Connecticut Self Storage Association Presentation

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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.
  • Connecticut Self Storage Association Presentation

    1. 1. ENERGY SUMMITfor Self StorageOwners and ManagersCTSSA ProgramMarch 12, 2013
    2. 2. OverviewDiscuss economic benefits of investing inenergy efficiency measures from both aninvestment and a tax perspective.Discuss low interest financing options.Review a case study – i.e. take you through anactual proposal and financial analysis for a CTstorage facility.
    3. 3. IntroductionsPanelists• Stephanie Grubb, Cohn Reznick - Investment Considerations and Tax Benefits• Jessica Bailey, CEFIA Commercial & Industrial Property AssessedClean 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 ImproveEnergy 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 Estimateto 9 Billion by 2040What will the effect be on: The Use of Energy? The Cost of Energy? The Environment, ifwe continue to usefossil fuel basedenergy?
    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 energyconsumer behind China The use of renewable energy will triple Renewables account for 7% of all energy and willrise to 14%
    7. 7. Electricity RatesOn average, CT electric rates have increased5% per year, over the last 10 years. (Source: US Energy InformationAdministration)Currently, the average commercial cost isbetween $0.16 - $0.17/kWh in CTStraight line projection of 5%/year =$0.27/kWh in 2023
    8. 8. Energy Conservation,Generation and AlternativeSupplyOn overview
    9. 9. How can you conserve energy in a building:1. Look at your process and learn if you can leanout the process;2. Make process equipment more energyefficient;3. Look at the building systems and determine ifyou can replace any systems with energyefficient technology;4. Manage you process and building systems withtechnology.5. An audit or benchmarking will help youdetermine the present situation and provideoptions for you
    10. 10. Next make sure you understand the economics ofconservation.As you will learn today there are many programs available toassist with funding for conservation projects.Understand some monies are incentive monies to do theproject, 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 incentivedollars which requires less funding for the projects andthen take the federal tax credit or deduction on your taxreturn.
    11. 11.  Federal programs apply to every state. Every state and within the sate the utility companymay have their own programs for conservation orgeneration. CT has the energy efficiency fund and CEFIA and nowCPACE 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 beknowledgeable CT utility companies can change their rates January 1and July 1 – this year UI will change their rate next inJanuary 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 ratesmonthly on the 1st.
    13. 13.  You can generate energy through renewabletechnologies such as solar, wind, etc You can generate energy with cleaner technologiessuch as fuel cell, co-gen etc Federal tax credits available for projects through 2016 In CT - CPACE program can potentially fund theprojects, you will learn more later-CPACE is in 27other 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 renewableenergy source Every hour, enough sunlight shines onthe earth to meet global energy needsfor an entire year
    16. 16. It’s Natural – Just like the SunSiliconIngotWaferSolar CellModulesArrayVirginSilicon
    17. 17. PV System on Building
    18. 18. Calculating Solar EfficiencyAzimuthPitchShading
    19. 19. Solar Economics
    20. 20. The Economics of Solar Avoided Cost of Electricity equals LowerOperating Expenses Federal Tax Benefits – ITC and Depreciation State/Utility Incentives - ZREC Life of Solar System (25 Year Warranties)
    21. 21.  30% Federal Tax Credit through 2016 5-year accelerated depreciation (MACRS) 50% bonus depreciation in 2013 Depreciable base is reduced by 50% of ITCcredit valueFederal Solar Programs
    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 TimelineMonth 1 2 3 4Week 1 2 3 4 5 6 7 8 9 10 11 12 13Stage I II IIIA. AgreementsCompletedB. PhysicalPlan/SiteReviewD. StateAuthorizationMunicipalPermitsAssumes no zoning orvariances requiredE. SystemInstallation(Assumes goodweather conditions)F. MunicipalInspectionG. Utility-NetMeter InstallC. Final DesignUtilityApplication/InterconnectionH. StateInspectionStage I - DesignStage II - ApplicationsStage III - Installation
