CT Self Storage Association Energy Summit presentation

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The panel of energy experts will cover everything from financing and rebates to installation and operations. Registration includes program and lunch. Fees are $45 for CT, MA, ME, and NH members. Nonmember rate is $60

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  • These should be a refresher of terms and acronyms….Note PPA, SPE ITC and PTC will be covered soon
  • These should be a refresher of terms and acronyms….Note PPA, SPE ITC and PTC will be covered soon
  • These should be a refresher of terms and acronyms….Note PPA, SPE ITC and PTC will be covered soon
  • Many ways to incentivize investments in renewable energy and energy efficiency, such as a direct cash payments. Feed In Tariffs have been used in Canada, Germany and Spain for solar.America differs from other nations in the manner it implements its federal energy policy through the income tax code. TIME CHECK = 12:10 pm (10 mins in)
  • Recap of the various technologies that are typically financedSolar PVis probably the most common renewable energy technology financed today.
  • Recent section 167 PPA PLR ???????
  • TIME CHECK = 1:40 pm (100 minutes in)
  • TIME CHECK = 12:20 pm (20 mins in)
  • 1st Bullet THEN…Will supply match demand? Not likely in the near future….
  • Whole Building Approach up to $3 per square foot.Incremental cost = Cost for Code (or Standard design) - Cost of proposed
  • Rebates on table in back of room
  • Up to 35% of installed cost of standard lightingUp to 40% of installed cost of high performance lighting (LED & induction)Up to 40% of installed cost of non lighting measuresComprehensive initiative – lesser of:Up to 50% of installed cost, orEnergy savings up to $0.50/kWh or $1500/kW
  • Energy dashboardsToolkits to manage & operate specific facilities
  • Services and incentives to create a more comfortable, affordable home.
  • Audit
  • Notification to Mortgage Holder / Consent
  • Referral then Capital Provider selected then Negotiations  Funding Agreement
  • Disclosure mattersFunding is paid through an assessment levied on propertyFinancing particularsPrincipalInterestOther costsProcess for collectionRemedies for non-paymentCredit Enhancement (if applicable)M&VProgram compliance
  • Disclosure mattersFunding is paid through an assessment levied on propertyFinancing particularsPrincipalInterestOther costsProcess for collectionRemedies for non-paymentCredit Enhancement (if applicable)M&VProgram compliance
  • Funding Disbursement(s) & Project Work Commences
  • Project Completion, Finalization of the Lien on the Property, Payment Schedule, etc.
  • CT Self Storage Association Energy Summit presentation

    1. 1. ENERGY SUMMITfor Self StorageOwners and ManagersCTSSA ProgramMarch 12, 2013
    2. 2. Overview Discuss economic benefits of investing in energy efficiency measures from both an investment and a tax perspective. Discuss low interest financing options. Review a case study – i.e. take you through an actual proposal and financial analysis for a CT storage facility.
    3. 3. IntroductionsPanelists • Stephanie Grubb, Cohn Reznick - Investment Considerations and Tax Benefits • Jessica Bailey, CEFIA Commercial & Industrial Property Assessed Clean Energy - C-PACE Financing • Elena Cahill, Globele Energy - Audit Requirements and Benefits • Nicholas Malagisi, Sperry Van Ness Advisors; Real Estate Benefits • Scott Hainey, Storage Insurance Brokers - Insurance Requirements • Tim McGrew, Connecticut Light & Power – CL&P Assistance to Improve Energy Efficiency • Christy Bradway, Connecticut Light & Power – Discussion of ZRECs • Ted Lawrence, Renewable Resources Inc. – Solar Process and Case Study • Tom Loredo, Renewable Resources Inc. - Panel Moderator
    4. 4. Energy Outlook
    5. 5. “Fuel for Thought” UN Population Growth Estimate to 9 Billion by 2040 What will the effect be on:  The Use of Energy?  The Cost of Energy?  The Environment, if we continue to use fossil fuel based energy?
    6. 6. World Energy Outlook by 2035 World primary energy demand will increase 36% China’s demand for energy is rising by 75% The US is now the second largest energy consumer behind China The use of renewable energy will triple Renewables account for 7% of all energy and will rise to 14%
    7. 7. Electricity Rates On average, CT electric rates have increased 5% per year, over the last 10 years. (Source: US Energy Information Administration) Currently, the average commercial cost is between $0.16 - $0.17/kWh in CT Straight line projection of 5%/year = $0.27/kWh in 2023
    8. 8. Energy Conservation,Generation and Alternative Supply On overview
    9. 9. How can you conserve energy in a building:1. Look at your process and learn if you can lean out the process;2. Make process equipment more energy efficient;3. Look at the building systems and determine if you can replace any systems with energy efficient technology;4. Manage you process and building systems with technology.5. An audit or benchmarking will help you determine the present situation and provide options for you
    10. 10. Next make sure you understand the economics of conservation.As you will learn today there are many programs available to assist with funding for conservation projects.Understand some monies are incentive monies to do the project, other programs can help you finance the project, and yet other benefits are federal tax credits or deductions.The benefits are cumulative: you may be qualify for incentive dollars which requires less funding for the projects and then take the federal tax credit or deduction on your tax return.
    11. 11.  Federal programs apply to every state. Every state and within the sate the utility company may have their own programs for conservation or generation. CT has the energy efficiency fund and CEFIA and now CPACE MA has Massachusetts Energy and Utility Assistance, National Grid has efficiency programs, etc NY has NYSERDA, Con ED has efficiency programs, etc DSIRE website for the benefits in your state
    12. 12.  Alternative electric and natural gas supply. Deregulation intended to save money and it can but be knowledgeable CT utility companies can change their rates January 1 and July 1 – this year UI will change their rate next in January 1, 2014 and CLP in July 2013. Present 24 hr rates- UI -.076 CLP - .078 Make sure the rate can not go up. Natural Gas utility companies change their rates monthly on the 1st.
