policies are changing: the time for solar is now may 12, 2015
TRANSCRIPT
Policies are Changing: The Time for Solar is Now
May 12, 2015
About TerraVerde Renewable Partners
Since 2009, TerraVerde has been California’s leading independent solar energy advisor for public agencies.
Recognized leader in project development consulting services, including: Energy Conservation, Solar PV, Energy/Battery Storage
In house engineering, structured finance, financial modeling, Engineering Procurement & Construction contracts & Power Purchase Agreements, Owner’s Rep project management, and post-installation Asset Management Services
92 solar projects completed for CA public agencies to date
25 projects currently under construction (scheduled for completion this summer); and another 12 scheduled to begin construction during 2015; 16 including battery storage.
Completed over $105 Million in solar & energy efficiency projects, on time and on budget; secured over $20 Million in competitive low-interest financing (CEC Loans, Build America Bonds, QSCBs)
All projects performing at 97-101% of projected performance
Wide ranging experience with multi-site construction, specification driven RFQ processes, public agency/education code policies and regulations, and turnkey design/build management.
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Our Clients’ Challenge
How to achieve verifiable solar cost savings that match projections and expectations, which requires
analyzing large quantities of complex data, multiple variables, and site conditions across numerous facilities/sites
evaluating many technologies and financing methods
accurately discerning highest value projects: achieving net positive cash flow savings with minimal upfront expense
minimizing burden on staff and disruption to operations: from initial project development through implementation
providing on-going management of O&M, warranties, and performance monitoring and reporting
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The Policy & Incentive Landscape
The Big Three Possible Changes
Net Metering (NEM) 1.0 and 2.0
Utility Rate Structures; i.e., Tariffs
Federal Investment Tax Credit (ITC)
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What is Net Metering (NEM)
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The NEM option allows you to receive a credit for the surplus electricity you supply to the electric grid. This credit is applied to your energy bill, to offset all or part of the costs associated with the energy you consume each month.
NEM Timeline
NEM 1.0 is available until your specific utility provider (PG&E, SCE or SDG&E) reaches a cap of 5% of their usage comes from customer solar production, or, June 30, 2017, whichever is first.
Any customer who comes on line with solar before this timeline will be grandfathered under NEM 1.O rules for 20 years.
NEM 2.0 regulations are currently being developed within a California Public Utility Commission proceeding scheduled to be complete by December 31, 2015.
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NEM Depletion
NEM 1.0 Projected Depletion Timing:
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NEM 1.0 Cap: Reason 1: The Time for Solar is Now
In order to come in under NEM 1.0, your solar project must be interconnected by your utility before the deadline is reached.
As more people become aware of this “ticking clock” there is a risk that an interconnection backlog will occur, further increasing the importance of moving sooner rather than later.
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We don’t yet know exactly how much NEM 2.0 is going to reduce the benefits of solar; however, there is a high degree of certainty that the benefits will be less under 2.0 than 1.0If you were to launch a solar development process today, best case scenario is achieving “interconnection” within 6-8 months.
NEM 1.0 versus 2.0
Case Study: “Example USD” – 4.0MW PPA project
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Assuming year-1 Avoided Cost is reduced by ~20% for
NEM2.0, net savings are reduced ~50% on a long-term
cumulative basis.
Utility Rate Structures; i.e. Tariffs
PG&E
A6: no demand charges, high summer and peak hour rates; up to 499 kW peak demand
E19R: reduced demand charges, increased summer and peak hour rates, available July 1, 2015, up to 999 kW peak demand
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Utility Rate Structures; i.e. Tariffs
Southern California Edison (SCE)
Option R; reduced demand charges
San Diego Gas & Electric (SDG&E)
DGR Rate; “DISTRIBUTED GENERATION RENEWABLE - TIME METERED”
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Solar Friendly Rates Going Away: Reason 2: The Time for Solar is Now
PG&E• Most elementary and middle schools are eligible for A6
• PG&E has applied to the CPUC to eliminate A6 for all but customers with 75kW peak demand
SCE
From November, 2013- January, 2015 there was a 12 month gap when Option R wasn’t available
On January 1, 2015, 250 MW of Option R was reauthorized by the CPUC
250 MW in Option R is likely to be used up within 18 -24 months
SDG&E
January 1, 2015, significant increase in demand charges
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Tariffs Make a Difference
Case Study:
1.18 MW project; impact to cumulative gross savings if A6 is not available as post-solar tariff
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Federal Investment Tax Credit (ITC)
Currently the IRS will provide any tax paying investor a 30% credit for every dollar invested in a solar facility
While schools and other public agencies can’t take advantage of this incentive directly, for those who enter into a Power Purchase Agreement (PPA) to obtain the benefits of solar, the price they are offered by the PPA provider is significantly reduced by the fact that the PPA provider is able to capture this benefit.
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ITC Going Down: Reason 3: The Time for Solar is Now
On December 31, 2016, the 30% ITC is scheduled to go down to 10% unless Congress acts.
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10% ITC versus 30% ITC
PPA providers will pass the pain of the ITC reduction along to customers in the form of higher PPA prices…
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10% ITC versus 30% ITC
PPA providers will pass the pain of the ITC reduction along to customers in the form of higher PPA prices…
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Don’t Jump…It’s not all that bad…
The costs of solar has come down as the cost of electricity has gone up (in some utilities as much as 25% over the past five years).