    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. 203AN ACT CONCERNING PROPERTY TAX EXEMPTIONS FORRENEWABLE ENERGY SOURCES.Be it enacted by the Senate and House of Representatives in General Assemblyconvened:That section 12-81 of the general statutes be amended to exempt from propertytax any Class I renewable energy source installed for the generation ofelectricity for commercial and industrial use, and to make such exemptionapplicable 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 commercialand industrial sectors to benefit from such sources by expanding current lawthat allows the property tax exemption for renewable energy sources only if thegeneration 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 EvaluationInvestment analysis considers ‘at-risk’ rule, therefore the project isfinanced at 80% maximum. Balance of system cost is invested byowner. 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% yearlyescalator)• 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. CohnReznick LLPR e n e w a b l e E n e r g y P r o j e c t F i n a n c eMarch 2013
    35. 35. • What drives the Renewable Energy Market• What is the ITC• How to finance a renewable energy project• What are the benefits to youA g e n d a
    36. 36. R e n e w a b l e E n e r g y M a r k e t D r i v e r s• Renewable Portfolio Standards (RPS)• Financial incentives̶ Renewable Energy Certificates (RECs), particularly for Solar (SRECs)̶ Feed-in Tariffs (FIT)̶ Rebate and grant programs̶ Federal tax incentives̶ State tax incentives• Rising cost of electricity̶ Driven by fossil fuel prices and growth in demand̶ 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. Sponsor – 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.Key Renewable Energy and Solar Terms
    39. 39. Avoided 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)Key Renewable Energy and Solar Terms
    40. 40. Federal Tax Incentives
    41. 41. Ta 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 rate̶ Assume 35% tax rate̶ $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 muchelectricity 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 thatelectricity 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 beforeCOD/PIS date̶ 5 year compliance/holding period (like § 47 Historic Rehab TaxCredits)̶ Credit vests and recapture period burns off 20% per year for 5years from date of COD/PIS
    44. 44. • 5 year MACRS depreciation on most technologies (Bonus Depreciationapplies when law allows)• Basis reduction – Must reduce depreciable tax basis by 50% of the creditamount• No governmental or tax exempt use allowed (“use” means ownership orlease)• Credits are Allocated by profit/loss ratio (like Historic Rehab Tax Credit)• May offset Alternative Minimum Tax liability (for tax years starting after2008)• Note, the ATRA of 2012 extended the election to claim the section 48investment tax credit (ITC) rather than the PTC for eligible wind andother PTC facilities. Not all PTC eligible facilities are allowed this option.For those that are, the election now applies for projects whereconstruction begins prior to January 1, 2014. This is a new rule.IRC 48 – Energy Investment Tax Credit (ITC)
    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 electricityConstructed/Purchased by the taxpayerMust 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 installationSystem integration/design/testingPermits, fees etc.Interest expense prior to PIS – Subject to Section 266 ElectionDeveloper fee if ReasonableOther soft costs properly capitalized
    48. 48. Practical 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 201043023Eligible Energy Tax Credit Basis
    49. 49. Test Your Knowledge: What is Eligible for ITC Basis?
    50. 50. B o n u s D e p r e c i a t i o nATRA Extended Bonus Depreciation50% - Additional 1st 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. M A C R S D e p r e c i a t i o n• Wind, solar and geothermal are generally classified as five-yearproperty• Biomass is typically classified as seven-year property• Ancillary components such as transmission lines are depreciated over alonger period, generally not include in tax credit basis.• MACRS Permanent part of the tax codeWind/SolarYear 1 Year 2 Year 3 Year 4 Year 5 Year 6MACRS 20.00% 32.00% 19.20% 11.52% 11.52% 5.76%MACRS +50% bonusdepreciation60.00% 16.00% 9.60% 5.76% 5.76% 2.88%
    52. 52. 58Financing RenewableEnergy ProjectsWhy and How.
