The document discusses the key steps and considerations for developing a solar energy project, including site selection, financing options, and important project documents. It outlines the four main types of players in a project and the typical four steps of planning, financing, construction, and operation. The solar energy market is growing rapidly but may see a short-term decrease in installations before continuing growth. Lower prices and policy support are helping solar compete with conventional energy sources.
2 Views
Presented at the 4th Global Infrastructure Basel Summit 21 & 22 May 2014.
Read more about the world leading platform for Sustainable Infrastructure Finance at www.gib-foundation.org.
Next Summit: 27 & 28 May 2015 in Switzerland
What's Sustainable About This? Business Alongside Corporate Social ResponsibiltyJon Petrochko, MBA
Thesis for my Master of Business Administration degree at Wilkes University. The topic is on small and large businesses and their ability to be environmentally sustainable and social responsible. Corporate Social Responsibility and Environmental, Social, Governance Performance Indicators were the highlight of the research.
Misplaced expectations from climate disclosure initiativesNadia Ameli
The financial sector’s response to pressures around climate change has emphasized the role of disclosure, notably through the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. This Perspective examines two dimensions of the expectations behind transparency and disclosure initiatives: the belief that disinvestment is driven by disclosure; and that investment ‘switches’ from high- to low-carbon assets. We warn about the risk of disappointment from inflated expectations about what transparency can really deliver and suggest some areas that research and public policy should examine to mobilize the required capital to meet climate goals.
The Challenge of Stimulating, Funding, Implementing and Regulating National R...Caribbean Development Bank
A presentation to the Barbados Association of Professional Engineers at their seminar '100% Renewable by 2030?'
presented by Joseph Williams, Head (ag.) Renewable Energy/Energy Efficiency Unit,
Caribbean Development Bank
Joy hughes open standards for shared renewablesJoy Hughes
The recent announcement by Tesla Motors that their patents would be released as open source has put the spotlight on open source and open standards within the renewable energy industry. Open source and open standards play a huge role in the computer and Internet industries. Just think of the impact of the open source architecture of the PC and the open communication standard HTML. Google built its business on the open source Apache server and the open source Android operating system. In the solar industry, Tioga Energy released an open source solar power purchase agreement. Could open standards and open source benefit the shared and community solar industry segment?
2 Views
Presented at the 4th Global Infrastructure Basel Summit 21 & 22 May 2014.
Read more about the world leading platform for Sustainable Infrastructure Finance at www.gib-foundation.org.
Next Summit: 27 & 28 May 2015 in Switzerland
What's Sustainable About This? Business Alongside Corporate Social ResponsibiltyJon Petrochko, MBA
Thesis for my Master of Business Administration degree at Wilkes University. The topic is on small and large businesses and their ability to be environmentally sustainable and social responsible. Corporate Social Responsibility and Environmental, Social, Governance Performance Indicators were the highlight of the research.
Misplaced expectations from climate disclosure initiativesNadia Ameli
The financial sector’s response to pressures around climate change has emphasized the role of disclosure, notably through the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. This Perspective examines two dimensions of the expectations behind transparency and disclosure initiatives: the belief that disinvestment is driven by disclosure; and that investment ‘switches’ from high- to low-carbon assets. We warn about the risk of disappointment from inflated expectations about what transparency can really deliver and suggest some areas that research and public policy should examine to mobilize the required capital to meet climate goals.
The Challenge of Stimulating, Funding, Implementing and Regulating National R...Caribbean Development Bank
A presentation to the Barbados Association of Professional Engineers at their seminar '100% Renewable by 2030?'
presented by Joseph Williams, Head (ag.) Renewable Energy/Energy Efficiency Unit,
Caribbean Development Bank
Joy hughes open standards for shared renewablesJoy Hughes
The recent announcement by Tesla Motors that their patents would be released as open source has put the spotlight on open source and open standards within the renewable energy industry. Open source and open standards play a huge role in the computer and Internet industries. Just think of the impact of the open source architecture of the PC and the open communication standard HTML. Google built its business on the open source Apache server and the open source Android operating system. In the solar industry, Tioga Energy released an open source solar power purchase agreement. Could open standards and open source benefit the shared and community solar industry segment?
This presentation expalins the nuances of acquiring distressed debt secured by real estate or mezzanine debt secured by the ownership interests in an entity owning real property, including the process of foreclosure, intercreditor issues, and other key points.
Capitalism has a long history of boom and bust, we have to continue to learn by every crisis. Two key problems arose especial in Mega Developments in the region with the soft economy and mix use / market shift, the first being most developments are designed for continuous construction rather than phased and the second most master plans could not be phased efficiently with sustainability issues pushes to the forefront. The Presentation focuses on Developers dilemmas and lessons learned and highlight some of the solutions including cost share and cost recovery mechanisms adopted through a project case study.