    13. 13.  You can generate energy through renewable technologies such as solar, wind, etc You can generate energy with cleaner technologies such as fuel cell, co-gen etc Federal tax credits available for projects through 2016 In CT - CPACE program can potentially fund the projects, you will learn more later-CPACE is in 27 other states Cumulative benefits again- CPACE- Fed tax credits, etc DSIRE will list renewable programs as well
    14. 14. Why Solar Power
    15. 15. Why Solar Power? Solar is a clean and renewable energy source Every hour, enough sunlight shines on the earth to meet global energy needs for an entire year
    16. 16. It’s Natural – Just like the Sun Silicon Ingot Virgin Wafer Silicon Array Solar Cell Modules
    17. 17. PV System on Building
    18. 18. Calculating Solar Efficiency Azimuth Pitch Shading
    19. 19. Solar Economics
    20. 20. The Economics of Solar  Avoided Cost of Electricity equals Lower Operating Expenses  Federal Tax Benefits – ITC and Depreciation  State/Utility Incentives - ZREC  Life of Solar System (25 Year Warranties)
    21. 21. Federal Solar Programs  30% Federal Tax Credit through 2016  5-year accelerated depreciation (MACRS)  50% bonus depreciation in 2013  Depreciable base is reduced by 50% of ITC credit value
    22. 22. Project Finance Direct Purchase – Conventional financing Capital Lease – 10 year term with $1 Buyout C-PACE – Property Assessed Lending
    23. 23. Solar Project Development Timeline Month 1 2 3 4 Week 1 2 3 4 5 6 7 8 9 10 11 12 13 Stage I II III B. Physical A. Agreements Stage I - Design Plan/Site C. Final Design Completed Review Municipal Permits Utility D. StateStage II - Applications Authorization Application/ Assumes no zoning or Interconnection variances required E. System Installation F. Municipal G. Utility-Net H. StateStage III - Installation (Assumes good Inspection Meter Install Inspection weather conditions)
    24. 24. Next Steps  Data Collection  12 Month History of Electric Use  Site plan  Blue Prints  Site review and structural analysis  Proposal  Financing Discussion  Preliminary Project Timing
    25. 25. Proposed Bill No. 203 AN ACT CONCERNING PROPERTY TAX EXEMPTIONS FOR RENEWABLE ENERGY SOURCES. Be it enacted by the Senate and House of Representatives in General Assembly convened: That section 12-81 of the general statutes be amended to exempt from property tax any Class I renewable energy source installed for the generation of electricity for commercial and industrial use, and to make such exemption applicable to assessment years commencing on or after October 1, 2012. Statement of Purpose: To encourage the use of renewable energy sources, and to allow the commercial and industrial sectors to benefit from such sources by expanding current law that allows the property tax exemption for renewable energy sources only if the generation of electricity is for residential or farm use.
    26. 26. Storage Insurance Brokers
    27. 27. Commercial Business Case Study  Building Overview Building Type: Pre-engineered, steel Roof Type: Metal, low pitch Electric Company: CL&P Electric Rate: $0.179/kWh Electric Consumption: Approx. 52,300 kWh/ yr. Anticipated Utility Rate Escalation: 3%
    28. 28. Metal Roof Installation
    29. 29. Commercial Business Case Study  Solar Installation • System Size— 46.08 kW • Panels— 192 @ 240 watts • System Production— 51,358 kWh (Year 1) • Percentage of Electricity Produced by Solar— 98% • System Degradation— 0.8%/year • System Mounting— S5 Metal Roof Clips • System Warranty— 25 year manufacturer’s warranty
    30. 30. Solar Array Mock-up
    31. 31. Investment – Financial Evaluation Investment analysis considers ‘at-risk’ rule, therefore the project is financed at 80% maximum. Balance of system cost is invested by owner. Also, a 35% corporate tax rate is assumed. Considerations • Project Cost— $175,104 • Cost/Watt— $3.80 • Avoided Electric Costs Savings— $0.16/kWh (with 3% yearly escalator) • 30% ITC Value— $52,531 • MACRS Value— $148,838 • Loan Value— $140,083 • Loan Term— 10 years • Loan Rate— 6% • Annual Loan Payment— $19,033 (assumes 1 yearly payment)
    32. 32. Investment – Financial EvaluationEvaluation Without ZREC Income • Avoided Electric Cost Savings over 25 years – $269,200 • $52,531 ITC—Year 1 • $148,838 available MACRS • ROI— 77% • IRR— 9.21%
    33. 33. Investment – Financial Evaluation Evaluation With ZREC Income • Avoided Electric Cost Savings over 25 years – • $269,200 • ZREC Income— $119,665; ZREC Value = $164.22 • $52,531 ITC— Year 1 • $148,838 available MACRS • ROI— 121% • IRR— 21.77%
    34. 34. Renewable Energy Project Finance March 2013CohnReznick LLP
    35. 35. Agenda• What drives the Renewable Energy Market• What is the ITC• How to finance a renewable energy project• What are the benefits to you
    36. 36. Renewable Energy Market Drivers• Renewable Portfolio Standards (RPS)• Financial incentives ̶ Renewable Energy Certificates (RECs), particularly for Solar (SRECs) ̶ Feed-in Tariffs (FIT) ̶ Rebate and grant programs ̶ Federal tax incentives ̶ State tax incentives• Rising cost of electricity ̶ Driven by fossil fuel prices and growth in demand ̶ Electricity prices (average retail price) vary considerably across the country • U.S average retail price for electricity is $0.0983/kWh • California costs are high, ~$0.13/kWh • New Jersey costs are higher, ~$0.147/kWh • Rates in Hawaii are among the highest, ~$0.25/kWh • Source (as of 1/30/2012): http://www.eia.gov/electricity/state/
    37. 37. Key Renewable Energy and Solar TermsPPA – Power Purchase Agreement = Contract for sale of electricityMW – Mega Watt - Utility Scale Power generation. Powers neighborhoodskWh – Kilowatt-hour – smaller unit of power output – e.g., a solar panel’selectrical outputREC or SREC – Renewable Energy Certificate or “credit.” NOT a tax credit.Represents the green/clean aspect of actual energy that is separatelyproduced. S in “SREC” means a Solar REC.EPC – Engineering Procurement and Construction contractorOff-taker – purchaser or user of the electricityHost – person or place where a project is physically located (could be thebuyer in a PPA)COD – Commence Operations Date (aka “Placed in Service”)
    38. 38. Key Renewable Energy and Solar TermsSponsor – Energy Project developer or project managerPV – Solar Photovoltaic (PV) technology. Makes electricity directly fromsunlight LightSPE – a Special Purpose Entity (often an LLC) that plays a specific role inthe renewable energy project such as owning and/or operating it.ITC – Investment Tax Credit (more on this later)PTC – Production Tax Credit (more on this later)Net Metering – Excess electricity is fed into the electrical grid. Projectowner is given a credit on their utility bill to use when the system generatesless electricity than needed.
