Your Trusted Sustainability Partner. Structuring a Solar Development · 2019-03-16 · > Bond...

Your Trusted Sustainability Partner.

Developing Solar on Landfills and Brownfields • June 12, 2017

Structuring a Solar Development

Jack HonorProject Development Manager

About Ameresco• Founded in 2000 – NYSE: AMRC• Core services include renewable energy

and energy efficiency • 2016 revenue of $651.2 million• Arranged financing for over $2.2 billion in

energy projects• Constructed over $5.5 billion in energy

efficiency and renewable energy projects • Corporate headquarters in Framingham,

MA and a national presence including more than 1000 employees

l © 2016 Ameresco, Inc. All rights reserved.

Solar Experience

• 150MW Constructed

• Over 100 Projects financed under PPA structure for local government

• 16 Landfill projects totaling 25.8MW

Rumford Landfill – 2.5MW Newton, Massachusetts

Project Structure

Structures – How Can We Participate


Lease Only

You are a landfill owner seeking lease revenue

Project Investment and/or Ownership

You are a landfill owner and want to invest in a solar energy project

Lease and Electricity

You are a landfill owner seeking lease revenue AND desire to purchase solar

energy but are not looking to invest capital

Lease Only

Sudbury Landfill – 1.5MW Sudbury, Massachusetts

Date of Presentation

Lease-Only


• What are developers looking for?

› Size› Topography› Constructability› Utility infrastructure› Clean closure› Clear environmental

responsibility• Location

› Solar-friendly state or utility

Typical 3-phase distribution

Key Policies and Regulations • Net Metering – Customers who generate

their own electricity from solar power can feed electricity they do not use back into the grid

• Virtual Net Metering – Allows power generated by a project to be applied to multiple offsite accounts

• 3rd Party Ownership – Solar Developer can own the project and sell electricity to a customer via a Power Purchase Agreement

• Community Solar – Policy that allows for electricity to be shared among a large number of customers including residential


A good developer will master the ‘Fine Print’ in each state and utility’s net metering programs and carefully model the value a customer will receive for electricity

Net Metering

State-developed mandatory rules for certain utilities (39 states + DC+ 3 territories)

No statewide mandatory rules, but some utilities allow net metering (2 states)

www.dsireusa.org / April 2017

KEYU.S. Territories:

39 States + DC,AS, USVI, & PR have mandatory Net Metering rules

DC

Statewide distributed generation compensation rules other than net metering (6 states + 1 territory)GU

AS PR

VI

3rd Party Solar PV Power Purchase Agreement (PPA)www.dsireusa.org / April 2017

At Least 26 States+ Washington DC and Puerto Rico Authorize or Allow 3rd Party Power Purchase Agreements for Solar PV

Apparently disallowed by state or otherwise restricted by legal barriers

Status unclear or unknown

U.S. Territories

DCVA: Limited capacity

CO: With system size limitations

TX: With system size limitations

NV: With system size limitations

AZ: Limited to certain sectors

Authorized by state or otherwise currently in use, at least in certain jurisdictions

Guam USVIPR NMI

LA, MS, SC: Solar leases explicitly allowed

The State of Community Solar


Source: Shared Renewables HQ / Vote Solar

• Currently only 14 states + Washington DC have community solar regulations in place

• But 26 states have at least 1 community solar project online

• And many more have regulations in process

Common Offtakers for Lease-Only• Utility (investor-owned or municipal)

> RPS requirements or PURPA> Pilot programs> Utility-run community solar

• 3rd party via net metering> Municipality or other public entity > Private companies

• Retail Market > 10MW+

• Community Solar


Stockbridge Landfill, Massachusetts – 900kW DCOfftaker: Town of Stockbridge w/ Virtual Net Metering

Completed 2016/2017 under SREC II Program

Lease Rates

• How much lease is common? > Based on project revenue> Construction & interconnection costs> Electricity prices> State incentive programs

• What about property tax?> Real property versus personal property> Exempt or set PILOT amounts common > Can be additional revenue stream for

municipal owners


Approximate Lease Rates by Region

Massachusetts: $2,000 - $5,000California: $2,000 - $5,000Northeast: $1,200 - $3,000Other Markets $1,000 - $2,000

Lease and Electricity

Lease and Electricity• Power purchase agreement

> Regulations> Economics

• Net Metering> Onsite versus Virtual

• Wholesale• Community Solar

> Common to have municipality as ‘anchor’