    53. 53. W h y F i n a n c e R e n e w a b l e E n e r g y ?For investors –Tax incentives:– Solar - 30% Investment Tax Credit (ITC), and for certain othertechnologies, 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 thanLIHTC and other tax credit investments.For owner-operators –Cash flow from the sale of energy to tenants or utilities under long termagreements 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 (sourcehttp://www.cohnreznick.com/sites/default/files/The%20Return%20%E2%80%93%20and%20Returns%20%E2%80%93%20of%20Tax%20Equity%20for%20US%20Renewable%20Projects.pdf)
    54. 54. H o w t o F i n a n c e R e n e w a b l e E n e r g yP r o p e r t y•Educate Lenders•Be aware of “At Risk Rules”
    55. 55. 61What Does This Mean ToYou?More Tax Rules!
    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 willcreate 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 entitiesQualified 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-exemptsPPA needs to be respected as sales/service contract… or lose / deferincentives
    57. 57. W h e r e c a n I f i n d m o r e i n f o r m a t i o n ?CohnReznick – Renewable Energyhttp://www.cohnreznick.com/industries/renewable-energyEnergy Tax Credits – DSIREhttp://www.dsireusa.org/– Information on federal tax credits and incentives– Provides links to relevant state websitesSolar Energy Industries Associationhttp://www.seia.org/American Wind Energy Associationhttp://www.awea.org/
    58. 58. C o h n R e z n i c k C a n H e l p Yo uStephanie Grubb, CPAManagerCohnReznick LLP525 N. Tryon StreetSuite 1000Charlotte, NC 28202Main (704) 332-9100Direct (704) 837-7252stephanie.grubb@cohnreznick.comwww.cohnreznick.comwww.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. Whyare PeopleInterestedin RenewableGeneration?Drivers:• To “Go-Green”• To reduce, or better predict, spending on energyBarriers:• Cost of Systems• No clear long-term revenue streams to support capitalinvestments• Public Act 11-80 created a billion dollar opportunity fordevelopers 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. WhatisaREC?=RenewableEnergyCertificate• How is a REC Created?Each time a renewable generation unit produces, the energy isconsidered “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 tosatisfy regulatory requirements (RPS)
    62. 62. HowManyRECs&HowMuchAre TheseRECsWorth? 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 withcustomerThe RECpurchase is aseparatetransactionUtility purchasesexcess energy underexisting tariff
    64. 64. Rec Contract with a developerElectric 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 InvestmentAuthority, or its predecessor the CT Clean Energy Fund (other than low costfinancing)• 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 100standard cubic feet• May include fuel cells and other low emission Class I resources, as well as all zeroemission 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)2) TariffProjectTypeSize AnnualBudgetRenewable Energy CreditPrice Cap*RFP Timeframe and FrequencyLargeZRECs≥250 kW to1,000 kW~$2.13 M Max. $350/REC Annual in April for 6 years2013 will be year 2MediumZRECs>100 kW < 250kWApproximately$2.13 MMax. $350/REC Annual in April for 6 years2013 will be year 2LRECs Up to 2,000kW$4 M Max. $200/REC Annual in April for 5 years2013 will be year 2ProjectTypeSize AnnualBudgetRenewable Energy Credit PriceCapTariff Availability andFrequencySmallZRECsUp to 100 kW ~$2.13 M Weighted Average of the MediumZREC price + 10% up to $350/REC- Year 1 Avg = $164.22/RECAnnually, after the approval of theRFP and the filing of the mediumZREC rate + 10%Expect to offer Yr. 2 Q4 2013 orQ1 2014
    67. 67. Budget & commitmentschedule
    68. 68. FinalResultsof 1st RFP• Final Selected Projects weighted average price/REC = $891. 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 = $121.132. RFP contracts will result in approximately 27 MW of installed renewable capacity in CT• LRECs = 5.6 MW – fuel cells• ZRECs = 21 MW - solarCategory Size # Bids #BidsSelectedAverageWeightedPrice/RECCommittedBudget ($M)UncommittedBudget ($M)% of BudgetUncommitted15 YearContractValue ($M)LRECs Up to 2 MW 43 12 $65.94 $3.0 $162K 5% $45.6MediumZRECs100 – 250kW113 47 $149.29 $2.0 $78K 4% $29.8LargeZRECs250 – 1,000kW140 21 $101.36 $2.1 $145K 7% $30.8Total 296 80 $89.13 $7.0 $386 k 5% $106