    39. 39. Key Renewable Energy and Solar TermsAvoided Cost- is the cost the utility would have incurred had it supplied the power itselfor obtained it from another source. It is the price at which an electric utility purchases theoutput of a Qualified Facility (QF)
    40. 40. Federal Tax Incentives
    41. 41. T a x D e d u c t i o n v s . Ta x C r e d i tTax deductions are a reduction of a taxpayer’s total income thatdecreases the taxable income used in calculating the actual tax to bepaid. What is a deduction worth? ̶ $1 Deduction = $1 x tax rate ̶ Assume 35% tax rate ̶ $1 x 0.35 = 0.35¢ of after tax valueTax credits reduce dollar for dollar the amount of tax actually owed andpayable to IRS. What is a tax credit worth? ̶ $1 tax credit = $1 of after tax value
    42. 42. Renewable Technology: Solar ElectricityUse of solar equipment (e.g. photo-voltaic (“PV”) or concentrated solarpower) to generate electricity.Eligible for 30% ITC (or 1603) through December 31, 2016, 10% thereafter.
    43. 43. IRC 48 – Energy Investment Tax Credit (ITC)• ITC is based on the percent of eligible equipment, not on how much electricity is produced and not on total project cost. Most ITCs are 30% with some 10% credits depending on technology.• Unlike production tax credits (PTCs), there is no requirement that electricity be sold, only that the facility generates electricity, heating, cooling or lighting or meets other standards per the tax code.• One year credit – generally claimed in year placed-in-service (PIS) ̶ End-user of tax credit must be an owner/partner in the deal before COD/PIS date ̶ 5 year compliance/holding period (like § 47 Historic Rehab Tax Credits) ̶ Credit vests and recapture period burns off 20% per year for 5 years from date of COD/PIS
    44. 44. IRC 48 – Energy Investment Tax Credit (ITC)• 5 year MACRS depreciation on most technologies (Bonus Depreciation applies when law allows)• Basis reduction – Must reduce depreciable tax basis by 50% of the credit amount• No governmental or tax exempt use allowed (“use” means ownership or lease)• Credits are Allocated by profit/loss ratio (like Historic Rehab Tax Credit)• May offset Alternative Minimum Tax liability (for tax years starting after 2008)• Note, the ATRA of 2012 extended the election to claim the section 48 investment tax credit (ITC) rather than the PTC for eligible wind and other PTC facilities. Not all PTC eligible facilities are allowed this option. For those that are, the election now applies for projects where construction begins prior to January 1, 2014. This is a new rule.
    45. 45. Ta x E q u i t y C a l c u l a t i o n$1,000,000 Eligible Cost of Energy Propertyx 30% Applicable ITC Rate (sometimes 10%)$ 300,000 ITC to standalone project
    46. 46. Solar Tax Credits: Eligible Property DefinedEquipment that uses solar energy to generate electricity Constructed/Purchased by the taxpayer Must be Depreciable or Amortizable (i.e., used in a trade or business) Acquired by the taxpayer and first used by the taxpayer – Exception for sale-leasebacks - 90 day rule (Old IRC Section 48(b)(2))
    47. 47. Eligible Energy Tax Credit Basis – Solar ITCWhich costs are eligible for the credit?• Solar panels, mounts, racks, wiring, inverters etc.• Hard construction costs in general• Direct and indirect costs of installation System integration/design/testing Permits, fees etc. Interest expense prior to PIS – Subject to Section 266 Election Developer fee if Reasonable Other soft costs properly capitalized
    48. 48. Eligible Energy Tax Credit BasisPractical Issue: The extent to which a support system (i.e., “racking”) forsolar qualifies for the credit. Note– roof surfaces do not qualify, unless thesolar panel is also the actual roof; See, PLR 201121005.• Base for ground-mounted units that have no other uses do qualify• Parking garage structures which support panels but provide shade? ̶ Portion of roofing repair? ̶ Parking garage/carport cost? What portion? For Solar Walls – See, PLR 201043023
    49. 49. Test Your Knowledge: What is Eligible for ITC Basis?
