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.

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
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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
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7 Sussex St.
Brigham & Women’s Hospital
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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)
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http://gis.cityofboston.gov/solarboston
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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
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0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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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)
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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
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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
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DRAFT
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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 $4.75
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Incentives for PV 2
Non-Residential Rebates Interactions with Tax Credits
Commercial Rebates for Incremental Capacity ($ 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
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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
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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
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