    69. 69. Small ZREC Tariff• Instead of competitive bidding - projects less than or equal to 100kW are eligible to enroll in a tariff• Price takers = $164.22/REC• Program establishes the price as the average of the selected Medium ZRECprojects +10%• Schedule - Small ZREC Tariff Program must open 30 days fromapproval of Medium ZREC Contracts• Medium ZREC Contracts approved 11/21/13• Opened Small ZREC Program 1/8/13 (with PURA approval for extension due toholidays)• Initial two-week window closed 1/22/13
    70. 70. Small ZRECTariff• At the close of the Small ZREC 2-week , CL&P received 479 completed Small ZREC Applications, which totaled over $5.6M in requestedSmall 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 completedApplications submitted during the 2-week window, which process was observed by a representative of the State of Connecticut Officeof Consumer Counsel (OCC). The random selection process resulted in a numerical rank of all completed Applications receivedduring 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 = $164.22/REC• Small ZREC Tariff will be open until all available budget has been allocated, or at the time when a new Small ZREC price has beenestablished for the next year Small ZREC applications.• Expect this round of the Small ZREC Program will result in an approximately 9 MW additional installed solar in CTCategory Size #ApplicationsReceivedApprox. # ofContracts tobe awardedPrice/REC AvailableBudget($M)Total AnnualValue ofApplications15 YearContractCommitmentValue ($M)SmallZREC0 – 100 kW 479 200 $164.22 $2.36 $5.6 $35.4
    71. 71. Timeline and Next StepsAction Date CommentsSmall ZREC Tariff ServiceAttachment ExecutionJanuary – July 2013 Execution of ~200 Service AttachmentsLREC and Medium/Large ZREC RFP –Year 2 OpeningApril, 2013 Year 2 RFP to open in April 2013
    72. 72. For additional information visit:Website: CL-P.com, and Click on RenewableEnergy Credits under the “Going Green” tabEmail: LREC.ZREC@NU.COMUI: www.uinet.com/powerprocurementEmail: LREC.ZREC@uinet.com
    73. 73. Energy Efficiency Programs forBusiness CustomersConservation & Load ManagementConnecticut Light & Power andYankee Gas
    74. 74. Energize Connecticut: Newname, same great programs• Energize Connecticut is the state’s new branding initiative to helpconsumers save money and use clean, affordable energy.• A partnership of the Energy Efficiency Fund, the Clean Energy Finance andInvestment 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 PublicUtilities Regulatory Authority
    75. 75. 2013 Program IncentiveBudgets & CapsProject caps• CL&P $1,000,000 per federal tax ID• YGS/CNG/SCG projects with an incentive amount greaterthan $100,000 require PURA approvalBudgetsCL&P C&I $ 35.2 MYGS $ 2.4 MCNG $ 2.3 MSCG $ 2.1 M
    76. 76. New Construction & Equipment• Captures electric and natural gassavings where they are most cost-effective: during design• Covers up to:– 95% of the incrementalcost of installingmeasures in newconstruction– 75% of the incrementalcost for equipmentreplacement projectsEnergyEfficientLightingLightingControlsHVACEquipmentBuildingEnvelope RefrigerationProcessEquipmentGas Boilers VFDs New Construction Major Renovation Equipment Replacement
    77. 77. Prescriptive Rebates• HVAC UnitaryEquipment• Heat pumps• Infrared heaters• Water heaters• Food service rebates• Gas heatingequipment– Condensing boilers– Non-condensingboilers– Condensing furnaces– Condensing unitheaters
    78. 78. Existing Buildings• Incentives to replace functioning equipment withmore energy-efficient optionsCovers up to:• 40% of installed cost• 50% of installed costfor comprehensiveprojectsEnergyefficientlightingLightingcontrolsEMS/ProgrammableThermostatsProcessEquipmentVFDsHVACRefrigerationControlsGas Measures