This presentation expalins the nuances of acquiring distressed debt secured by real estate or mezzanine debt secured by the ownership interests in an entity owning real property, including the process of foreclosure, intercreditor issues, and other key points.
Capitalism has a long history of boom and bust, we have to continue to learn by every crisis. Two key problems arose especial in Mega Developments in the region with the soft economy and mix use / market shift, the first being most developments are designed for continuous construction rather than phased and the second most master plans could not be phased efficiently with sustainability issues pushes to the forefront. The Presentation focuses on Developers dilemmas and lessons learned and highlight some of the solutions including cost share and cost recovery mechanisms adopted through a project case study.
Prospering from the Energy Revolution: Six in Sixty - Technology and Infrastr...KTN
Hear about one of the key facets of PFER, a £102m programme focussed on the integration of power, heat and transport and the business models needed to enable Smart Local Energy Systems (SLES) to scale towards net zero.
If you’re part of the smart systems community this session on Finance and Investment within the Prospering From the Energy Revolution (PFER) ISCF, part of the Six in Sixty mini-series is a must see. The fast-paced, quick-fire, hour-long webinar with a minimum of six speakers will continue the story of Smart Local Energy Systems (SLES) and PFER, focusing on the Finance and Investment pillar.
This presentation was delivered by Tessa Williams-Robertson, Head, Renewable Energy and Energy Efficiency Unit, CDB, at the Fifth Caribbean Sustainable Energy Forum in The Bahamas in January 2017. For more information about renewable energy and energy efficiency in the Caribbean, visit www.caribank.org.
Unlocking the appropriate quantity and quality of capital for the Region's sustainable energy needs is the focus on this presentation. Delivered by Tessa Williams Robertson, Head, Renewable Energy/ Energy Efficiency Unit, CDB at the Fifth Caribbean Sustainable Energy Forum in the Bahamas from January 23-25, 2017.
Reducing Your Operating Costs With Solar EnergyJoshua Hensler
American businesses are turning to solar because it’s good for their bottom line. For many companies, electricity costs represent a significant operating expense, and solar provides the means to reduce costs and hedge against electricity price increases.
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4 Players in Every Project
• Project Owner/Developer – sell electricity for profit
• Off-taker – purchase electricity cheaply
• Lender – repayment of credit with interest
• Contractor – build a facility for profit
• A successful project balances everyone’s interests
• Not unusual for parties (or subsidiaries) to take on multiple
roles – contractor as a lender; developer as a contractor;
off-taker as a developer
• Other parties – grid operator, government agencies
(incentives and regulations), consumers, environmental
concerns
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4 Steps in Every Project
• Planning
Where?
What?
• Financing
How do we pay for it?
• Construction
How do we build it?
• Operation
How do we ensure its success?
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Site Selection
• Site Selection
Good solar irradiation level
Adequate site size (purchase or lease)
Access to grid interconnection
Local incentives for solar development
No serious environmental issues
Limited potential local opposition
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Due Diligence
• Review of all aspects to determine if the project is
commercially viable
Technical feasibility – Is this the best technology for this location?
Financial feasibility – Can the project’s income service its debt?
Commercial feasibility – Is there a reliable purchaser of the
project’s output?
Regulatory/environmental/social feasibility – Are there significant
roadblocks to successful completion? Are there incentives for
project development?
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Financing Options
• Equity financing – one or more partners (investors)
provides capital/services to the project co. in exchange for
equity
• Non/limited recourse financing (project financing) – credit
is secured against assets of project co. only; project
income services debt
• Project is rarely financed exclusively through equity or
non-recourse loans, often a hybrid
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Key Financing and Project Documents
• Financing Documents
Credit/Loan Agreements
Shareholder Agreement
Security Agreements
Disbursement Agreement
• Project Documents
Power Purchase Agreement (PPA)
Engineering, Procurement, and Construction Agreement (EPC
Agreement)
Operation & Maintenance Agreement (O&M Agreement)
• One document you don’t need with solar – fuel supply
agreement!
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Financing Documents Key Provisions
• Senior Loan – often a short-term construction loan
converted to a longer term loan upon successful start-up
• Subordinated Loan – provided by investors/contractors;
should parallel senior loan
• Intercreditor Agreement – governs rights and
responsibilities among lenders
• Security Documents – assignment of all project assets and
revenue to lenders; typically a UCC filing or equivalent
• Disbursement Agreement – governs the “waterfall” of
project revenue; typically O&M expenses, debt service first
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Financing Documents Key Provisions (cont’d.)
