Belfast, Maine Friday, October 18, 2013

Transcription

1 Belfast, Maine Friday, October 18, 2013

2 The Power Purchase Agreement

3 845 kw in NH. 2,500 kw in MA.

4 SAU 17 Solar Air Thermal PPA

5 Simple to understand Costs. Hard Soft Equipment & Installation. Legal, Financing, Permitting. Ongoing O & M Insurance Legal and Accounting Revenues: Investment Incentives Tax-based Rebate-based Power sales. Production Incentives RECs Grants Not reliable

6 Project Success Agreement to buy energy. Provides a stable contracted income that allows for financing. Financial Intelligence. Tax equity investors. Source of Debt. This is the PPA foundation

7 Power Purchase Agreement Host: Purchase Power savings in lower rate No operations or maintenance Decision at end to buy at FMV or remove Risks: Developer bankruptcy Damage to facility Absentee tenant Developer Finances system Installs system Operates and Manages System All Revenues (PPA, RECs, Tax) Risks: Bankruptcy of Host Incentive stability

8 Leveraged PPA Host: Purchase Power savings in lower rate. No operations or maintenance. Decision at end to buy at FMV or remove. Tax Incentives! Shared Risks: Developer bankruptcy. Incentive Stability. Absentee tenant. Developer Finances system. Installs system. Operates and Manages System. Shared Revenues (PPA, RECs, Tax). Shared Risks: Bankruptcy of Host. Incentive stability.

9 Leveraged PPA Pro Forma Host Finances 12 year Pro Forma 113% Investment Principle & Interest Tax Credit Depreciation Value PPA Income or Savings Project Income (SREC) OMI Total Years -$400,000 -$400,000 -$176,400 $600,000 $102,000 $57,750 $156,750 -$15,000 $725, $176,400 $163,200 $57,461 $155,966 -$15,000 $185, $176,400 $97,920 $57,174 $155,186 -$15,000 $118, $176,400 $58,752 $56,888 $154,410 -$15,000 $78, $176,400 $58,752 $56,604 $153,638 -$15,000 $77, $176,400 $29,376 $56,321 $152,870 -$15,000 $47, $176,400 $56,039 $152,106 -$15,000 $16, $176,400 $55,759 $151,345 -$15,000 $15, $176,400 $55,480 $150,589 -$15,000 $14, $176,400 $55,203 $149,836 -$15,000 $13, $176,400 $54,927 $26,156 -$15,000 -$110, $176,400 $54,652 $26,025 -$15,000 -$110, Total -$2,116,800 $600,000 $510,000 $674,257 $1,584,878 -$180,000 $1,072,334

10 Financial Intelligence Deals are complicated. Banks are regulated. Tax equity is scarce. Requires a team approach.

11 Deal Structure is complicated

12 Deals have many parties

13 Unfortunate Reality Soft costs are the same for 25 kw as for 500 kw. Smaller the project - harder the host s job.

14 Belfast, Maine Friday, October 18, 2013

15 Net Energy Billing: What is it? How Does it Work to Promote Locally-Owned Wind Power Generation? Sue Jones Windependence Community Energy Partners, LLC Freeport, Maine

16 Preface to this topic, event, etc. Wind power, especially from larger projects, is currently the cheapest form of renewable energy; prices are trending further downward. Installing your own on-site project can be costeffective, and can save you money over the long-term life of the project. Community wind, including Distributed Wind, and large-scale corporate projects are compatible and complimentary; there s room for both. The difference is ownership. 16

17 Preface to this topic (continued) Each can even help improve/benefit the other, for example: Community wind projects can be initiated by piggybacking on corporate wind projects development work; and Corporate wind projects can enjoy helping to spur new community wind projects by providing seed money, technical assistance, and other attributes to schools, municipalities, etc. to towns/schools that host their projects. Distributed wind helps both community wind and corporate wind because it introduces the public to smaller scale projects whose risks are born by the owner(s), and whose impacts are localized. 17

18 What is Community Wind? Means, locally owned, where one or more members of a local community have a direct financial stake in the project other than through land lease or tax revenue. An emerging market force in the US Its roots are from Germany and Denmark: Over 100,000 German and over 175,000 Danes own part of a wind project 88% of projects in Germany, and 84% in Denmark are locally-owned Equivalent to 5400 mw in Germany and 1900 mw in Denmark Power consumed either on-site (behind the meter) or sold to grid (gridconnected); on-shore or offshore Photo Credits: 18 EWEA

19 Community Wind Municipal Private Co-ops State Institutions Schools Farmers State Colleges Small Businesses The State of Maine State Agencies State Prisons 19