    50. 50. Bonus DepreciationATRA Extended Bonus Depreciation50% - Additional 1 st year depreciation of 50% for qualified propertyacquired and placed in service before Jan. 1, 2014 (before Jan. 1, 2015 forcertain longer-lived and transportation property). (Code Sec. 168(k)(2), asamended by Act Sec. 331(a)).A conforming change is made to Code Sec. 460(c)(6)(B) (relating to 50%bonus depreciation not being taken into account as a cost in applying thepercentage of completion method for certain long-term contracts).Bonus depreciation may be allocated as of the placed in service date, soplanning of Investor entry is important.
    51. 51. MACRS Depreciation• Wind, solar and geothermal are generally classified as five -year property• Biomass is typically classified as seven-year property• Ancillary components such as transmission lines are depreciated over a longer period, generally not include in tax credit basis.• MACRS Permanent part of the tax code Wind/ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Solar MACRS 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% MACRS + 60.00% 16.00% 9.60% 5.76% 5.76% 2.88% 50% bonus depreciation
    52. 52. Financing Renewable Energy Projects Why and How. 58
    53. 53. Why Finance Renewable Energy?For investors – Tax incentives: – Solar - 30% Investment Tax Credit (ITC), and for certain other technologies, owners can elect Production Tax Credits (PTC) or a 30% immediate Investment Tax Credit depending on technology. – Five year tax depreciation (with some exceptions) on the equipment. Yields can be considerably higher with shorter holding periods than LIHTC and other tax credit investments.For owner-operators – Cash flow from the sale of energy to tenants or utilities under long term agreements and renewable energy certificates (REC’s)For energy user or “off-takers” – Lock in their energy costs for 10-20 years• Bloomberg Energy estimates the US energy tax credit equity market is at $7B (source http://www.cohnreznick.com/sites/default/files/The%20Return%20%E2%8 0%93%20and%20Returns%20%E2%80%93%20of%20Tax%20Equity%20for%20 US%20Renewable%20Projects.pdf)
    54. 54. How to Finance Renewable EnergyProperty•Educate Lenders•Be aware of “At Risk Rules”
    55. 55. What Does This Mean To You? More Tax Rules! 61
    56. 56. W h o C a n U s e E n e r g y Ta x C r e d i t s ?Corporate investors (widely-held corporations) An estimated 15-20 active investors; expiration of the Sec.1603 grant will create demand for much more tax equity from investorsIndividuals (and closely-held corporations) There are several rules that may come into play here.Tax-exempt and government entities Qualified allocations – Not eligible for tax credits, but won’t affect other partners if there are “qualified allocations.” A technical rule. – Section 168(h) election required for wholly-owned subsidiaries of tax- exempts PPA needs to be respected as sales/service contract… or lose / defer incentives
    57. 57. Where can I find more information?CohnReznick – Renewable Energy http://www.cohnreznick.com/industries/renewable-energyEnergy Tax Credits – DSIRE http://www.dsireusa.org/ – Information on federal tax credits and incentives – Provides links to relevant state websitesSolar Energy Industries Association http://www.seia.org/American Wind Energy Association http://www.awea.org/
    58. 58. C o h n R e z n i c k C a n H e l p Yo u Stephanie Grubb, CPA Manager CohnReznick LLP 525 N. Tryon Street Suite 1000 Charlotte, NC 28202 Main (704) 332-9100 Direct (704) 837-7252 stephanie.grubb@cohnreznick.com www.cohnreznick.com www.cohnreznick.com/industries/renewable-energy
    59. 59. The LREC/ZRECPROGRAMAn Opportunity to Develop Behind-The-Meter RenewableGeneration in ConnecticutChristie BradwayManager, Renewable Power ContractsNortheast Utilities
    60. 60. Why are People Interested in RenewableGeneration?Drivers: • To “Go-Green” • To reduce, or better predict, spending on energyBarriers: • Cost of Systems • No clear long-term revenue streams to support capital investments• Public Act 11-80 created a billion dollar opportunity for developers and installers of small renewable systems• CL&P and UI will enter into 15 year contracts to purchase “RECs” from new small renewable projects
    61. 61. What is a REC? = Renewable Energy Certificate• How is a REC Created? Each time a renewable generation unit produces, the energy is considered “renewable” LREC: Low – emission RECs = e.g Fuel Cells ZREC: Zero – emission RECs = e.g Solar, Wind, Small Hydro Each megawatt hour of energy produced = 1 REC• Why Should You Care About RECs? • RECs have a value (commodity) and are used by electric companies to satisfy regulatory requirements (RPS)
    62. 62. How Many RECs & How Much Are These RECs Worth? RECs from Zero Emission units (solar, wind, hydro) may be worth up to $350 each* (cap) : However, average price of selected medium zrec bids from 2012 = +/- $150 each Example 1: Residential Home = 5 kW Solar System= 6 RECs/year  Annual Payment = $900.  $150/REC x 6 RECs/year =+/- $900. per year  Total Payment over 15 years = $13,500.  $900 x 15 years = $13,500 Example 2: Commercial Business = 100 kW Solar System = 114 RECs/year  Annual Payment = $17,100.  Total Payment over 15 years = $256,500. RECs from Low Emission units (Fuel Cells) may be worth up to $200 each* (cap) However, average price of selected bids from 2012 = +/- $90 each Example 3: Commercial Business = 400 kW Fuel Cell = 3,154 RECs/year  Annual Payment = $283,860  Total Payment over 15 years = $4,257,900
