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PV Market Update and Creative Financial Structures

PV Market Update and Creative Financial Structures. NYC Solar Summit 2008. Jason Coughlin National Renewable Energy Laboratory June 17, 2008. 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

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PV Market Update and Creative Financial Structures

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  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/Sinclair_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

  7. 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

  8. 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.

  9. Impact of PTC volatility Source: Adapted from American Wind Energy Association (http://www.awea.org/)

  10. Creativity drives the market

  11. Third Party PPA Models Federal Government • Host • Government • Commercial • Residential Tax benefits • Investors • Tax equity • Debt Purchase PV System output $$$ Fixed price power for 15-20 years • Solar Developer • SunEdison • MMA Renewable Ventures • Many others Return on Investment Debt Service

  12. “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

  13. 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/ellensburg.shtm 2. http://www.smud.org/news/releases/08archive/04-17-08_solar_shares_contract.pdf

  14. 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

  15. Incorporating Solar into New Construction • Solar communities • Roof-integrated PV (BIPV) • “PV Ready” • Pre-wired • Roof pitch • Roof Orientation

  16. 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-through.shtml

  17. 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-Taxbreaksturnsolarpower.pdf

  18. 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

  19. 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

  20. 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

  21. The U.S. Department of Energy’s National Renewable Energy Laboratory www.nrel.gov Contact Information Jason_Coughlin@nrel.gov 303-384-7434 Golden, Colorado

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