Innovations in Clean Energy Financing:

Transcription

1 B Y : C A R M E N C A R R U T H E R S, O U T R E A C H D I R E C T O R Innovations in Clean Energy Financing: The Need for Consumer Options CERTs Conference March 28, 2018 Carmen Carruthers, Outreach Director

2 CUB Looking Out for Consumers Nonprofit Policy Work Consumer Advocates Outreach Work

3 Consumers Need Financing Options CUB helps people Save money on utility bills Understand their (clean) energy options Saving money on energy bills often requires money Many households cannot easily cover upfront costs for an energy emergency or a planned improvement An 2016 Forbes article stated that over 60% of American s couldn t cover a $500 emergency

4 Energy Bills- The Environment and your Budget Homes account for 21% of Minnesota energy use Less than 4% of budget for average household Average single family households spends about $2,000 a year on residential utilities and fuels (electricity and heating/cooling as of 2012) Regressive cost

5 Energy Bills 60% 50% 40% 30% 20% 10% Breakdown of utility expenses What does the data tell us? 55%- Heating and cooling 15%- Water heating 15%- Appliances 10%- Lighting 5%- Electronics 0% Heating and cooling Water heating Appliances Lighting Electronics

6 Several Financing Options Exist Consumers need to shop around Compare the best options for individual situations Consider all costs including closing costs, interest rates, flexibility, etc. Ideally, plan ahead Common financing options: Personal bank loans Home equity loans/lines of credit Credit cards Several additional options Some specifically focused on energy improvements

7 Several Financing Options Exist Minnesota Housing Finance Agency Fix Up Program Rehab Loan Program Emergency Loan Program Local Community Loan Sources Counties and municipalities may provide low interest options Some offer forgiveness based on income level and length of residency after the improvement Community Development Block Grant loan programs Center for Energy and Environment (CEE) Lending Center administers several programs Weatherization Program for Low-Income Households Free energy upgrades

8 Thank you Check out our January 2 blog: Thinking about Energy Efficient Improvements? Look Around for Payment Options at cubminnesota.org Feel free to contact me with comments or questions Carmen Carruthers Outreach Director Citizens Utility Board of Minnesota carmenc@cubminnesota.org,

9 March 28, 2018 CERTs 2018 Conference By: Peter Klein, VP Finance

10 Energy Financing Programs Trillion BTU Property Assessed Clean Energy (PACE) Energy Savings Partnership (ESP)

11 Trillion BTU Results 191 Projects $85,576,000 of Project Costs $12,211,700 Annual Savings 485,865,000,000 BTUs Saved Annually 700 Jobs Retained/Created 1,223 Construction Jobs Created

12 How Does it Work? Property Assessed Clean Energy Local government establishes a Joint Powers Agreement with MinnPACE Building owner evaluates and selects projects that reduce energy costs MinnPACE (or third party lender) provides financing to building owner Local government adds assessment to tax rolls Building owner pays assessment for up to 20 years

13 Qualifying Industries Property Assessed Clean Energy Industrial/manufacturing Multi-family housing (5+ units) Agriculture Nonprofit Places of Worship

14 Client Benefits Property Assessed Clean Energy No upfront costs No payments until following May No accrued interest for the first three months Payments rolled into biannual property tax assessment Bonus depreciation and investment tax credits Utility savings exceed payment obligations (CASH POSITIVE)

15 Potential Hurdles Property Assessed Clean Energy Financing limited to 20% of the current assessed value of the property Application requires signature from existing mortgage holder(s)

16 Niches for PACE Property Assessed Clean Energy Renewable Energy Projects ITC & MACRS before first payment Positive cash flow Multi-tenant Buildings Owner does not pay the utilities Line item on real estate taxes Passed through to tenants along with regular property taxes Still positive cash flow to tenant Not a negative cash flow to owner

17 Motives of Building Owners Property Assessed Clean Energy Renewable Energy Projects Cost reduction / positive cash flow Marketing Energy Efficiency Projects Tenant comfort Tenants increasingly requiring more efficiency Governmental requirements Public disclosures & rankings of building efficiencies

18 PACE Results Property Assessed Clean Energy 121 Projects $49,291,000 of Project Costs $4,085,700 Annual Savings 151,703,000,000 BTUs Saved Annually 87 Jobs Retained/Created 501 Construction Jobs Created