• Financing documents should work together (and with
project documents) to ensure adequate liquidity to build
and operate the facility while protecting the lenders’
interests
• Risk Allocation
Debt structure/repayment
Interest rate risk
Change in laws/regulations
Technical risk
Operational risk
Off-taker/counterparty risk
Construction risk
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PPA Key Provisions
• Principal asset of the project is the revenue stream
provided by selling its electric output
• Price often divided between fixed “capacity” and variable
“energy”
Capacity charges – capital costs of the facility, fixed O&M
charges, developers’ ROE
Energy charges – solar significantly reduces variable costs to
variable O&M charges, taxes, insurance
• PPA is a long-term contract (15 – 30 years) – long enough
to repay debt
• PPA should limit project owner default and be oriented
towards “cureability”
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EPC Agreement Key Provisions
• Guaranteed completion date with “delay liquidated
damages” for each day project is not complete
• Guaranteed performance with “performance liquated
damages” tied to performance shortfall
• Warranties on design, materials, and workmanship
• Payment schedule may be tied to milestones
• Withholding/retainage for final completion of “punch list
items” or LDs
• Force majeure provision to excuse delay
• Termination in favor of developer
• Limitation of liability in favor of contractor
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Commissioning and Operation
• Requirements for commissioning and acceptance
Construction completed
Grid interconnection achieved
Performance test successfully completed
• O&M typically handled though O&M Agreement
O&M contractor assumes operational risk for facility
Duties include scheduled and unscheduled maintenance,
administration of relevant agreements, compliance with
laws/regulations
Payment can be fixed, cost-plus, or incentive-based
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International Issues
• Currency risks include non-convertability, transfer, and
devaluation
• Expropriation risk especially high when local government
is a partner
• Change in law/regulatory risk including import/export
restrictions, local workforce requirements, and price
controls
• Political violence/terrorism risk
• General issues related to corporate domicile, banking, and
labor laws
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Good 2015
• 7.3 GW of solar PV installed*
• Year-over-year growth of 17%
• Utility-scale solar growth 6%; more than half of all newly
installed solar PV
• Residential solar growth of 66% with over 2 GW of new
installed solar
• New solar capacity exceeded new natural gas capacity
and represented nearly 30% of all new generating
capacity
* Statistics courtesy of the Solar Energy Industries Association
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Better 2016
• 16 GW expected to be installed
• 119% growth
• 74% of new installation will be utility-scale
• Strong growth in residential and commercial markets too
• By 2021 U.S. solar capacity estimated to exceed 100
cumulative GW with an annual installation of 20 GW
• ITC extended to 2019 with step-down through 2022
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Continued Price Drops
• 17% drop in overall solar PV pricing in 2015
• Utility-scale projects enjoyed greatest decrease
• Average pricing for utility-scale was between $1.33 and
$1.54 per watt depending on technology
• Average pricing for residential was $3.50 per watt
• Increased efficiency/economies of scale from contractors
and developers will result in continued price drops,
especially in the utility-scale sector
• Lower prices per watt will make solar more competitive
with conventional power
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Solar is Getting Noticed
• Warren Buffet’s 2015 Letter to Shareholders noted the
effect renewables were having on the electric market
• Buffet: under the old natural monopoly regime “a ‘sloppy’
[utility] could do just fine financially”
• The efficiencies of renewables combined with tax benefits
will “erode the economics of the incumbent utility,
particularly if it is a high-cost operator”
• Buffet’s utility interest include a $16 billion investment in
renewables – 6% of U.S. solar generation and 7% of wind
generation
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Not All Sunny Skies
• Solar PV installation will likely decrease significantly in
2017 and not reach 2016 levels again until 2020
• Decrease due to pull-back in the utility-scale sector;
residential market likely to continue steady growth
• Why the decrease? Likely over-build in 2016 because of
concerns ITC would not be renewed
• Decreased electricity consumption – EIA estimates a 1.1%
decline in electricity sales in 2015; 5th decline in 8 years
• Reduction or removal of solar and renewable incentives,
especially at the state level
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Oil’s Slide Into Solar?
• Drop in oil prices presents a two-pronged challenge:
Dampening investor interest in the energy sector generally
More difficult for solar to compete on price
• Link between oil prices and solar development is limited
• Electricity generation is less oil and more solar
• Solar provides price stability among commodity price
fluctuations – known and controllable start-up costs and
only maintenance costs over the long term
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Questions?
Contact
Frederick (Erik) J. Heinle
Associate
Duane Morris
505 9th Street, N.W., Suite 1000
Washington, DC 20004-2166
P: +1 202 776 7874
F: +1 202 478 2270
C: +1 703 798 8150
fjheinle@duanemorris.com
www.duanemorris.com