    63. 63. REC Contract directly withcustomer The RECUtility purchases purchase is aexcess energy under separateexisting tariff transaction
    64. 64. Rec Contract with a developer Electric Supply
    65. 65. LREC & ZREC EligibilityGeneral Project Eligibility Criteria • Must be located behind contracting utility distribution meter • Must not have received funding/grants from Clean Energy Finance Investment Authority, or its predecessor the CT Clean Energy Fund (other than low cost financing) • Projects must be in service on, or after, July 1, 2011LRECs • No larger than 2,000 kW • Must have low emissions • <0.07 lbs/MWh NOx; <0.10 lbs/MWh CO; 0.02 lb/MWh VOCs, 1 grain per 100 standard cubic feet • May include fuel cells and other low emission Class I resources, as well as all zero emission Class I resourcesZRECs • No larger than 1,000 kW • Must have zero emissions • May include solar, hydro and wind
    66. 66. Procurement Processes1) Competitive Solicitation - (RFP) Project Size Annual Renewable Energy Credit RFP Timeframe and Frequency Type Budget Price Cap*Large ≥250 kW to ~$2.13 M Max. $350/REC Annual in April for 6 yearsZRECs 1,000 kW 2013 will be year 2Medium >100 kW < 250 Approxim Max. $350/REC Annual in April for 6 yearsZRECs kW ately 2013 will be year 2 $2.13 MLRECs Up to 2,000 $4 M Max. $200/REC Annual in April for 5 years kW 2013 will be year 22) Tariff Project Size Annual Renewable Energy Credit Price Tariff Availability and Type Budget Cap FrequencySmall Up to 100 kW ~$2.13 M Weighted Average of the Medium Annually, after the approval of theZRECs ZREC price + 10% up to $350/REC RFP and the filing of the medium - Year 1 Avg = $164.22/REC ZREC rate + 10% Expect to offer Yr. 2 Q4 2013 or Q1 2014
    67. 67. Budget & commitmentschedule
    68. 68. Final Results of 1st RFPCategory Size # Bids # Average Committed Uncommitted % of Budget 15 Year Bids Weighted Budget ($M) Budget ($M) Uncommitted Contract Selected Price/REC Value ($M)LRECs Up to 2 MW 43 12 $65.94 $3.0 $162K 5% $45.6Medium 100 – 250 113 47 $149.29 $2.0 $78K 4% $29.8ZRECs kWLarge 250 – 1,000 140 21 $101.36 $2.1 $145K 7% $30.8ZRECs kWTotal 296 80 $89.13 $7.0 $386 k 5% $106 • Final Selected Projects weighted average price/REC = $89 1. Average prices were about 1/3 of the cap • LREC Cap = $200 and Avg. Weighted Price/LREC = $65.94 • ZREC Cap = $350 and Avg. Weighted Price/ZREC = $121.13 2. RFP contracts will result in approximately 27 MW of installed renewable capacity in CT • LRECs = 5.6 MW – fuel cells • ZRECs = 21 MW - solar
    69. 69. Small ZREC Tariff• Instead of competitive bidding - projects less than or equal to 100 kW are eligible to enroll in a tariff• Price takers = $164.22/REC • Program establishes the price as the average of the selected Medium ZREC projects +10%• Schedule - Small ZREC Tariff Program must open 30 days from approval of Medium ZREC Contracts • Medium ZREC Contracts approved 11/21/13 • Opened Small ZREC Program 1/8/13 (with PURA approval for extension due to holidays) • Initial two-week window closed 1/22/13
    70. 70. Small ZREC TariffCategory Size # Approx. # of Price/REC Available Total Annual 15 Year Applications Contracts to Budget Value of Contract Received be awarded ($M) Applications Commitment Value ($M)Small 0 – 100 kW 479 200 $164.22 $2.36 $5.6 $35.4ZREC • At the close of the Small ZREC 2-week , CL&P received 479 completed Small ZREC Applications, which totaled over $5.6M in requested Small ZREC funding - more than 138% above CL&P’s available Small ZREC budget of $2.36M for this round of the Small ZREC Program. • Based on the volume of applications received during the two-week window, CL&P conducted a random selection process of completed Applications submitted during the 2-week window, which process was observed by a representative of the State of Connecticut Office of Consumer Counsel (OCC). The random selection process resulted in a numerical rank of all completed Applications received during the two-week window. • Based on the queue and available budget, we expect to enter into contracts with approximately 200 applications • PURA approval of these individual contracts is not required • PURA approved the Small ZREC Tariff and the price of tariff = $164.22/REC • Small ZREC Tariff will be open until all available budget has been allocated, or at the time when a new Small ZREC price has been established for the next year Small ZREC applications. • Expect this round of the Small ZREC Program will result in an approximately 9 MW additional installed solar in CT
    71. 71. Timeline and Next StepsAction Date CommentsSmall ZREC Tariff Service January – July 2013 Execution of ~200 Service AttachmentsAttachment ExecutionLREC and Medium/Large ZREC RFP – April, 2013 Year 2 RFP to open in April 2013Year 2 Opening
    72. 72. For additional information visit:Website: CL-P.com, and Click on Renewable Energy Credits under the “Going Green” tabEmail: LREC.ZREC@NU.COMUI: www.uinet.com/powerprocurementEmail: LREC.ZREC@uinet.com