19 Current County List Joint Powers Agreements Becker Beltrami Benton Big Stone Blue Earth Carlton Carver Chippewa Chisago Cook Cottonwood Dakota Dodge Fillmore Goodhue Hennepin Houston Hubbard Kandiyohi Lake of the Woods Lac qui Parle LeSueur McLeod Meeker Mille Lacs Mower Nicollet Olmsted Pine Pope Ramsey Renville Pending: Anoka, Clay, Lake, Lyon, Marshall and Otter Tail Rice Saint Louis Scott Sherburne Sibley Stearns Steele Stevens Swift Wabasha Waseca Washington Wilkin Winona Wright Yellow Medicine Map does not include pending counties

20 Current City List Joint Powers Agreements Bloomington Bridgewater Township Cottage Grove Duluth Eagan Eden Prairie Edina Ely Falcon Heights Hastings Hopkins Mankato Marshall Minneapolis Minnetonka Mountain Iron Oakdale Pine City Red Wing Roseville Saint Louis Park Saint Paul Virginia Pending: Blaine, Morris and Saint Cloud Map does not include pending cities

21 $174,000 40kw Solar Installation REAP Grant Property Assessed Clean Energy

22 $174,000 40kw Solar Installation REAP Grant Property Assessed Clean Energy

23 $139,000 40kw Solar Installation Property Assessed Clean Energy

24 $139,000 40kw Solar Installation Property Assessed Clean Energy

25 Treasure Island Center Property Assessed Clean Energy

26 Treasure Island Center Property Assessed Clean Energy Financing Summary Sources of Funds: Construction / Permanent Financing $ 40,000, Tax Increment Financing (TIF) $ 8,000, MinnPACE $ 7,000, Equity $ 15,000, Total $ 70,000,000.00

27 Madison Equities Property Assessed Clean Energy First National Bank Building

28 Madison Equities Property Assessed Clean Energy First National Bank Building U.S. Bank Centre 375 Jackson Total Square Feet 1,133, , ,927 1,991,308 Total Project Costs $ 6,800, $ 3,820, $ 1,650, $ 12,270, Xcel Rebates $ (965,321.00) $ (498,507.00) $ (264,498.00) $ (1,728,326.00) Net Costs $ 5,834, $ 3,321, $ 1,385, $ 10,541, Financing Trillion BTU $ 1,800, $ - $ - $ 1,800, MinnPACE $ 5,000, $ 3,820, $ 1,650, $ 10,470, Annaul Savings $ 737, $ 428, $ 215, $ 1,381, Annual Payments $ (507,378.00) $ (328,105.00) $ (128,048.00) $ (963,531.00) Cash Flow $ 230, $ 100, $ 87, $ 418,080.00

29 MinnPACE allows us to sell more projects, install more systems, and in some cases it allows us to increase project size. -Eric Pasi IPS Solar Questions?

30 Expanding solar access for residents and business owners through group purchasing programs Jane Cowan, Solar Program Manager Midwest Renewable Energy Association (MREA)

31 Midwest Renewable Energy Association (MREA) Founded in 1990 with the first Energy Fair Offices in Minneapolis, Custer, Milwaukee 2,500 Members The Energy Fair Solar Training Market Development

32 Goals: ü ü ü Make communities more sustainable by making solar faster, easier, and more affordable Bring smaller solar projects together so Everyone participating gets a more affordable price for a physical array attached at their home and/or business Here and here and here. Solarize group buy uses economies of scale but it s NOT one big community solar garden.

