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Peter Y. Flynn, September 16, 2014

Utilizing ESPC to Develop Renewable Energy Projects. Peter Y. Flynn, September 16, 2014. About Bostonia. Founded in 1998, Bostonia Partners is a full-service investment bank with primary market focus in energy and real estate, and additional services in structured finance and advisory

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Peter Y. Flynn, September 16, 2014

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  1. Utilizing ESPC to Develop Renewable Energy Projects Peter Y. Flynn, September 16, 2014

  2. About Bostonia • Founded in 1998, Bostonia Partners is a full-service investment bank with primary market focus in energy and real estate, and additional services in structured finance and advisory • Bostonia Global Securities, the broker/dealer affiliate, provides direct access to investors and daily participation in the capital markets • Bostonia ranked seventh among all banks for domestic private placements in 2009 – 2011 Domestic Private Placement Summary 2011 - 2013

  3. Agenda • Renewable Energy Contracting Options – focus on ESPC • ESPC Financing Structures for Renewable Projects • OMB Memoranda – Challenges • Case Studies • Conclusions

  4. Financing and Contracting Options

  5. ESPC Financing Structure FINANCIER

  6. ESPC Renewable Energy Structure

  7. CEQ/OMB Memorandum 8/16/11 • ESPCs can incorporate purchase of on-site renewable energy – if lower energy consumption and costs to the Government • Complexity of PPAs require special consideration and agencies must submit PPAs entered into under ESPC for OMB review

  8. OMB Memorandum 10/3/12 • For an “onsite energy source” to qualify as an ECM, the arrangement must: • be “applied to a Federal building”; • “improve energy efficiency”; • be “life cycle cost effective”; and • involve energy conservation, cogen, renewable energy sources, improvements in O&M efficiencies, or retrofit activities. • Conditions for annual scoring • ESPCs including onsite energy generation – “the Federal government must retain title to the installed capital goods at the conclusion of the contract.” • ESPCs and UESCs may not be used for the purchase of “off-site new renewable generation or to build merchant scale power generating facilities on federal land.”

  9. White Sand Missile Range, NM • Project Overview • $18 million ESPC for US Army in White Sands, New Mexico – largest military installation in the US • ESPC includes 4.5 MW Solar PV array (ground mount and carport) and an Energy Management Control System • Solar array will produce 10.4 million kWh and contribute approximately 10% of total energy consumption at the installation • Project will create total cost savings of approximately $44 million over the 25-year contract term based on escalation of electricity rates • Siemens Government Technologies selected to construct and operate the system • Financing Overview • Unlike a traditional ESPC, private ownership of the energy assets allowed the project to monetize federal tax credits • Long-term Energy Services Agreement (ESA) allows Government to acquire solar power without upfront capital or a buy down of project capital cost • Title to non-solar ECMs will vest with the Government at acceptance • Government will pay same utility rate it currently pays and will own the RECs

  10. Hill Air Force Base, UT • Project Overview • $5 million ESPC financing at Hill AFB - 1st DOE Biomass Super Project • Main parties include DOE, Ameresco, Bostonia, Hill Air Force base, Davis County Landfill, Utah Power utility • Large electrical demand and steam load at Hill AFB; large waste disposal in place and daily disposal rate at Davis County Landfill • Biomass and Alternative Methane Project included : 1.2 MW IC engines, 20 year contract, 2 mile pipeline, conventional ECM’s in other buildings • Reduction of 5,000 tons of greenhouse gases, 5.5 tons of Nitrogen Oxide, 4.8 tons of Carbon Monoxide, 19 tons of Sulfur Dioxide • Financing Overview • Structured as securitization for ECMs, including biomass and alternative methane fuel energy savings project that generates electricity for the Government to sell to utility for credit • Total cost savings of $16+ million over the 20-year contract • Overall simple payback under 10 years • No Capital investment required by Hill AFB • Monthly credit received by Hill AFB for Green Power generation

  11. Conclusions • ESPC is an important tool for meeting Federal energy goals and achieving energy security • Long-term contracting authority up to 25 years • Established program with proven contracting partners • Traditional ECMs can subsidize renewable energy projects • Government or a private entity can own assets • ESCO operates and maintains the project • RE projects are complex with steep learning curves • Important to assemble the team early • Projects need a “champion” at the installation • Work with a public/private mentality and remain adaptive and flexible • Markets, incentives, and technologies drive projects • Important to understand federal and state incentives, standards, and energy prices in order to determine complete revenue picture • Important to determine what technologies are best suited to specific geographic conditions

  12. Contact Information Peter Y. Flynn Executive Vice President 617-226-8103 Direct 617-437-0150 Main pflynn@bostonia.com

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