    79. 79. Small Business Energy Advantage(SBEA)• Turnkey energy-saving program• Pay nothing upfront• Existing business, municipal, andgovernment customers• Average 12-month peak demand between 10kW and 200 kW• All possible energy efficiency measures• On-bill, 0% financing to qualifying customers
    80. 80. BUSINESS & ENERGYSUSTAINABILITY (BES)Retro Commissioning/PRIME/O&M Services/Training & Outreach
    81. 81. Business & Energy Sustainability(BES)• The next level after all or mostmajor capital improvementshave been completed• Maximize operationalstrategies with existing capitalequipment & people• Develop managementpractices
    82. 82. BES Programs• Retro Commissioning: Optimizes operation ofcustomer’s facility without installing capitalequipment• PRIME: Focuses on industrial manufacturingprocesses• Operations & Maintenance: Improves efficiencythrough changes and repairs that can be classifiedas maintenance or operational procedures• Training & Outreach
    83. 83. FinancingType Min Max Rate TermMaxPymt SourceSBEA/Muni$500 $150,000 0% 4 yrs On-Bill UtilityC&I $2,000 $1 Million(1st $100,000w/ subsidy)2.99% or4.99%5 yrs 3rd Party 3rd PartyPURALoan(>50 kWsavings)$1Million1% belowrate/nomore thanprime10 yrs 3rd Party 3rd Party
    84. 84. Residential ProgramsHome Energy SolutionsHES – Income EligibleResidential New ConstructionRetail ProductsHeating & 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. C-PACE:A financing tool for multi-familyClean Energy Finance and Investment Authority
    89. 89. Property Assessed Clean Energy▪ An innovative financing structure that enables commercial, industrial, andmulti-family property owners to access financing for qualified energyupgrades and repay through a benefit assessment on their property tax.Private capitalprovides 100%upfront, low-cost,long-term fundingRepayment throughproperty taxesA senior PACE lien isput on the propertyand stays regardlessof ownership
    90. 90. CRE Owners Face Barriers to UpgradesREFERENCESEE Indicator – NA 2010, Johnson Controls and InternationalFacilities Management Association (IFMA)
    91. 91. PACE Addresses Key BarriersREFERENCESEE Indicator – NA 2010, Johnson Controls and InternationalFacilities 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 interestrates▪ PACE assessment stays with the property upon sale▪ Ability to pass payments through to tenants▪ Higher rents and greater long-term property valuebecause 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•Onboard Municipalities•Website launched (www.c-pace.com)DesignProgram•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage LendersAdministerProgram•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)AttractPrivateCapital
    95. 95. CEFIA’s Role in C-PACE•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)DesignProgram•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage LendersAdministerProgram•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)AttractPrivateCapital
    96. 96. Municipalities Opted into C-PACEComing Soon: Cheshire, Clinton, East Granby, East Hartford, Fairfield, Hamden,Manchester, Meriden, New Haven, Plymouth, Torrington, Waterbury, Wethersfield▪ Beacon Falls▪ Bridgeport▪ Durham▪ Hartford▪ Middletown▪ Norwalk▪ Old Saybrook▪ PutnamHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthbury▪ Simsbury▪ Southbury▪ Stamford▪ Stratford▪ West Hartford▪ Westport▪ Wilton▪ Windham
    97. 97. C-PACE Opportunities in ConnecticutHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthbury
    98. 98. Customers Apply Into C-PACEHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthbury
    99. 99. CEFIA’s Role in C-PACE•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)DesignProgram•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage LendersAdministerProgram•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)AttractPrivateCapital
    100. 100. C-PACE Partners do Technical UnderwritingHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthbury3rd PartyAdministrator:BuonicorePartnersProgram Expertise:Buonicore Partners• Milford, CT• Modeled Energy Profile of CT• Nationwide PACE experienceTechnical Expertise:Celtic Energy• Glastonbury, CT• $1bn of energy-related projects• Experience with large commercialend-users, utilities, and governmentReal Estate Expertise:Sustainable RealEstate Solutions• Trumbull, CT• Benchmarking Database• Industry leader in building energyperformance assessment
