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Lessons Learned from Gainesville

Regional UtilitiesBill Shepherd

Energy & Business Services ManagerGainesville Regional Utilities

May 3rd, 2010


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Introduction and Overview

Challenges of current rebate-based

model GRUs FIT

Setting the price

Lessons Learned Summary

Presentation Outline


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The Gainesville Community

City population of 130,000

More than 60 square miles

14th largest in Florida

County population of243,000

930 square miles

Home to the University of

Florida (Gators) Low tax base - rely heavily

on municipal utility (GRU)


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Gainesville Regional Utilities

Municipally-owned Utility(electric, gas, water/wastewater, telecom)

90,000 customers 481 MW Peak

611 MW Capacity


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Carbon Reduction Efforts

Committed to U.S. Mayors Climate ProtectionAgreement

Must achieve 7% of 1990 CO2 levels by 2012(Kyoto Protocol)

Applies to City operations(including electric generation)

Gainesville will meet in 2013 Documented in City Plan

Utility Plays a Key Role


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GRUs Strategies and Options

Energy Efficiency Lowest kilowatt-hour usage per residential customer in

Florida*

Customer incentives/ education

Rebates for efficient gas and electric appliances

Information

Rate designs

Renewable energy based on resource availability Biomass and Solar

Wind, hydro, geothermal, tidal not available

*Among Florida generating utilities


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GRUs Biomass Commitments

3 MW Landfill Gas (Methane)

100 MW Biomass Waste Wood Online in late 2013

Third party ownership and operation


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GRUs Solar Commitments

Solar water heater rebate

Residential solar photovoltaic rebates Net metering

Feed-in Tariff (FIT)

32 MW by 2016


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Why Solar?Its Expensive!

Customer survey of 400 residentialcustomers Would you support or oppose GRUs efforts to

encourage solar energy investments in yourcommunity if it would add one dollar or less permonth to all customers utility bills?

Support: 75 percent

Strong community environmental ethic Continuous advances in cost-effectiveness

Largest single source of energy on planet


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Challenges of CurrentRebate Model

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Rebate Program Challenges:

Customers Perspective Net metering benefits limited to whoever has the

utility account (not necessarily the propertyowner)

Does not create cash flow for financing

System size limited to circuit rating of building

Payments not equal among customer classes

Customers with the greatest square-footage potentialfor PV have the least incentive


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Net Metering Value Varies Among

Rate Classes$/kWh

Rate ClassParameterRes GSN GSD LP

Net Metering Tariff For Excess PV Production .125 .140 .095 .094Taxes Avoided Inside City

City Utility Tax .0062 .0077 .0032 .0031Other Non-Local .0031 .0134 .0093 .0092

Taxes Avoided Outside CityCity Electric Surcharge .0062 .0077 .0032 .0031

County Utility .0068 .0085 .0035 .0038Other Non-Local .0035 .0137 .0094 .0093

Largest RoofsLeast Incentive


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Rebate Program Challenges:

GRU/Gainesville Perspective Incentives pay for capacity with little

guarantee of future performance

Risk to GRU of system performance GRU responsible for policing system

design to ensure adherence to

standards Reduces local tax revenues


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Feed-In TariffAddresses All of These Issues

Predictable, performance-based financialarrangements

Creates opportunity for creative businessmodels that can capture tax benefits forcustomers

Improves financial feasibility of solar PV forall customer classes

No impact to local utility tax revenues


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GRUs FIT


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Implemented first European

style Solar Feed-in Tariff Provides grid interconnection andmust take provision

Involves a separate supply-orientedmeter- its not net metering

Designed to ensure profitability to

owner for investment Different prices offered based on roof

mount versus Greenfield


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Advantages of the FIT

for GRU Reduces Risk to GRU Rebates front load payment and do not

assure continued performance

PV system could be moved (or blown) offroof and never function again

Maintaining system responsibility ofowner

Minimizes solar police function Hedge against future regulation state or

federal RPS/ carbon tax


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Advantages of the FIT for

Gainesville Helps achieve Climate Protection goals

Quicker penetration of solar

Provides jobs and economic growth Local solar contractors have increased

from one in 2006 to six currently

Attracting solar developers from

other states Hope to attract manufacturing


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How does GRUs FIT work?

