that area could supply almost 30% of U.S. electricity According to USDOE, PV power will be competitive in price with traditional sources of electricity within 10 years

7. 7 Powering Green Market Growth/Potential (cont.)  NJ is No. 2 nationally for solar power installations  NJ solar 100+ MW as of October 2009  Up to 2,200 additional MW in next decade  RPS goal of up to 3% solar by 2020 and 7% by 2026

8. 8 Powering Green Federal Legislation Climate Change / GHG Reduction –Waxman-Markey Bill (American Clean Energy and Security Act of 2009) –Kerry-Boxer Bill (Clean Energy Jobs and American Power Act) –Kerry-Graham-Lieberman Framework for Climate Change and Energy Independence Legislation The Stimulus (American Recovery and Reinvestment Act of 2009) –Extension of credit for electricity produced from certain renewable resources

9. 9 Powering Green Federal Legislation (cont.) 10 Million Solar Roofs and 10 Million Gallons of Solar Water Heating Act of 2010 (S. 993) –“use of solar photovoltaics on the roofs of 10 percent of existing buildings could meet 70 percent of peak electric demand” –“the State of New Jersey is second in the United States in installed solar photovoltaic systems and has used incentive programs to achieve 90 megawatts of installed solar capacity”

10. 10 Powering Green Federal Legislation (cont.) 10 Million Solar Roofs (cont.) –“despite inventing solar technology, the United States has fallen behind nations with less solar resources because those nations have set in place policies to promote solar energy, and the United States now ranks fourth in installed solar behind Germany, Spain, and Japan”

11. 11 Powering Green NJ Legislation NJ Global Warming Response Act The Solar Energy Advancement and Fair Competition Act –Increasing RPS for solar Favorable siting legislation NJ Programs EMP, BPU, Clean Energy Program –RPS goals

12. 12 Powering Green NJ Programs (cont.) EMP, BPU, Clean Energy Program (cont.) –Helped to install 90+ MW of solar capacity during last eight years –From 6 installations to more than 4,000 in eight years –Rebates, net metering, standardized interconnection, RPS for solar, SREC trading system –Clean Energy Fund ↓ ↓ ↓ ↓

13. 13 Powering Green Innovations in Financing Power Purchase Agreement Solar Lease RPS/SACP SRECs Tax credits

14. 14 Powering Green May 12, 2010 Solar Options for Buildings/Sites Lyle Rawlings, P.E. CEO, Advanced Solar Products President, Mid-Atlantic Solar Energy Industries Association

15. 15 The Photovoltaic Effect Phosphorous has one more electron than Silicon, and Boron has one less. When these materials are substituted into a Silicon crystal, it creates an electric field that sweeps electrons freed by light energy out of the cell and to a load. No material is consumed and the process could continue indefinitely.. Si P B The Photovoltaic Effect

16. 16 Solar is desired for Jobs and Economic Growth… Among today’s energy resources, PV is the most intensive job creator per MWH generated. Sources: Renewable Energy Policy Project, “The Work That Goes Into Renewable Energy”, and Mid-Atlantic Solar Energy Industries Association

17. 17 Creation of a Diverse Market: A (partial) success story: The New Jersey Solar Market Over 260 solar integrator companies in the state Plus… + Large engineering firms + Architectural firms + Electrical contractors + Financial Community + Brokers & Aggregators + Accounting firms + Law firms + Union locals + Real estate firms and developers Etc., etc.

18. 18 What kinds of jobs are created? Engineers Project managers Marketing and sales Upper management Architects Administrative Manufacturing jobs Installers Electricians Lawyers Accountants Brokers & Aggregators Bankers Etc., etc.

19. 19 Types of PV Arrays: Residential PV Systems

20. 20 Types of PV arrays: Flat Roof-mounted arrays (Older Design: Less common today due to lower annual output)

21. 21 Types of PV arrays: Tilted roof-mounted arrays (Current Application10-15 degree tilt, higher annual output) Lawrence High School

22. 22 Types of PV arrays: Tilted ground-mounted arrays

23. 23 Fixed-Tilt Ground Array – View from South

24. 24 Fixed-Tilt Ground Array – View from North

25. 25 Types of PV arrays: Trackers

26. 26 PV Power for Emergency Facilities: Bayonne Midtown School

27. 27 In a power outage, the existing emergency power system In a power outage, the existing emergency power system automatically disconnects from the outside electric grid automatically disconnects from the outside electric grid The Generator starts The Generator starts The Inverter re-starts in a special “Generator Support Mode” and The Inverter re-starts in a special “Generator Support Mode” and automatically shares the building’s emergency power load with the automatically shares the building’s emergency power load with the Generator, keeping fuel use to a minimum Generator, keeping fuel use to a minimum When power is restored, the Inverter goes back to normal mode, When power is restored, the Inverter goes back to normal mode, supplying solar power to the building supplying solar power to the building The entire process is fully automated The entire process is fully automated 1 2 3 PV Inverter Main Distribution Panel Emergency Power Panel T R S A W N I S T F C E H R Generator Meter 1 2 3 ADVANCEDSOLARPRODUCTSADVANCEDSOLARPRODUCTS