    101. 101. Upgrades: What’s EligibleAnything that saves energy from baseline▪ High efficiency lighting▪ HVAC upgrades▪ New automated building and HVACcontrols▪ Variable speed drives (VSDs) on motorsfans and pumps▪ High efficiency chillers, boilers, andfurnaces▪ High efficiency hot water heatingsystemsHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthbury… as long as it isn’t going anywhere▪ Combustion and burner upgrades▪ Fuel switching▪ Water conservation▪ Heat recovery and steam traps▪ Building enclosure/envelopeimprovements▪ BMS▪ Renewable energy systems
    102. 102. Upgrades: What’s Not▪ Appliances, e.g., refrigerators,dishwashers, etc.▪ Plug load devices▪ Vending machine controls▪ Any package of measures with aweighted average effective useful life(EUL) that does not meet or exceedthe life of the loan▪ Any package of measures that doesnot achieve an energy savings (overthe life of the loan) to [total project]investment ratio > 1HartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthbury▪ Any measure that is easilyremoved/not permanentlyinstalled▪ Any measure that does not resultin improved energy efficiency▪ Extending natural gas lines to theproperty line to enable a PACE-eligible gas conversion project.
    103. 103. CEFIA’s Role in C-PACE•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)DesignProgram•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage LendersAdministerProgram•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)AttractPrivateCapital
    104. 104. Capital PartnersHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthburyQualified Capital Providers▪ CEFIA qualified 8 capital providersthrough a RFI.▪ “Lending tree” modelOwner Arranged Financing▪ Property owner is free to choosetheir capital provider from theprivate market. There is nogovernment financing required.Construction and Term Financing fromCEFIA▪ CEFIA authorized $20M short termfacility for construction and termfinancing.
    105. 105. Requirements▪ Building must be commercial, industrial, or multifamily▪ Non-profits eligible if municipality allows▪ Building must be located in a municipality which hasopted 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 compellingsavings & ROI– Proceed to Level II/III audit when significant savings potentialexists. Determine the optimized bundle of ECMs, calculateproject cost, projected energy savings & key financial metrics▪ Fast Track– Designed for buildings where prior energy audits have beencompleted including ECM recommendations, but failed to getimplemented 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. ▪ Developed in light of other PACE and leading CRE energyretrofit finance programs around the country▪ Incorporates three established industry protocols– ASTM Building Energy Performance Assessment (BEPA) StandardE2797-11 for baseline energy use data collection and analysis– ASHRAE Level 1, 2, 3 Energy Audit Guidelines to identify ECMsand project energy savings– International Performance Measurement & Verification Protocol(IPMVP) for energy savings measurement and verification▪ Underwriting methodology is technically sound,standardized, reliable & fully-transparentApplication Review: Technical Standards
    108. 108. $$$$$$$$C-Pace CapitalProviderContractorProperty Owner$$CEFIATown TaxCollectorTown LandRecordsProperty/ECMsLien$$$Mortgage HolderNotification &ConsentAssessment & C-PACEServices ContractFundingAgreementFunding: Capital Flow Process“M&V”FinancialConduitAgreement
    109. 109. Property Audit/Energy AssessmentContractorProperty Owner$$$$$$$Funding: Capital Flow Process$$$
    110. 110. ContractorProperty Owner$$$$$$$Funding: Capital Flow Process$$$Mortgage HolderNotification &Consent
    111. 111. ContractorProperty Owner$$$$$$$Funding: Capital Flow Process$$$Mortgage HolderNotification &ConsentCEFIA ProgramAdministratorTechnicalReview
