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Financing Source for Renewable Energy

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					Financing Paths for Renewable Energy
U.S. Green Building Council Renewable Energy Meeting September 23, 2008 Matt Gray and Kevin DeGroat

Major Renewable Energy Resources

Renewable Energy Cost Trends

Subsidies not included

Levelized cost of energy in constant 2005$ (Ethanol is fuel)

Source: NREL Energy Analysis Office

RE Screening Assumptions
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Estimated cost (capital costs, less present value of incentives) divided by estimated annual savings (value of annual power generated by project, less O&M).
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Present value of incentives calculated using 3% discount rate Capital cost = $7,000/kW O&M =0.04% capital cost/year System losses = 25% Various scenarios with different number of wind turbines and varying sizes (10 to 2100 kW) Capital cost = $6,750/kW (small) to $2,300/kW (large) O&M = $600/turbine/year (small) to $42,000/turbine/year (large), with 3%/year escalation

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Photovoltaics
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Wind
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Solar Hot Water and Solar Hot Water and Solar Ventilation Preheat Solar Ventilation Preheat

http://www.nrel.gov/gis/femp.html#water

Renewable Project Integrator/Supplier

Power Purchase Advantages

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Private entity owns, operates and maintains:  Investors with “tax appetite” who can use tax credits and incentives a building owner may not  Renewable energy expertise  Channel for selling RECs if necessary  Responsibility for system performance – no power, no revenue Their concerns:  Land/building access over life of project – leasing terms  Termination provisions to keep their investors whole  Contract/project term/lifetime
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“Wiring Diagram” for Recent Deal
Agreements PPA: Customer - Developer Easement/Access: Customer – Developer REC: Developer - Utility

$/RECS

Utility

REBATE

RECS

Customer

POWER PURCHASE ($)

POWER (MWH)

Developer

FEDERAL TAX INCENTIVES

Incentives are Essential
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Federal Personal Tax Credit: 30%, $2000 max for PV and SWH – expires December 31 Federal Business Tax Credit: 30%, no maximum – expires December 31 Accelerated Depreciation: 5 years for solar, wind and geothermal property State incentives vary by state, sometimes by utility or municipality

Renewable Portfolio Standards (RPS)
MN: 25% by 2025
(Xcel: 30% by 2020)

ME: 30% by 2000
VT: RE meets load growth by 2012
10% by 2017 - new RE

*WA: 15% by 2020

ND: 10% by 2015

☼ NH: 23.8% in 2025 WI: requirement varies by
utility; 10% by 2015 goal

MA: 4% by 2009 +
1% annual increase

OR: 25% by 2025 (large utilities)
5% - 10% by 2025 (smaller utilities)

MT: 15% by 2015

RI: 16% by 2020 CT: 23% by 2020 IA: 105 MW IL: 25% by 2025
MO: 11% by 2020

☼ *NV: 20% by 2015

☼ NY: 24% by 2013 ☼ NJ: 22.5% by 2021 ☼ PA: 18%¹ by 2020

CA: 20% by 2010

☼ CO: 20% by 2020 (IOUs) *10% by 2020 (co-ops & large munis)

☼ MD: 9.5% in 2022
☼ AZ: 15% by 2025 ☼ NM: 20% by 2020 (IOUs)
10% by 2020 (co-ops)

☼ NC: 12.5% by 2021 (IOUs)
10% by 2018 (co-ops & munis)

☼ *DE: 20% by 2019 ☼ DC: 11% by 2022
*VA: 12% by 2022

TX: 5,880 MW by 2015 HI: 20% by 2020
☼ Minimum solar or customer-sited RE requirement * Increased credit for solar or customer-sited RE ¹PA: 8% Tier I / 10% Tier II (includes non-renewables)
State RPS State Goal Solar water heating eligible

DSIRE: www.dsireusa.org March 2008

Support for Solar Energy Support for Solar Energy Support for Solar Energy in State RPS Policies in State RPS Policies in State RPS Policies
WA: 2x multiplier for DG NH: 0.3% solar electric by 2014 NY: 0.1542% customer-sited DG by 2013 NV: 1% solar by 2015 2.4x multiplier for central PV 2.45x multiplier for distributed PV NJ: 2.12% solar electric by 2021 PA: 0.5% PV by 2020 MD: 2% solar electric by 2022 CO: 0.8% solar electric by 2020 (half from customer-sited projects) 1.25x multiplier for in-state projects 3x multiplier for co-ops and munis for solar installed before July 2015 DE: 2.005% PV by 2019 3x multiplier for PV installed before 2015 DC: 0.386% solar electric by 2021 1.1x multiplier for solar 2007-09 NC: 0.2% solar by 2018

AZ: 4.5% customer-sited DG by 2025 (half from residential)

Set-aside Set-aside with multiplier Multiplier

NM: 4% solar electric by 2020, 0.6% DG by 2015

Source: Lawrence Berkeley National Laboratory

Maryland RE Portfolio Standard
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MD requires 20% renewable energy in 2022 from Tier 1 resources, starts at 1% for Tier 1 (.005% for solar) Penalty rate (ceiling cost) of 45¢/kWh for missing solar requirement in 2008, 40¢ in 2009, declining to 5¢/kwh in 2023 and beyond Utilities bid for RECs from suppliers – 15 year contracts upfront with Level 1 suppliers (<10 kW), no advance payments for Level 2 owners (>10 kW)

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Key PPA Issues
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Renewable energy certificate (REC) ownership
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Ensure that PPA contract explicitly spells out REC ownership
Solar RECs may be very valuable (see states with RPS solar setasides)
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REC monthly price report http://www.evomarkets.com/resources/index.php?xp1=1&type=mmu

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Escalation factor typically included (usually 1-3%) May be fixed price or tied to utility rate Evaluate price and escalation factors carefully

Interconnection and Net Metering
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Interconnection can be a major cost driver Net metering can be an important revenue stream for larger systems with excess generation MD allows net metering for solar, wind or biomass
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Less than 2 MW size Aggregate capacity cap of 1500 MW Compensation at a formula rate that excludes T&D costs

Information Sources
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U.S. Department of Energy, Energy Efficiency and Renewable Energy www.eere.energy.gov Database of State Incentives for Renewable Energy (DSIRE) www.dsireusa.org Solar Energy Industries Association www.seia.org MDV-Solar Energy Industries Association www.mdv-seia.org NREL Solar Advisor Model (SAM) www.nrel.gov/analysis/sam

Conclusion
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Wall Street meltdown is going to make access to credit tougher – especially on the residential side Federal indecision on RE tax credits adds another element of uncertainty States are making up some of the difference There is still demand, and it is growing

GSA Sacramento PV Project
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.5 MW roof-top PV (thin film)
10-year contract Price matched to energy rate, with price floor Utility rebate and federal incentives (30% tax credit & accelerated depreciation) - pay for approximately 1/2 cost License for use of roof Renewable developer retains RECs

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Came on-line March 2008


				
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