33 4 Basic Program Awareness Promotion and outreach fliers, s, newsletters, calendars, etc. Education Educational workshops offered through target region Enrollment Site Assessment Decision Installation Residents enroll through online registration page Installer provides free no-obligations site assessments and bids to enrollees Customer decides whether to accept the bid at program price Contractor installs the system and helps customer through paperwork for incentives

34 In Practice Competitive Contractor Selection Chosen by community volunteers Provides transparency to build customer/contractor trust Can be tailored to community values (local workforce, affordable solar) Outreach and Education Community-led outreach local, trusted partners Educational events cohosted/endorsed by the community Implementation Installer focuses on site assessments, cost estimates As the program grows, residents achieve greater discounts

35 How It Increases Access Solarize programs overcome common market barriers to solar investment: Obstacle High Upfront Cost Complexity Customer Inertia Solution Package with incentives Bulk purchase tiered pricing Pre-select installer Educational events Simplifies decision Yes or No? Competitive pricing Limited-time offer Safety in numbers Trusting the process and community

36 Group Buy Savings (example from Solar Cedar Rapids, Linn County 2017) Group buy base price - $2.45/W (9% lower than retail price) Customer receives savings as a rebate or discount from the installer Customer receives relevant tax credits: federal (30%) + state (15%) Initial cost kw Threshold Price per watt Savings Federal Tax Credit 30% State Tax Credit 15% Total Cost $10,658 - $2.45 $0-3,197-1,599 $5,862 $10, kw $ $218-3,132-1,566 $5,742 $10, kw $ $438-3,067-1,533 $5,622 $10, kw $ $653-3,001-1,501 $5,503 $10, kw $ $870-3,401-1,700 $5,383

37 Education and the Joneses Series of free, public educational sessions focused on providing information about going solar for homes and/or businesses Energy efficiency Solar basics Incentives/financing Program design Solar is contagious! Adding one rooftop system on a block increased the average number of installations within a half-mile radius by

38 Audience and Outreach Works best for: Home and business owners (landlords?) Community solar gardens Best practices: Emphasis on the power of local people to make the program a success Tools should be shareable and accessible, reflect grassroots ethos Speak with (not at ) community integrate intro process Survey responses (3 markets in WI & IL): 73% - important or extremely important that the program is managed by an independent, nonprofit organization 80% - important or extremely important that the has municipality support 75% - important or extremely important that the information provided at the Solar Power Hour is developed by an independent, non-profit organization Without the group buy, how likely were you to install solar? 45% said not likely; 20% said likely

39 Program Outcome (example from Solar Cedar Rapids, Linn County 2017) Goal: 350 kw Installed: 607 kw on 104 homes & businesses Success Rate: > 1 in 5 meeting attendees went solar Est. Year 1 Utility Savings: $105, Est. Year 1 CO 2 Offset: 947,267 lbs (v. fossil fuel) Partners: City of Cedar Rapids, Linn County Public Health, Linn County, Indian Creek Nature Center, Iowa350, The Nature Conservancy Iowa Installer: Moxie Solar

40 Educational sessions May through August 2018 Find one near you or get involved at

41 Thank you! Resources: Irvine, L, Sawyer, A, Grove, J, & Northwest SEED. The Solarize Guidebook. Retrieved from Plumer, B (2016, May 4). Solar power is contagious. These maps show how it spreads. Retrieved from Graziano, M & K Gillingham (2015). Spatial patterns of solar photovoltaic system adoption: the influence of neighbors and the built environment. Journal of Economic Geography, 15.4, Examples all from MREA experience, more information at Jane Cowan, Solar Program Manager janec@midwestrenew.org Midwest Renewable Energy Association (MREA)

42 Upgrade to $ave Pay As You Save INCLUSIVE FINANCING How$mart tariff-based on-bill repayment

43 MAGICAL & PRACTICAL THINKING

44 KNOW THYSELF We are nearly 30% renters (over 50% in Twin Cities) 10% of us are experiencing poverty The housing-cost-burdened make up 25% of us in single-family homes, and 48% of us in multi-family buildings If we fit the American average, 56% of us have sub-prime credit 20% of us identify as Native, Latino, Black, African American, Asian, or multi-racial on the census, and 80% as white We have some of the worst racial disparities in a country with legacies of colonization, genocide, forced assimilation, slavery, segregation, environmental and institutionalized racism that has yet to be reckoned with We are living in a rapidly destabilizing climate caused by human activity. Those Minnesotans in orange above are set up to experience the worst consequences climate change. Sources: 2016 Census, CFED, MNCompass

45 WHO CURRENTLY CAN SAVE MONEY WITH SOLAR AND EFFICIENCY?

46 THE BIG THREE: INCOME, credit, property Low-income ratepayers subsidize high-income participation in efficiency and renewable programs if they can t also participate Low-income households are less likely to have [energy saving measures like] compact fluorescent bulbs and low-flow showerheads, but 25% more likely to have energy-intensive [appliances like] space heaters and 50% more likely to rely on window air conditioning units Source: OPower,