    112. 112. ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderFundingAgreementNotification &Consent
    113. 113. ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderAssessment & C-PACEServices ContractFundingAgreementNotification &Consent
    114. 114. ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderFinancial ConduitAgreementFundingAgreementNotification &Consent
    115. 115. ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderFundingAgreementProperty/ECMsFinancial ConduitAgreementNotification &ConsentAssessment & C-PACEServices Contract
    116. 116. ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderAssessment & C-PACEServices ContractFundingAgreementTown LandRecordsProperty/ECMsCaveatFinancial ConduitAgreementNotification &Consent
    117. 117. $$$$$$Equipment &ServicesContractorProperty Owner$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderAssessment & C-PACEServices ContractFundingAgreementTown LandRecordsProperty/ECMsCaveatFinancial ConduitAgreementNotification &Consent
    118. 118. CEFIA$$$$$$ ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderFundingAgreementTown LandRecordsProperty/ECMsLIENAssessment & C-PACEServices ContractFinancial ConduitAgreementNotification &Consent
    119. 119. CEFIATown TaxCollector$$$$$$ ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderCEFIAC-Pace CapitalProviderAssessment & C-PACEServices ContractTown LandRecordsProperty/ECMsLIENFinancial ConduitAgreementFundingAgreementNotification &Consent
    120. 120. CEFIATown TaxCollector$$$$$$ ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderNotification& ConsentCEFIAC-Pace CapitalProviderAssessment & C-PACEServices ContractFundingAgreementTown LandRecordsProperty/ECMsLIEN$$$Financial ConduitAgreement
    121. 121. $$CEFIATown TaxCollector$$$$$$ ContractorProperty Owner$$$$Funding: Capital Flow Process$$$Mortgage HolderNotification& ConsentCEFIAC-Pace CapitalProviderAssessment & C-PACEServices ContractFundingAgreementTown LandRecordsProperty/ECMsLIEN$$$FinancialConduitAgreement
    122. 122. $$$$$$$$C-Pace CapitalProviderContractorProperty Owner$$CEFIATown TaxCollectorTown LandRecordsProperty/ECMsLien$$$Mortgage HolderNotification &ConsentAssessment & C-PACEServices ContractFundingAgreementFunding: Capital Flow Process“M&V”FinancialConduitAgreement
    123. 123. 130Recap:▪ 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 BillFunding: Capital Flow Process
    124. 124. ▪ Full Assessment & Fast Track project data are entered & tracked in CEFIA’s DataManagement Platform (CDMP)M&V: Data Management Platform CDMP is powered by SRS’s cloud-based software platform CDMP facilitates key project data &analytics management across theentire project life cycle (projectdevelopment through M&V)
    125. 125. Benefits to Other StakeholdersHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthburyCapital Providers• Low risk investmentopportunity• Senior lien• Secure repaymentmechanism (taxes)• Legal and technicalstructure administeredby CEFIAMortgage Lenders• Improves BuildingFinancials/Risk• Lowers OPEX• SIR>1• No acceleration• Creates a moreattractive building foroccupants and owners• Finances deferredmaintenance needsMunicipalities• Creates economicdevelopment & jobs• Reduces energy costsfor businesses• Reduces pollution
    126. 126. The Customer (Building Owner):PACE Addresses Key BarriersHartfordWest HartfordBridgeportNorwalkSimsburyStamfordStratfordSouthburyNear term plan to sell?Lack of funding?Cannot assume more debt?Insufficient payback/ROI?Split incentives?Uncertain savings/technical expertise?Tax obligation fixed to property100% upfront, 20 year financingPACE assessments qualify as OPEXPositive cash flow in year 1Assessment/savings pass to tenantsTechnical underwriting / SIR>1
    127. 127. PACE Project Example$1,500,000 add to Building Value (8.9%)13430 Year Old,200,000 ft2commercialbuilding
    128. 128. 860.257.2888jessica.bailey@ctcleanenergy.comwww.c-pace.comJessica Bailey, Director C-PACEClean Energy Finance and Investment Authority
    129. 129. Thank you!

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