    73. 73. Energy Efficiency Programs for Business Customers Conservation & Load Management Connecticut Light & Power and Yankee Gas
    74. 74. Energize Connecticut: New name, same great programs• Energize Connecticut is the state’s new branding initiative to help consumers save money and use clean, affordable energy.• A partnership of the Energy Efficiency Fund, the Clean Energy Finance and Investment Authority, and local electric and gas utilities• Energy efficiency is a valuable resource for Connecticut, it: – Reduces air pollutants and greenhouse gases – Saves customers money – Reduces need for more energy generation – Creates jobs• Program funding: – Electric customers pay 3 mills per kilowatt-hour – Natural gas programs are funded through gas utility bills and approved by the Public Utilities Regulatory Authority
    75. 75. 2013 Program Incentive Budgets & Caps Budgets CL&P C&I $ 35.2 M YGS $ 2.4 M CNG $ 2.3 M SCG $ 2.1 MProject caps• CL&P $1,000,000 per federal tax ID• YGS/CNG/SCG projects with an incentive amount greater than $100,000 require PURA approval
    76. 76. New Construction & Equipment• Captures electric and natural gas savings where they are most cost- effective: during design  New Construction  Major Renovation• Covers up to:  Equipment Replacement – 95% of the incremental cost of installing Energy Lighting HVAC measures in new Efficient Controls Equipment construction Lighting – 75% of the incremental cost for equipment Building Refrigeration Process replacement projects Envelope Equipment Gas Boilers VFDs
    77. 77. Prescriptive Rebates• HVAC Unitary • Gas heating Equipment equipment• Heat pumps – Condensing boilers• Infrared heaters – Non-condensing boilers• Water heaters – Condensing furnaces• Food service rebates – Condensing unit heaters
    78. 78. Existing Buildings• Incentives to replace functioning equipment with more energy-efficient optionsCovers up to: Energy EMS/• 40% of installed cost efficient Lighting Programmable controls• 50% of installed cost lighting Thermostats for comprehensive projects Process VFDs Equipment Refrigeration HVAC Gas Measures Controls
    79. 79. Small Business Energy Advantage (SBEA)• Turnkey energy-saving program• Pay nothing upfront• Existing business, municipal, and government customers• Average 12-month peak demand between 10 kW and 200 kW• All possible energy efficiency measures• On-bill, 0% financing to qualifying customers
    80. 80. Retro Commissioning/PRIME/O&M Services/Training & OutreachBUSINESS & ENERGYSUSTAINABILITY (BES)
    81. 81. Business & Energy Sustainability (BES)• The next level after all or most major capital improvements have been completed• Maximize operational strategies with existing capital equipment & people• Develop management practices
    82. 82. BES Programs• Retro Commissioning: Optimizes operation of customer’s facility without installing capital equipment• PRIME: Focuses on industrial manufacturing processes• Operations & Maintenance: Improves efficiency through changes and repairs that can be classified as maintenance or operational procedures• Training & Outreach
    83. 83. FinancingType Min Max Rate Term Pymt Source MaxSBEA/ $500 $150,000 0% 4 yrs On-Bill UtilityMuniC&I $2,000 $1 Million 2.99% or 5 yrs 3rd Party 3rd Party (1st $100,000 4.99% w/ subsidy)PURA $1 1% below 10 yrs 3rd Party 3rd PartyLoan Million rate/no(>50 kW more thansavings) prime
    84. 84. Residential Programs Home Energy Solutions HES – Income Eligible Residential New Construction Retail Products Heating & Cooling
    85. 85. CL&P Contacts• New Construction (ECB): Rich Asselin (860) 665-3292• Retrofit (EO): Glen Eigo (860) 665-5084• Business & Energy Sustainability: Dave McIntosh (860) 665-3531• Cool Choice: Dennis Beauregard (860) 665-4758• Express Lighting Rebates: Dennis Beauregard (860) 665-4758• Small Business: Randy Vagnini (860) 665-4753• Financing: Gentiana Darragjati (860) 665-4757• Residential Programs: Lomont White (860) 665-3790• Natural Gas Programs: Matt Fox (860) 665-3749• Your Account Executive
    86. 86. UI Contacts• New Construction (ECB) : Peter Aufdemorte (203) 499-4715• Retrofit (EO) : Peter Aufdemorte (203) 926-4715• Cool Choice ( CCH) : Will Riddle (203) 499 -2407• Express Lighting : Will Riddle (203) 499 -2407• Your account manager
    87. 87. QUESTIONS? Thank you!1-877-WISE-USEEnergizeCT.com
    88. 88. Clean Energy Finance and Investment AuthorityC-PACE:A financing tool for multi-family
    89. 89. Property Assessed Clean Energy▪ An innovative financing structure that enables commercial, industrial, and multi-family property owners to access financing for qualified energy upgrades and repay through a benefit assessment on their property tax. Private capital A senior PACE lien is provides 100% Repayment through put on the property upfront, low-cost, property taxes and stays regardless long-term funding of ownership
    90. 90. CRE Owners Face Barriers to Upgrades REFERENCES EE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)
    91. 91. PACE Addresses Key Barriers REFERENCES EE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)
    92. 92. Why C-PACE▪ Zero up-front cash investment▪ Immediate positive cash flow▪ Long-term financing (up to 20 years) and low interest rates▪ PACE assessment stays with the property upon sale▪ Ability to pass payments through to tenants▪ Higher rents and greater long-term property value because of energy efficiency▪ Preservation of borrowing capacity through off-balance– sheet financing