47 THE BIG THREE: income, CREDIT, property 50% of U.S. renters and 20% of homeowners have a credit score less than 650 With the exception of limited capacity energy assistance programs, you must pass a credit check The vast majority of solar options that don t require upfront money require a credit score OR charge a premium per kwh Credit: Urban Institute,

48 THE BIG THREE: income, credit, PROPERTY Average American moves every 8.5 years* (more frequent for low-income, and people of color), which is shorter than most payback periods for most substantial energy savings measures Split incentive for both landlord and tenant to make upgrades: landlord holds property rights, tenant pays for energy *(between age 20 and 80); Source: FiveThirtyEight: Photo: fizz_in_space via Flickr

49 HOW CAN WE ADDRESS ACCESS?

50 INNOVATIVE SOLUTIONS TO CREDIT & UPFRONT COST Remove credit barrier to financing by using alternative criteria, like on-time utility bill repayment = Photo: Joe via Flickr

51 RATEPAYER PROTECTION Meter-tied allows pay as you save to stay with property Non-utility capital Loss reserve holds utility and ratepayer harmless Users cover administrative costs

52 BROAD SCOPE + Community engagement and institutional culture

53 HOW DOES INCLUSIVE FINANCING DO THIS?

54 INCLUSIVE FINANCING BASICS

55 HOW IT WORKS DURING REPAYMENT Utility or capital provider 5% LOWER BILL monthly payments less than savings Energy Customer upfront cash Contractor savings and comfort from efficiency and renewables INCLUSIVE FINANCING

56 HOW IT WORKS AFTER REPAYMENT Utility ~25% lower bills with full savings from improvements Energy Customer at upgraded property Energy as needed INCLUSIVE FINANCING

57 BENEFITS 100% 50% 50% 10% 10% 3.0% 0.3% Default Rate Source: Clean Energy Works

58 STRUCTURING PAYS REPAYMENT TERMS 100% 100% 25% 15%

59 WHERE HAS THIS MODEL BEEN USED?

60 PRECEDENTS NH Elec. Co-op Clean Energy Works Portland Several co-ops using tariffs serve disproportionately low-income customers How$mart KY Midwest Energy Roanoke Elec. Co-op Ouachita Electric Central Elec. Power Existing programs Commission-approved tariffs

61 IMPORTANT QUESTIONS, BEST PRACTICES

62 WE RE DOING JUST FINE (or common misconceptions) FINANCING ISN T THE MAIN REASON PEOPLE DON T PARTICIPATE ALL COST EFFECTIVE MEASURES ARE ALREADY BEING DONE REBATES ARE THE ONLY WAY TO COVER INCREMENTAL COST OF FURNACES/ BOILERS

63 COMMUNITY AT THE HELM Photo: Soulardarity, member-based community energy organization based in Highland Park, MI

64 WORKFORCE DEVELOPMENT Photo: Contractor works on wall insulation

65 ACCOMPANYING POLICY THAT SUPPORTS EXISTING COMMUNITY

66 ACTION THAT MEETS OUR GOALS Current rate of adoption 75% 75% of properties by 2025 <1% of housing stock per year for whole building retrofits both Single-Family & Multi-Family across Minneapolis

67 Nothing can seem extraordinary until you have discovered what is ordinary. Belief in miracles, far from depending on an ignorance of the laws of nature, is only possible in so far as those laws are known [...] Miracles, in fact, do not break the laws of nature. - C.S. Lewis

68 STRUCTURING ON-BILL REPAYMENT TERMS Percent of savings used for repayment 33% Repayment term (years) Net monthly savings 16 $15 16 $15 12 $12

69 POTENTIAL CAPITAL PROVIDERS Banks and credit unions Port Authorities Institutional investors (e.g. pension funds)

70 POTENTIAL LOSS RESERVE PROVIDERS Philanthropy (Initiative Foundations) Impact Investing Cities, towns, neighborhoods, counties Contractors

71 ENGAGEMENT Credit: Marti Frank, California efficiency program evaluator