28. 28 Power conversion: Inverters convert DC power to AC

29. 29 Current Trends In one year, PV module supply has gone from severe scarcity to severe oversupply – and back to scarcity. Module prices and system prices have plummeted (economy, cuts in Spain, more & cheaper silicon feedstocks) – but in last 6 weeks, supply has become very tight and prices have risen. Thin-film PV has arrived as a low-cost alternative, but also low efficiency. Requirements for Made in America for school and ARRA projects PV serving multiple purposes e.g., PV for emergency power / homeland security

30. 30 Current Situation: the SREC structure is resulting in a ratepayer burden that is far too high.

31. 31 This was predicted - BPU-Commissioned Summit Blue Study on the Cost of Different Models:

32. 32 Status Quo 1 : SREC Market: $0.67/KWH PSEG Loan II:$0.38/KWH JCPL/ACE LT contracts:$0.40/KWH 2 Real Cost of Production:$0.25/KWH 3 Notes: 1.Prices do not include LSE markups (which apply to PSEG and JCPL/ ACE as long as SRECs are auctioned instead of retired & allocated) 2.Does not include JCP&L/ACE markup. 3.With a “reasonable rate of return” added

33. 33 Ratepayer Burden: The Cost of High SREC Prices could amount to: $60 million to $160 million per year of additional costs $2.3 billion between 2010 and 2026 of additional costs

34. 34 Additional Ratepayer Burden as long as SRECs are short : SACP Payments: even higher than commodity market prices As an example, if we are 50% short on SRECs, then the SREC cost burden effectively doubles due to SACP payments.

35. 35 The Other Side of the Coin: What if there is an SREC oversupply (e.g., two years from now)? SREC prices are likely to crash 100’s of schools who have issued bonds to build solar systems cannot pay off their bonds Tens of thousands of homeowners, hundreds of municipal buildings, thousands of business, churches, farms, etc., all of whom have built solar power systems, are losing money. Result: large-scale political turmoil and unhappiness

36. William Amann, P.E., LEED AP Chairman: USGBC, NJ Chapter Chairman: Somerset County Energy Council President: M&E Engineers, Inc. Green Power – Funding & Incentives

38. ENERGY & ATMOSPHERE Building Design Building Operations & Maintenance Renewable Energy Energy Modeling Energy Audits Commissioning

39. Investment Tax Credit –(Section 179D) Renewable Energy Credits Energy Incentives (“Rebates”) Federal Funding Energy Incentives

40. Funded since 2001 from “Societal Benefits Charge” on utility bill Provides opportunities for energy projects in three sectors: –Residential (Energy Star) –Renewable (Solar, Wind, Biomass) –Commercial & Industrial New Jersey’s Clean Energy Program

41. 2010 Funding Levels: Energy Efficiency- –Residential $113,899,902 –C&I$119,963,654 Subtotal$233,863,556 Renewable $183,343,174 Total$417,206,730 New Jersey’s Clean Energy Program

42. Renewable Energy Incentive Program (REIP) –</=10 kW residential solar projects up to $1.35 per watt with Home Performance with ENERGY STAR audit –</= 50 kW commercial/municipal solar projects up to $.80 per watt –Wind rebates based on estimated energy production, from $0.50 up to $3.20 –Sustainable biomass projects from $0.15 up to $4.00 per watt 2010- Renewable Energy Programs

43. Ferreira Construction Branchburg, NJ Renewable Energy Solar is delivered at $0.21/Kwh +/-

44. “The cheapest, cleanest energy is the energy you don’t use” Energy Efficiency is delivered at $0.03/Kwh or $0.30/therm

45. Before considering solar or wind alternatives, take steps to reduce energy consumption in buildings with measures that address… Building envelope – insulation, air sealing, windows Lighting and lighting controls Heating, ventilation, air conditioning, water heating Variable frequency drives and motors Energy Efficiency vs. Renewable Energy

46. NJ SmartStart Buildings Design Assistance Prescriptive Equipment Rebates Custom Measures Program Direct Install (< 200 kW Peak Demand) Pay for Performance (includes Combined Heat & Power) Commercial & Industrial Programs

47. Eligibility New Construction, Renovation, and Equipment Replacement Commercial & Industrial Customers Served by a Public Utility Municipalities and Government-Owned Facilities Features Financial Incentives to Reduce Capital Cost (Prescriptive and Performance) Comprehensive Design Support for Larger Projects (≥ 50,000 sq. ft.) Technical Assistance for Other Projects (Walk- through analysis) Up to $500,000 per utility account per calendar year NJ SmartStart Buildings Program