    93. 93. Connecticut Special SessionPublic Act 12-2 (June 2012)▪ Commercial, industrial & multi-family property▪ Requires the consent of the existing mortgage lender▪ Requires SIR>1; permanently affixed▪ Enables municipalities to opt-in▪ Enables CEFIA to administer a statewide program
    94. 94. CEFIA’s Role in C-PACE • Publish Guidelines November 2012 Design • Onboard Municipalities Program • Website launched (www.c-pace.com) • Technical Underwriting Administer • Marketing & Outreach Program • Work with Existing Mortgage Lenders Attract • Qualify Capital Providers • Offer Credit Enhancement tools (as needed) Private • Provide capital (as needed) Capital • Develop warehouse / bonding authority (Q2 2013)
    95. 95. CEFIA’s Role in C-PACE • Publish Guidelines November 2012 Design • Onboard Municipalities Program • Website launched (www.c-pace.com) • Technical Underwriting Administer • Marketing & Outreach Program • Work with Existing Mortgage Lenders Attract • Qualify Capital Providers • Offer Credit Enhancement tools (as needed) Private • Provide capital (as needed) Capital • Develop warehouse / bonding authority (Q2 2013)
    96. 96. Municipalities Opted into C-PACE ▪ Beacon Falls ▪ Simsbury ▪ Bridgeport ▪ Southbury ▪ Durham ▪ Stamford Hartford ▪ Hartford ▪ Stratford West Hartford Bridgeport ▪ Middletown ▪ West Hartford Norwalk Simsbury Stamford ▪ Norwalk Stratford ▪ Westport Southbury ▪ Old Saybrook ▪ Wilton ▪ Putnam ▪ WindhamComing Soon: Cheshire, Clinton, East Granby, East Hartford, Fairfield, Hamden,Manchester, Meriden, New Haven, Plymouth, Torrington, Waterbury, Wethersfield
    97. 97. C-PACE Opportunities in Connecticut Hartford West Hartford Bridgeport Norwalk Simsbury Stamford Stratford Southbury
    98. 98. Customers Apply Into C-PACE Hartford West Hartford Bridgeport Norwalk Simsbury Stamford Stratford Southbury
    99. 99. CEFIA’s Role in C-PACE • Publish Guidelines November 2012 Design • Onboard Municipalities Program • Website launched (www.c-pace.com) • Technical Underwriting Administer • Marketing & Outreach Program • Work with Existing Mortgage Lenders Attract • Qualify Capital Providers • Offer Credit Enhancement tools (as needed) Private • Provide capital (as needed) Capital • Develop warehouse / bonding authority (Q2 2013)
    100. 100. C-PACE Partners do Technical Underwriting Technical Expertise: Celtic Energy • Glastonbury, CT • $1bn of energy-related projects Hartford Program Expertise: • Experience with large commercial Real Estate Expertise: West Hartford end-users, utilities, and government Bridgeport Buonicore Partners Sustainable Real Norwalk Simsbury • Milford, CT Estate Solutions Stamford Stratford • Modeled Energy Profile of CT • Trumbull, CT Southbury • Nationwide PACE experience • Benchmarking Database • Industry leader in building energy performance assessment 3rd Party Administrator: Buonicore Partners
    101. 101. Upgrades: What’s EligibleAnything that saves energy from baseline … as long as it isn’t going anywhere▪ High efficiency lighting ▪ Combustion and burner upgrades▪ HVAC upgrades Hartford ▪ Fuel switching West Hartford▪ New automated building and HVAC Bridgeport controls ▪ Water conservation Norwalk Simsbury▪ Variable speed drives (VSDs) on motors ▪ Heat recovery and steam trapsStamford Stratford fans and pumps ▪ Building enclosure/envelope Southbury▪ High efficiency chillers, boilers, and furnaces improvements▪ High efficiency hot water heating ▪ BMS systems ▪ Renewable energy systems
    102. 102. Upgrades: What’s Not▪ Appliances, e.g., refrigerators, ▪ Any measure that is easily dishwashers, etc. removed/not permanently▪ Plug load devices installed Hartford▪ Vending machine controls ▪ Any measure that does not West Hartford result in improved energy efficiencyBridgeport▪ Any package of measures with a Norwalk Simsbury weighted average effective useful life ▪ Extending natural gas lines to the Stamford Stratford (EUL) that does not meet or exceed property line to enable a PACE-Southbury the life of the loan eligible gas conversion project.▪ Any package of measures that does not achieve an energy savings (over the life of the loan) to [total project] investment ratio > 1
    103. 103. CEFIA’s Role in C-PACE • Publish Guidelines November 2012 Design • Onboard Municipalities Program • Website launched (www.c-pace.com) • Technical Underwriting Administer • Marketing & Outreach Program • Work with Existing Mortgage Lenders Attract • Qualify Capital Providers • Offer Credit Enhancement tools (as needed) Private • Provide capital (as needed) Capital • Develop warehouse / bonding authority (Q2 2013)
    104. 104. Capital PartnersQualified Capital Providers▪ CEFIA qualified 8 capital providers through a RFI.▪ “Lending tree” model Hartford West HartfordOwner Arranged Financing Bridgeport Norwalk▪ Property owner is free to choose Simsbury Stamford their capital provider from the Stratford private market. There is no Southbury government financing required.Construction and Term Financing fromCEFIA▪ CEFIA authorized $20M short term facility for construction and term financing.
