Commercial Project Management Services

Transcription

1 Introduction Rod Jané President, New England Expansion Strategies Former Executive Director, MOBD Former Senior Executive with Honeywell, Inc. Former Selectman in Westborough 1

2 Commercial Project Management Services Government Incentives Site Search and Selection Zoning, Permitting, Regulatory Assistance Renewable Energy Development 2

3 Renewable Energy Development (Private, Commercial-Scale, Wholesale, Wind) Government Incentives Site Search and Selection Zoning, Permitting, Regulatory Assistance Site Testing Energy Resource (Wind) Power Purchase Agreement Interconnection Agreement 3

4 Financing Wind Energy Projects Prerequisites Adequate Wind Resource (12 mo. Study) Permits Interconnection Agreement Power Purchase Agreement EPC Contract 4

5 Financing Wind Energy Projects Economics (Typical) Net Revenues: 1.35 x Debt Service Developer Return: 15-20% Year Term PPA Must be Long-Term and the Pricing Adequate to Achieve the Above 5

6 Financing Wind Energy Projects Renewable Energy Price Premium PPA Pricing Challenge Wind Energy Pricing $0.10-$0.20 per KWh Natural Gas Pricing $0.06-$0.07 per KWh Coal Pricing $0.03-$0.05 per KWh 6

7 Financing Wind Energy Projects Government Solutions Renewable Energy Portfolio Standards - 6% in 2011 Growing to 15% by Renewable Energy Certificates (REC s) Green Communities Act - Utilities Must Buy 3% of Load via Long-Term Contracts with Renewable Energy Generators 7

8 Why Local Tax Exemptions and PILOT s are Critical Economics of Wind Energy Projects Typically Do Not Work Without Tax Incentives and Subsidies (REC s) Local RE and PP Taxes at Full Value (Installed Cost) Can - Represent 25 to 35% of Annual Operating Costs - Represent 6 to 10% of Electricity Price True Value of Turbine Depends Upon Project/Site Economics Revenue Stream (PPA): Flat, Fixed Pricing for Years RE, PP Tax Rates are Uncertain and Typically Increase Almost All Commercial Wind Farms in Northeastern United States Have PILOT Agreements 8

9 Allowable Methods of Developing PILOT Agreement with the Municipality Tax Increment Financing (TIF) - Prior to January 1, 2010 With ITC - After January 1, 2010 Without ITC - Must be an ETA Municipality MGL Chapter 59 Section 38(H) 9

10 Douglas Woods Wind Farm Example 27.5 MW Wind Farm on 300 Acre Site Private Owner/Developer on Private Land Permitted 12- Months of Met Tower Data 6.8 m/s Draft Interconnection Agreement with National Grid Strong Support from the Town and State 10

11 Douglas Woods Wind Farm Example Selected TIF Agreement Method Rationale Douglas is an Economic Target Area (ETA) 5% Investment Tax Credit from the State Town was Familiar with the TIF Program 11

12 Douglas Woods Wind Farm Example Estimates at Time of TIF Agreement Total Project Investment Cost: $65.6 Million Portion Invested in Douglas: $60.2 Million Increase in RE Property Value: $52.8 Million FY 2010 Tax Rate: $11.78 Incremental Annual Taxes: $621,984 8% of Electricity Price or nearly $0.01 per KWh 12

13 Douglas Woods Wind Farm Example TIF Agreement Town Exempted 100% of RE and PP Taxes on the Incremental Value for 18 Years Town and Developer Agreed on an 18 Year Schedule of PILOT Payments PILOT Payments - Average Exemption of 60% 5% State Investment Tax Credit 13

14 Douglas Woods Wind Farm Example TIF Agreement Developer Obligations Build the Wind Farm Facility Create 3 New Full-Time Jobs Make Project Accessible to Town Schools Up Front Payment of $15,000 to Town 14

15 Douglas Woods Wind Farm Example TIF Agreement Town Meeting Approved TIF Agreement 56-0 State (EACC) Approved TIF and 5% ITC 12/10 15

16 Douglas Woods Wind Farm Example Benefits of TIF to the Developer Approximately $6 Million in Potential Tax Savings over the Project Life - $4.2 Million Savings in Local Taxes (RE, PP) - $2.1 Million in Savings in State Taxes (ITC) Greater Certainty of Tax Liability During Financing Period Potential Reduction in Electricity Price of $0.01 per KWh 16

17 Douglas Woods Wind Farm Example Benefits of TIF Agreement to the Town Enabled Development of a 43D Priority Site Incremental Annual Taxes of More than $150,000 Project will be the Highest Commercial Taxpayer in the Town (More Than 2 Times the Next Highest) 17