Projects that didn’t “pencil” 2-3 years ago may now make economic sense
While the cost of solar has come down, as the proportion of labor in overall solar installation costs has gone up, further dramatic cost reductions are unlikely.
Even more important, interest rates/borrowing costs are at historic lows.
Even more reasons now is a good time to consider solar
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Other Options
RES-BCT
Advanced Energy (Battery) Storage
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Renewable Energy System-Bill Credit Transfer
“Allows a Local Government with one or more eligible renewable generating facilities to export energy to the grid and receive generation credits to benefitting accounts of the same Local Government.”
In other words, you can build your own solar farm and take advantage of economies of school in solar installation costs, and offset usage at multiple meters.
Not governed by net metering rules; only offsets actual usage.
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Battery Storage Paired With Solar PV
Peak demand charge is normally calculated as the highest peak demand during the monthly billings cycle based on a 15 minute interval.
Adding solar energy generation reduces utility energy (kWh) use/cost, but often has little effect on peak demand (kW) charges. Summer peak demands often occur during the late afternoon and early evenings when solar energy output drops off.
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For many commercial customers the peak demand part of their utility bill can be 30–40 percent of their total electric bill.
Advocacy
Solar advocates (including CASBO) are not sitting on their hands.
They are fighting to…
Keep A6,
Expand Option R and
Make sure NEM 2.0 is structured to meet the statutory requirement to “ensure sustainable growth of distributed generation” (i.e., solar provided at customer sites).
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TerraVerde’s Experience
Projects Completed To Date: $105 Million
Projects Under Construction/Development: $31 Million
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Sample of Clients• Visalia USD• Clovis USD• Burton City Schools• Corcoran USD• Sanger USD• City of Woodland• Rancho California Water Agency• City of Lathrop• City of Bishop • Inyo County• Firebaugh Las Deltas USD• Golden Valley USD• Monterey Peninsula USD• Fowler USD• Sonoma County Family YMCA
What Our Clients Say
“TerraVerde emphasizes education and transparency. We feel confident that they provide us an unbiased assessment of the risks and benefits.”Don Ulrich, Assistant Superintendant, Clovis USD
“TerraVerde is the best partner I have ever worked with in my 28 years of school construction experience.”
Eric Cederquist, Superintendent, Fowler Unified School District
“TVRP paid special attention to our unique needs and requirements throughout the development and implementation process. Most importantly, they have worked as a true partner, providing information in a fully transparent manner and have worked collaboratively with us to address issues and problems that inevitably arise during the development process.”Steve Bolman, Superintendant, Petaluma City Schools
“It is my pleasure to provide my highest recommendation for TerraVerde. As their name implies, they have truly become our partner in all energy matters. Every person that we have worked with at TVRP knows our particular issues and concerns and is an integral member of our team as we evaluate both solar and now Prop 39 projects.”
Robert Groeber, Assistant Superintendent, Visalia USD
“While we were in the process of developing our solar project, we had over ten contractors participate in the mandatory site walk. One of the contractors said to me how fortunate our district is to be working with Terra Verde. They said that there is never a question as to what is expected of the contractors and that Terra Verde is very well organized which leaves little room for mistakes or issues once the project begins.”
Tracy Tucker, MOT Director, Burton City Schools
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Contact Information
Rick Brown, PhD, President
TerraVerde Renewable Partners, LLC1100 Larkspur Landing, Suite 155
Larkspur, CA 94939707-953-2885
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TerraVerde’s Mission
Assist California public agencies achieve energy independence, while obtaining meaningful cost savings, and a reduced carbon footprint
Serve as an independent advisor and owner’s rep, to develop & implement high value energy projects while mitigating risk
Set realistic goals & objectives
Educate clients about technologies, Utility tariffs/programs, project funding & financing options, incentives, regulations, contracts
Leverage advanced knowledge, tools, methods, and experience
Develop Client-specific comprehensive energy management programs
Demand management
Energy efficiency measures
Renewable energy generation systems
Systematic analysis and evaluation to deliver maximum benefit projects
Client-centric services: from concepts & plans to life-long operations management
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Best Practices: Solar Project Development
Phase 1: Planning, Project Development, Analysis, Recommendations
Set goals & objectives
Gather all relevant data, perform in-depth discovery, develop projects for further consideration
Prepare feasibility assessments and financial analysis for selected projects
Review finding & recommendations with Client, finalize execution plan
Phase 2: Competitive Bidding, Contractor Selection, Contracts
Develop RFP & run competitive bid process: performance and construction specs, contract form documents and instructions that yield comparable scopes/pricing
Obtain best value at lowest possible cost and assist with contract negotiations
Phase 3 & 4: Owner’s Rep – Design/Build Process
Oversee design, construction, commissioning and performance validation process
Phase 5: Asset Management (see Slide 12 for more detail)
Perform O&M services, 24/7 systems performance monitoring, quarterly performance reports & PM logs, and detailed annual financial reports
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Note: For more information on Solar Best Practices, go to CASBO/TerraVerde Webinar: http://www.casbo.org/?page=Prop39Webinar&hhSearchTerms=%22Webinar+and+Bid%22