    105. 105. Requirements▪ Building must be commercial, industrial, or multifamily▪ Non-profits eligible if municipality allows▪ Building must be located in a municipality which has opted in▪ Feasibility study required for renewables▪ Mortgage lender must consent
    106. 106. Application Review: Two Paths▪ Full Assessment – Whole Building Analysis – Begin with a Level I screening step (by CRE owners consultant), designed to cost effectively identify projects with compelling savings & ROI – Proceed to Level II/III audit when significant savings potential exists. Determine the optimized bundle of ECMs, calculate project cost, projected energy savings & key financial metrics▪ Fast Track – Designed for buildings where prior energy audits have been completed including ECM recommendations, but failed to get implemented due to owner inability to self-fund the project – Less technically complex projects (single ECM) – Pre-approved projects under utility EE incentive/rebate programs
    107. 107. Application Review: Technical Standards▪ Developed in light of other PACE and leading CRE energy retrofit finance programs around the country▪ Incorporates three established industry protocols – ASTM Building Energy Performance Assessment (BEPA) Standard E2797-11 for baseline energy use data collection and analysis – ASHRAE Level 1, 2, 3 Energy Audit Guidelines to identify ECMs and project energy savings – International Performance Measurement & Verification Protocol (IPMVP) for energy savings measurement and verification▪ Underwriting methodology is technically sound, standardized, reliable & fully-transparent
    108. 108. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement Consent C-Pace Capital Provider $$$ Property Owner $$$ Contractor Financial Assessment & C-PACE Conduit $ Services Contract $ Property/ECMsAgreement $ $ Town Tax CEFIA $$$ Collector Lien Town Land “M&V” Records
    109. 109. Funding: Capital Flow Process Property Owner $$$ Contractor Property Audit/ Energy Assessment $ $ $ $ $$$
    110. 110. Funding: Capital Flow Process Mortgage Holder Notification & Consent Property Owner $$$ Contractor $ $ $ $ $$$
    111. 111. Funding: Capital Flow Process Mortgage Holder Notification & Consent Property Owner $$$ Contractor Technical $ $ Review $ $ Program CEFIA $$$ Administrator
    112. 112. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement ConsentC-Pace Capital Provider Property Owner $$$ Contractor $ $ $ $ CEFIA
    113. 113. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement ConsentC-Pace Capital Provider Property Owner $$$ Contractor Assessment & C-PACE $ Services Contract $ $ $ CEFIA
    114. 114. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement ConsentC-Pace Capital Provider Property Owner $$$ Contractor Financial Conduit $ Agreement $ $ $ CEFIA
    115. 115. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement ConsentC-Pace Capital Provider Property Owner $$$ ContractorFinancial Conduit Assessment & C-PACE $ Agreement Services Contract $ Property/ECMs $ $ CEFIA
    116. 116. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement ConsentC-Pace Capital Provider Property Owner $$$ ContractorFinancial Conduit Assessment & C-PACE $ Agreement Services Contract $ Property/ECMs $ $ CEFIA Caveat Town Land Records
    117. 117. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement Consent C-Pace Capital Provider $$$ Property Owner $$$ Contractor Equipment & ServicesFinancial Conduit Assessment & C-PACE $ Agreement Services Contract Property/ECMs $ CEFIA Caveat Town Land Records
    118. 118. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement Consent C-Pace Capital Provider $$$ Property Owner $$$ ContractorFinancial Conduit Assessment & C-PACE $ Agreement Services Contract $ Property/ECMs $ $ CEFIA LIEN Town Land Records
    119. 119. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement Consent C-Pace Capital Provider $$$ Property Owner $$$ ContractorFinancial Conduit Assessment & C-PACE $ Agreement Services Contract $ Property/ECMs $ $ Town Tax CEFIA LIEN Collector Town Land Records
    120. 120. Funding: Capital Flow Process Mortgage Holder Funding Notification Agreement & Consent C-Pace Capital Provider $$$ Property Owner $$$ ContractorFinancial Conduit Assessment & C-PACE $ Agreement Services Contract $ Property/ECMs $ $ Town Tax CEFIA $$$ LIEN Collector Town Land Records
    121. 121. Funding: Capital Flow Process Mortgage Holder Funding Notification Agreement & Consent C-Pace Capital Provider $$$ Property Owner $$$ Contractor Financial Assessment & C-PACE Conduit $$ Services Contract $ Property/ECMsAgreement $$ $ Town Tax CEFIA $$$ LIEN Collector Town Land Records
    122. 122. Funding: Capital Flow Process Mortgage Holder Funding Notification & Agreement Consent C-Pace Capital Provider $$$ Property Owner $$$ Contractor Financial Assessment & C-PACE Conduit $ Services Contract $ Property/ECMsAgreement $ $ Town Tax CEFIA $$$ Collector Lien Town Land “M&V” Records
    123. 123. Funding: Capital Flow ProcessRecap:▪ Audit▪ Notification to Mortgage Holder / Consent▪ Project Review by Program Administrator▪ Referral out to Qualified Capital Providers▪ Capital Provider Selected by Owner▪ Negotiations  Funding Agreement▪ Assessment & C-PACE Services Agreement & Financial Conduit Agreement (CEFIA – Owner – Cap Provider)▪ Caveat on the Property (CEFIA – Town/City)▪ Funding Disbursement(s) & Project Work Commences▪ Project Completion▪ Finalization of the Lien on the Property, Payment Schedule, etc.▪ Owner Enjoys More Efficient Building & Repays Funding via Tax Bill 130
    124. 124. M&V: Data Management Platform▪ Full Assessment & Fast Track project data are entered & tracked in CEFIA’s Data Management Platform (CDMP)  CDMP is powered by SRS’s cloud- based software platform  CDMP facilitates key project data & analytics management across the entire project life cycle (project development through M&V)
    125. 125. Benefits to Other Stakeholders Capital Providers Mortgage Lenders Municipalities• Low risk investment • Improves Building • Creates economicHartford opportunity Financials/Risk developmentWestjobs & Hartford Bridgeport • Senior lien • Lowers OPEX Norwalk Simsbury • Secure repayment • SIR>1 • Reduces energy costs Stamford mechanism (taxes) • No acceleration for businesses Stratford Southbury• Legal and technical • Creates a more • Reduces pollution structure administered attractive building for by CEFIA occupants and owners • Finances deferred maintenance needs
    126. 126. The Customer (Building Owner):PACE Addresses Key Barriers Near term plan to sell? Tax obligation fixed to property Hartford West Hartford Bridgeport Lack of funding? 100% upfront, 20 year financing Norwalk Simsbury Stamford Cannot assume more debt? PACE assessments qualify as OPEX Stratford Southbury Insufficient payback/ROI? Positive cash flow in year 1 Split incentives? Assessment/savings pass to tenants Uncertain savings/technical expertise? Technical underwriting / SIR>1
    127. 127. PACE Project Example $1,500,000 add to Building Value (8.9%) 30 Year Old, 200,000 ft2 commercial building 134
    128. 128. Jessica Bailey, Director C-PACEClean Energy Finance and Investment Authority860.257.2888jessica.bailey@ctcleanenergy.comwww.c-pace.com
    129. 129. Thank you!

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