Acton Landfill, Massachusetts – 1.5MW DCOfftaker: Town of Acton w/ Virtual Net Metering

Completed 2013 under SREC I Program

Power Purchase Agreements• Solar developer owns and operates • Can be 3rd party involved for financing• No operational risk

> Only pay for power produced> Performance guarantees> O&M included

• Commonly 20 to 25 year term• Fixed prices

> Flat or increasing

• Reliant on Net Metering typically• Consider end of contract provisions• Credit rating of offtaker


Electricity Savings

Lease Revenue

Ownership Structures

Lowell Landfill – 1.5MW Lowell, Massachusetts

Ownership – Public Entity


Opportunities• Lowest LCOE • Return on investment• Subsidized financing available

Challenges• No lease revenue • Not eligible for tax benefits• Operational risk

School District, Municipality, State Agency, Housing Authority, State Government,

Federal Government, Military, etc.

The levelized cost of electricity (LCOE) is the net present value of the unit-cost of electricity over the lifetime of a generating asset.

Ownership – Private Entity


Opportunities• Lowest LCOE• Return on investment • Investment Tax Credit (30%)• MACRS 5-year depreciation • Bonus depreciation (50% in year 1)

Challenges• No lease revenue • Financing more costly• No subsidized financing • Operational risk

Investment Tax Credit (ITC) - 30 percent for projects which commence construction through 2019, declining to 26 percent in 2020 and 22 percent in 2021. After 2021, commercial and utility credit will drop to a permanent 10 percent

Subsidized Financing for Public Entities • TELP – Tax Exempt Lease Purchase (or Municipal Lease)

> Customer granted title to equipment during lease and retains ownership after lease ends> Solar developers or financiers can arrange private placement> Minimal (often none) cost of issuance> Payments treated as expense rather than debt> Interest rates fixed during repayment term (typically for solar 15-20 years)> Excellent vehicle for energy efficiency improvements and/or energy performance contracting> Savings can often be guaranteed


Successful Solar Project TELP EquationValue of Electricity > Lease Payments + O&M

Subsidized Financing for Public Entities • CREBs - Clean Renewable Energy Bonds

> Bond issued to finance renewable energy projects. > Issuer (Solar project owner) responsible for repaying the

principal on the bond> Private bondholders receive federal tax credits in lieu of a

portion of the traditional bond interest, resulting in a lower effective interest rate for the borrower.

> Maximum project size: $40 million. More than $160 billion remaining available cap

• QECB – Qualified Energy Conservation Bonds> Similar in mechanism to CREBs but funding cap allocated to

states, local governments, and tribal governments based upon population.

> Remaining allocation varies greatly by region


Advantages:

• Very low cost financing

Challenges

• Higher transaction costs and more complicated versus a PPA or TELP

• Many public entities averse to debt

• Caps on volume and allocation

• Allocation for QECB’s based on state, region, population

Case Study: City of Pittsfield Massachusetts - PPA • 2.91 MW DC System on the City’s

municipal landfill • 20-year PPA with no escalator, and

decommissioning at end of term• Funded in part by MA SREC II• $140,000 per year in combined

electricity savings and property tax> Solar projects are taxed as business personal

property in MA

• Schedule: > Contract signed July, 2015> Project construction completed December 2016> Online March 2017


“This project creates the opportunity to give otherwise unusable land a new life by converting it into a site to generate solar energy. We’ve converted what was once a cost center for the City into a revenue generating asset,”– Jim McGrath, City of Pittsfield

Case Study: Minneapolis Airport - QECB• 3MW Solar PV; 7,700 LED Fixtures

plus EV Charging• Ameresco conducted financing

solicitation and arranged funding by QECB at an effective interest rate of $0.75%

• 30-year NPV of $10M with around $170k in positive annual cash flow


“The Metropolitan Airports Commission has worked for decades to operate Minneapolis-St. Paul International Airport as sustainably as possible, investing millions in infrastructure to reduce impacts to soil, water and air quality, and spending nearly a half-billion dollars on noise mitigation around MSP,” - Jeff Hamiel, the Commission’s executive director and CEO.

Your Trusted Sustainability Partner.

QUESTIONS?

Feel free to reach out directly

Jack HonorProject Development Manager

Albany, [email protected]

518-569-3061

mailto:[email protected]

Your Trusted Sustainability Partner. Structuring a Solar Development · 2019-03-16 · > Bond...

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