48. Small and Medium-Sized Businesses and Government-Owned Facilities with ≤200 kW Peak Load Designated Contractor (+/or PSE&G) Provides Walk-thru Energy Audit, Recommendations and Installation 80% of Material and Labor Costs Paid Directly to Contractor Facility Owner Pays Remaining 20% No Cap on Measure Installations (as long as measures hit savings criteria) Direct Install Program

49. The greater the savings, the greater the incentives… Buildings over 200 kW Peak Demand Network of Trained Program Partners Whole-Building Approach – Minimum 15% Performance Threshold Incentives up to $1 Million/Meter – Natural Gas and Electricity Additional Incentive up to $1 Million for Combined Heat & Power Staged Incentives Pay for Performance (P4P)

50. Energy Reduction Plan Development $ 25,000 Energy Reduction Design Incentive $ 150,000 Post Construction Verification $ 300,000 (or 75% of project incremental cost) Up to $475,000 of potential incentives for this project, not including additional CHP incentive 300,000 Sq Ft building with a 21% energy reduction plan

52. USGBC-NJ Chapter Coordinator: Marianne Leone Coordinator@usgbcnj.org www.usgbcnj.org US Green Building Council – New Jersey Chapter 4 th Annual Gala – May 20 th, New Brunswick

53. Funding and Tax Incentives for Green Energy Melinda Fellner Bramwit

54. 54 An Update Since Last We Met American Recovery and Investment Act of 2009 gave us credit vs. grant option Payout on grants- over $1 billion? Predictions

55. 55 Grant Eligible Basis Costs incurred in connection with tangible property which is an integral part of a “qualified facility” Eligible projects- windfarms, biomass facilities, geothermal, solar, kinetic and others Certification of Grant Eligible Basis Commencement of Construction

56. 56 ITC and Treasury Grant Compare and Contrast- what works for your project Partnership issues- entity of choice

57. Seminar Intermission

58. Power Purchase Agreements James Laskey

59. 59 When is a Power Purchase Agreement (PPA) Needed? A.Whenever the producer and consumer of electricity are not the same 1.Most common situation is when the on-site generating equipment is owned by one party but the host itself wants to use the electricity 2.Also comes into play if the electricity is being generated at one location and consumed at a second “off-site” location B.Is not needed if the user of the generating equipment will be using the electricity itself C.PPA–related provisions are often inserted into agreements that address other issues, such as sale or lease of equipment, installation, and maintenance. These latter issues must be addressed even if a PPA is not required.

60. 60 Example Where PPA Is Not Needed

61. 61 Example Where PPA Is Needed PV System Owner Host PV System Owner generates electricity and earns SRECs. Host consumes and purchases electricity from PV System Owner.

62. 62 What Issues Do PPAs Address? A.Quantity 1.Usually the full output of the facility 2.Typically provides for minimum guaranteed output at least on an annual basis 3.Accurate metering is important to determine both amount to be paid by user and also whether minimum guaranteed output has been achieved 4.Note that this metering is separate from the metering that the local utility will use to determine how much energy has been delivered to the site (or, in a net metering situation, how much energy has been delivered back to the grid).

63. 63 What Issues Do PPAs Address? B.Price 1.Can be expressed either as a flat amount per kilowatt-hour (KwH) or as a percentage of the local utility’s otherwise applicable rate (e.g., 85%, meaning a guaranteed 15% savings) 2.Even if the first year is a flat amount, it is common to provide for annual escalations, either flat percentage, or tied to an index such as the CPI, or tied to the increase in the local utility’s rates 3.Large installations will often also include a fixed capacity charge, either annual or in monthly installments

64. 64 What Issues Do PPAs Address? C.Allocation of Environmental Attributes 1.Solar renewable credits (SRECs) initially belong to the generator but can be transferred to the host 2.Often the generator will keep SREC proceeds up to a certain threshold, and then share additional proceeds with the host on a prenegotiated basis 3.SRECs can either be sold in the spot market or sold to wholesale power producers under long term contracts

65. 65 What Issues Do PPAs Address? D.Compensation for Shortfall of Production 1.Usually based on cost for replacement power from the utility 2.True-up usually annual, but sometimes guarantee is stated over longer period of time

66. 66 What Issues Do PPAs Address? E.Length of Contract 1.Developer wants a sufficiently long period to recover its investment: 15 years is not unusual 2.Provisions for early termination payment are common

67. 67 What Issues Do PPAs Address? F.Other Provisions 1.The generator’s rights under a PPA are often assigned to a lender as security for repayment of the loan needed to procure the equipment. In such event, the host needs assurance that in the event of foreclosure any operational covenants of the generator will continue to be observed 2.Force majeure – note that typical “acts of God” provisions may affect performance under PPAs more often than in other commercial settings 3.Regulatory uncertainty or “change of law” can be significant point of negotiation

68. Solar and Wind Power in New Jersey: Legislative Accomplishments and Objectives and How Businesses and Individuals Can Support Them NJ State Senator Bob Smith Chair, Senate Environment and Energy Committee

69. Questions & Answers Session Thank you for coming!