20 year fixed price by contract

Degression schedule to match future cost

GRU pays producers $.32 per kWh for buildingor pavement mounted systems

$.26 per kWh for green field systems

Price set to assure profitability for investor


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GRUs FIT Program Overview

Residential customers can choose rebate+ net metering or the FIT (not both)

4 MW annual stop loss provision- Equivalent to approximately 0.6% price

increase per year, cumulative

- 1 MW annual cap on Ground Mount

First Come First Served CapacityQueue established


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Interconnection AndPurchase Agreements

Interconnection Agreement- Approved Electrical Design

- Operation Rights

- Liability + Indemnification

Solar Energy Purchase Agreements - SEPA- Price per kWh, Term

- $0.32/kWh, 20years ($0.26/kWh greenfield)- GRU retains REC + Carbon Rights- Assignable + Collateralizable- Completion Requirement (120 days)


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Solar Feed In Tariff ScheduleEffective March 1, 2009

2009 2030 $0.32 $0.26

2010 2031 $0.32 $0.26

2011 2032 $0.30 $0.25

2012 2033 $0.28 $0.23

2013 2034 $0.27 $0.222014 2035 $0.26 $0.21

2015 2036 $0.25 $0.20

2016 2037 $0.23 $0.19

Contract Entered into

Under This Policy

During Calendar Year

Fixed Rate per kWh

Applied Uniformly

From the Date of

Installation ThroughDecember 31,

Fixed Rate $/kWh Over Life of Contract

Free Standing

(Non-Building or Non-Pavement Mounted)

Building or Pavement Mounted

(any size)

orGround Mounted < 25 kW

Years 2011 through 2016 subject to change


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Big Roll Out

Cap of 4 MW a year to manage rate impact

Hit capacity limit two days prior to implementation date ofMarch 1

Limit 1 MW Ground Received 32 MW

Capacity queue filledthrough 2016

Backed by excellent

counter-party - GRUcredit AA rated(Moodys/ Standard & Poors)


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Setting The Price

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Setting the Price

Pricing developed using Tax credits and deductions

Documented cost figures Estimated O&M expenses

20 year rate of return

Cost neutral compared with our rebateand net metering program

Modeled total cost to customersPhoto Credit: Kelly LaDuke for The New York Times


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Setting the Price

Extensive public discussion

After Tax Internal Rate of Return (IRR)

5.0% after taxes set as target profit level

IRR greater if reference price beat

With state rebates and lower PV costs,

profit levels should be higher


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Lessons Learned

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Learned on the fly

Queue management Had to ensure submittals were real Required a non-binding agreement for systems installed

on leased property

7 years of applications received in 4 months One or two developers had most of the queue accountedfor

Developers spent a lot of time fishing for the bestprice

Had to require milestones for project 60 days to contact Engineering 60 days to complete Engineering Equipment purchase 60 after SEPA signed Construction complete 120 days after SEPA signed


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Learned on the fly

Selling of capacity queue not allowed No change of size, location, or owner

Ground mount projects needed extra time to

allow for permitting Financing became difficult for large projects Systems


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Future considerations

Charge application and/or capacityreservations for projects allowed to

build early More stringent with extension requests

Differentiate tariff rates based on

observed system costs


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Summary

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Program Stats

1,855 kW installed 804 FIT

1,050 Net Metered 3 large projects remain for 2009

2 ground mount

1 large developer with multiple systems

2010 projects meeting milestones


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GRUs Objectives

Encourage early private investment and innovationin photovoltaic installations

Assure good performance from installed PV

systems

Make solar PV a good investment for both GRUand our customers

Adds diversity to our fuel mix


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Projected Generation mix late 2013

Fossil Fuels

73.0%

Nuclear

6.0%

Renewables21.0%


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FIT in a Nutshell

Simple to understand, easy to explain

GRU will purchase all the energy

produced by the PV system over the

next 20 years for 32 cents per kWh.


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The End

Thank You For Your Time!Any Questions?

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