PV Market Update and Creative Financial Structures

1
PV Market Update and Creative Financial
Structures
NYC Solar Summit 2008

• Jason Coughlin
• National Renewable Energy Laboratory
• June 17, 2008

2
US Solar Industry 2007 Year in Review

• 150 MW installed in 2007 (45 increase from 06)
• 12,700 sites connected to the grid in 2007
• Average US residential system 4.8 kW
• Average US commercial system 69 kW
• 4th largest market after Germany, Japan, and
  Spain

Source Solar Energy Industry Association
Prometheus Institute
http//www.seia.org/Year_in_Review_2007_lr.pdf
3
Top 5 States for PV
Big projects in Nevada (15 MW) and Colorado (8
MW) impacted rankings
Sources Prometheus Institute, July 2007 as
presented by Mark Sinclair of the Clean Energy
States Alliance at the NARUC workshop on Nov. 14,
2007.http//www.narucmeetings.org/Presentations/Si
nclair_2.pdf Solar Energy Industry Association
Prometheus Institute http//www.seia.org/Year_in_
Review_2007_lr.pdf
4
Why?

• Renewable Portfolio Standard
• (ideally with a solar/DG carve out)
• Good incentives and commitment to renewables
• Above average cost of electricity

5
Nonetheless, a long way to go..
2.4
Electricity Generation 2006
Source EIA Annual Energy Review 2007
6
Federal ITC in jeopardy

• Solar Investment Tax Credit
• 30 of installed cost
• 2,000 cap for residential PV
• Expires on 12/31/2008
• Business ITC reverts back to 10
• Residential ITC will expire
• Lots of legislation in Congress yet none has a
  clear path to approval

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H.R. 6049 Renewable Energy and Job Creation Act

• Highlights of H.R. 6049
• Extend commercial ITC at 30 for 6 more years
• Removes limitation on public utilities
• Extend residential ITC at 30 for 6 years
• (4,000 cap)
• White House views on 6049
• support the concept but not financing mechanism
• senior advisers would recommend a veto
• Failed in the Senate last week

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Potential impact if 30 ITC not renewed

• Navigant Consulting1
• 325MW of PV instead of 565 - 790MW
• 39,400 jobs will be lost in 2009
• 8 billion in investments will not happen
• GreenTech Media2
• The greatest foreseeable threat to the PPA market
  in the U.S. is the expiration of federal
  Investment Tax Credit (ITC) provisions.
• Lessons from Wind Industry

1. Economic Impacts of Tax Credit Expiration.
Navigant Consulting. February 2008. 2. Solar
Power Services How PPAs are changing the PV
Value Chain. John Guice and John King.
GreenTech Media. February 2008.
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Impact of PTC volatility
Source Adapted from American Wind Energy
Association (http//www.awea.org/)
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Creativity drives the market
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Third Party PPA Models
Federal Government

• Host
• Government
• Commercial
• Residential

Tax benefits

• Investors
• Tax equity
• Debt

Purchase PV System output

• Solar Developer
• SunEdison
• MMA Renewable Ventures
• Many others

Fixed price power for 15-20 years
Return on Investment Debt Service
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Berkeley Model

Lender (bond/loan)
Berkeley
Property taxes
Repays loan
Finances system
Homeowner

• Property Tax Finance Model
• City borrows money to pay for the installation
• of residential PV systems upfront
• Repaid over 20 years as part of property tax
  bill
• Security for lenders and the city
• Transferable to next homeowner

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Community Solar Virtual PV

• City of Ellensburg, WA1
• 36 kW system (168 kW potential)
• intermediate step between participation in a
  green power program and owning a complete system
• proportional ownership of system
• SMUD SolarShares2
• 1 MW system
• 20 year PPA with enXco
• focus on renters and occupants of multi-unit
  buildings

1. http//www.greentagsusa.org/renewables/ellensbu
rg.shtm 2. http//www.smud.org/news/releases/08arc
hive/04-17-08_solar_shares_contract.pdf
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Residential Solar Leasing
PV Vendor
Lease PV system
Lessor
Homeowner
Lease Payments
Investors

• Investors/Lessor takes the tax benefits
• Goal Utility savings Lease payment
• Minimize upfront investment
• Ownership options at end of lease term

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Incorporating Solar into New Construction

• Solar communities
• Roof-integrated PV (BIPV)
• PV Ready
• Pre-wired
• Roof pitch
• Roof Orientation

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Oregon Monetize tax credits
BETC
Entity that pays state tax
School
Upfront cash payment

BETC
Installs PV system

• Business Energy Tax Credit (BETC)
• State Income Tax Exemption
• 50 taken pro-rata over 5 years
• Pass Through Option
• Governments and non-profits can sell their BETC

Reduces tax burden
Source Oregon Department of Energy.
Pass-Through Option
http//www.oregon.gov/ENERGY/CONS/BUS/tax/pass-thr
ough.shtml
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Portland Habilitation Center (PHC)
Non-profit (PHC)
Partnership
Investor
Non-profit (PHC)

• Partnership flip model with a non-profit
  organization
• Creates a structure to allow a non-profit to
  benefit from
• tax incentives
• Incorporates a PPA
• Largest PV system in Oregon (870 kW)

Source The Oregonian Tax breaks turn solar
power into hard cash. Gail Kinsey
Hill. March 16, 2008.
www.phcnw.com/pages/documents/ARTOregonian031608-T
axbreaksturnsolarpower.pdf
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Denver PV and Affordable Housing

• Tax equity investor universe similar for solar
  and affordable housing
• Northeast Denver Housing Center and Groundwork
  Denver
• Stapleton project
• Whittier project
• Key Element Train residents within the
• community as solar installers

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DOE Solar America Cities

• 25 cities across the United States
• Financial and technical assistance
• 2-year program to develop comprehensive programs
  that incorporate PV and SHW into city planning

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Conclusions

• 2007 was a good year for PV
• Momentum is jeopardized by expiring federal tax
  incentives
• Creativity is the key to getting PV projects
  installed

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The U.S. Department of Energys National
Renewable Energy Laboratory www.nrel.gov
Contact Information Jason_Coughlin_at_nrel.gov 303-38
4-7434
Golden, Colorado