Solar Financing: Shedding Light on Solar Incentives

  • 372 views
Uploaded on

Learn about: …

Learn about:

a) The current federal and state incentives,

b) The interaction between federal and state incentives, and

c) Pending or proposed changes to the current incentive landscape.

The presentation will also provide an overview of the Massachuetts Technology Collaboratives commercial project financial calculator.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
372
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. 7/16/2009 City of Boston Climate Action Plan Solar Financing: Shedding Light on Solar Incentives 2000: Boston joins ICLEI—Cities for Climate Protection 2005: Mayor Menino signs U.S. Mayors Climate Protection Agreement Kyoto Protocol targets 2007: Executive Order Relative to Climate Action: – Greenhouse Gas Emissions reduction goals: • 7% below 1990 levels by 2012 • 80% below 1990 levels by 2050 July 16th, 2009 CITY OF BOSTON Green Roundtable Thomas M. Menino, Mayor 1 2 Environmental and Energy Services James W. Hunt, III, Chief Green Building Green Affordable Housing Program Action Plan • Department of Neighborhood Development (DND) All private projects over 50,000 • $2 million from Massachusetts Technology Collaborative square feet must be LEED 1460 DOT Ave. “Certifiable” • 140 kW on 240 units of housing All public projects must be LEED John Hancock Building • All housing must now be: Silver certified – PV ready – LEED Silver certifiable 10 million square feet of LEED – ENERGY STAR or equivalent construction is currently in the pipeline. • Over half of current Boston capacity is cited on affordable housing 3 4 7 Sussex St. Brigham & Women’s Hospital 1
  • 2. 7/16/2009 Samuel W. Bodman Thomas M. Menino US Secretary of Energy Mayor of Boston PV Technical 25 MW BY 2015 Potential: Fenway Park 670-900 MW April 9, 2008 5 (14%-19% 2006 electricity consumption) 6 http://gis.cityofboston.gov/solarboston 7 8 2
  • 3. 7/16/2009 Where are we? Where are we Going? Market Growth Solar Installed Capacity 1800 1600 Installed capacity 1400 1200 increased over 300% from 1000 W S WH 2006-2008 k PV 800 600 480 kW to 1.8 MW of PV 400 and solar hot water heating 200 0 198 4… 1995 … 1999… 2001 2002 2 003 Year 200 4 2005 2006 2007 2 008 Solar Policy 50% average annual PV PV Market Growth Scenarios market growth rate (2002- 160 2007) 140 120 100 25% 47.8% average annual 80 35% 45% growth (PV and SWH) 60 55% 65% necessary to meet Mayor’s 40 goal of 25 MW by 2015 20 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 9 10 Year Investment Tax Credit Modified Accelerated Cost Recovery System (MACRS) • Investment Tax Credit Year Percentage – 30% for PV 1 20.00% 2 32.00% – In place through December 31, 2016 3 19.20% 4 11.52% – Carryforward 20 years for commercial and through at least 2016 for residential 5 11.52% 6 5.76% – Previously, $2000 cap for residences; now uncapped and can take against the alternative •50% bonus depreciation available for systems installed in 2009 minimum tax •If claiming federal tax credit, depreciable basis reduced by 15% – Utilities can now get it •Approximately 90% of PV systems can be depreciated according to MACRS, 5% can be depreciated on 20-year schedule, and 5% can’t be depreciated – Have to be rich •MACRS provides an approximately 26% net present value (= 12% better than standard depreciation) 11 12 3
  • 4. 7/16/2009 RE Finance: U.S. Landscape Financial Crisis • RE investing in the US is tax-driven; this continues to be true today, even if recent legislation has temporarily expanded the options for monetizing federal tax credits. • RE finance thru mid-2008 was characterized by: – Complex structures necessary to allocate tax benefits to parties with tax liability (“Tax Investors”). – Available capital exceeds RE project demand, resulting in downward pressure on Tax Investor returns and debt yields. • Finance Landscape in 2009 – Investment capital liquidity severely constrained. – Project capital requirements exceed available funding, resulting in higher Tax Investor returns. – Tax Investor financing is largely unavailable with consolidation in the market, constrained capital and uncertainty about future income tax liability, leading to a “flight to quality”. – Debt terms (rates and tenors) have tightened, lenders are more selective and the number of “club financings” (a group of banks sharing risk equally) have increased. – Tenor (debt term) have shortened - many banks offering ‘mini-perms’ which require re-financing after 5 – 7 years. – Temporary move away from PTC risk toward the ITC / Cash Grant. • Summary – Project capital is severely constrained and what is available is expensive. Good-Bye Tax Equity 13 DRAFT 14 14 Hello IRS RE Finance: U.S. Landscape • Near term market drivers – ITC and Cash Grant: increases financing options (allows lease transactions for wind); increases pool of investors; eliminates production risk. – Reduced access to development capital slows the new project pipeline. • Longer-term trends – Discussions of national RPS and Carbon Cap & Trade. – Sunset date on Cash Grant may suggest continued tax-based incentives • Summary – The current supply of capital is limited, and costlier than pre credit crisis, with only the best projects being financed (i.e. “flight to quality”). – Long-term recovery will be driven by regulatory policy and general economic conditions. Commercial PV gets 30% grant in 2009/10 15 DRAFT 16 16 4
  • 5. 7/16/2009 Incentives for PV 1 Massachusetts Tax Benefits Residential Rebates (www.masstech.org/solar) • 20-year value-added property tax exemption Base Incentive $1.00 • Commercial: – 100% income tax deduction MA Components $0.50 • = ~9.5% tax credit • = ~5.7% net value tax credit after federal interaction Moderate home value adder $2.00 • Residential – 15% tax credit Moderate income adder $1.25 • Capped at $1,000 (<120% of median income) • Three year carryforward – Sales tax exemption Total possible rebate $4.75 17 18 Incentives for PV 2 Non-Residential Rebates Interactions with Tax Credits Commercial Rebates for Incremental Capacity ($ per watt (dc)) • If grant is taxable income, apply full tax credit to First: Next: Next: Next: full installed cost > 100 > 200 Incremental Capacity 1 to 25 > 25 to kW to kW to • If grant is non-taxable, subtract out grant value 100 kW kW 200 500 from tax credits before calculating benefits kW kW Base Incentive $3.15 $3.00 $2.00 $1.40 • Example: PLUS: Additions to Base – Taxable commercial rebate has 66% total value after federal interaction Massachusetts Company Components Adder $0.15 $0.15 $0.15 $0.15 – Non-taxable commercial rebate has ~44% total possible value Public Building Adder $1.00 $1.00 $1.00 $1.00 19 20 5
  • 6. 7/16/2009 Net Metering Renewable Energy Credits Treatment by # of Designees for Generating Utility – Treatment by Utility Type Capacity Transfer of Credits Allocation of source Gov. – private NM credits owned May be transferred to another customer Utility Class I up to 60kW Solar and Wind ~Retail in same utility no more than 5 territory May be transferred to > 60kW to Agricultural another customer Class II 1 products, ~Retail in same utility no more than 10 MW Solar & Wind ~Retail territory From Agricultural Without distribution May be transferred with Class III products, cost for each no more than 50 Solar & Wind kWh utility’s permission Customer 1 to 2 MW 21 22 Questions? REC Options Andy Belden, Solar Boston Coordinator • Generator retires and claim “greenness” Andy.belden@mc-group.com (703) 963-9163 • Sell to REC broker/aggregator – Ex. Mass Energy Consumers Alliance – $0.03/kWh for three years Wilson Rickerson, Consultant • Try to sell on your own into RPS Wilson.rickerson@mc-group.com – Register with NEPOOL GIS REC tracking system – Register with MA Department of Energy Resources • Wait for DG carve-out rules to be developed – RPS carve-out for generators 2 MW and under – ?% – ? Technologies – ? structure 23 24 6