20 Maine Community Wind, by the numbers Now operating: Maine currently has ~6 mw of community wind energy operating Less than 1 mw of this is owned by municipalities 4.5 mw is Fox Islands Wind In the pipeline: Maine has ~ mw of community wind in development, almost entirely private landowners ~ 5 mw of wind in development is owned by municipalities Majority of planned community wind projects will be with small and medium-sized, single turbines Left: credit UMPI Upper Credit: Pittsfield 20

21 How is Community Wind beneficial? Depends on the type of community wind project; the following are various options: Distributed wind (behind the meter): saves on long-term, on-site electricity expenses; can be up to 1 mw, typically; NEB works well in this size and scale Examples: Pittsfield, ME; Camden, ME Community Wind Development: typically grid-tied, merchant: acts as a price-taker, suppressing electricity prices; reduces dependence on fuel for electricity, helping to insulate electricity prices from varying fuel prices; invests money in the local economy Top credit: Pittsfield 21

22 Examples of Community Wind Projects in Maine Pittsfield Middle School (10 kw) University of Maine Presque Isle (600 kw) Camden High School (100 kw) new Above credit: UMPI Center credit: Pittsfield Right credit: Skystream (example) 22

23 Distributed Wind: Pittsfield Maine Wind Project: Overview Location: Pittsfield Recycling Facility, Pittsfield, Maine Owner: Town of Pittsfield Size: 10 kilowatts (kw) Type: Bergey Wind Turbine Collaboration: Maine Central Institute, Efficiency Maine (Energy and Environmental Conservation) Photo credit: Pittsfield 23

24 Distributed Wind: Camden Hills Regional High School Wind Project: Overview Location: Camden Hills Regional High School Grounds Owner: Camden Hills Regional High School Collaboration: Island Institute Size: 100 kw Type: Northwind 100 Project Cost: about $510,000 Timeline: 2004-March 2012; operating now 24

25 Camden Hills Regional High School Wind Project: Project Site Top left and right, and bottom left credits: Camden High School Center and right bottom credits: Northern Power Systems 25

26 Determining whether community wind is a good fit for you? What are your goals? Economic savings: Long-term hedge on anticipated rising electricity prices Economic development: keeping revenues local where they are typically reinvested Environmental: Desire to offset dirty power with green power Independence: Desire to self-generate and be more independent Demonstration value: Desire to demonstrate the technology with curriculum development at local schools Many others. 26

27 If so, is Net Energy Billing (NEB) right for you It s been called: A game changer The most cost-effective policy mechanism for spurring new small to medium-sized projects NEB helps to improve current paradigms and stereotypes about where our electricity comes from, and who is responsible for providing it because it enables more people to co-own projects and share risks and rewards 27

28 What is it? NEB is a billing and metering practice under which a customer and shared ownership customers are billed on the basis of the net energy whereby net energy is the difference between the kwh consumed and kwh generated by a customer or shared ownership customers. 28

29 What is it (continued)? NEB allows a generator ( facility owner ) to receive the full value of the retail rate for all excess electricity generated (14 cents/kwh, roughly) while having generated it at wholesale. Meaning, in more detail, that your monthly excess is credited back to you at the retail rate from your local T & D i.e., you re compensated for it (not with a check but with a credit). 29

30 How long does it last? For as long as you want, and the policy is in place (as you and the T & D negotiate in your NEB Contract; most are evergreen contracts ) unless you specify a certain term. See note in January 2012 s rule amendment: that in your discretion you may insert a time frame up to 10 years, for example, as a term in your NEB contract) 30

31 Thus, let s run through that again. If generator provides excess electricity (kwh) than needed/used by all co/owners, then a credit is given for excess kwh Generation plus credits are apportioned based on ownership basis; (up to) 10 accounts/meters, provided all are located within one T & D territory i.e., CMP, BH, or MPS Excess kwh are carried forward on rolling basis Unused credits accumulate and can be banked for a rolling 12-month period (to offset usage within each 12-month time period) 31

32 And then.? At end of each 12-month period, any accumulated unused kwh is credited to the T & D utility and not to the owner(s) i.e., use it or lose it Shared ownership billing is done on an ownership interest basis Billing is done based on annualized net energy 32

33 Applicant and Project Eligibility Qualifications: Eligible facility using renewable fuel or technology, or a micro-combined heat and power system i.e., wind, solar, fuel cells, CHP with certain efficiencies, etc. T & Ds must offer it to generators up to 660 kw; Co-ops must offer to generators 100 kw or less, and in their discretion up to 500 kw 33

34 Applicant and Project Eligibility (continued) Generation/NEB allocation must be in roughly same amount as each co-owner s ownership interest (%) Shared ownership qualifications : sometimes called community net metering allows several people to invest in an eligible system together allows all owners sharing of risks and rewards 34

35 How do I apply? Application form is submitted to local T & D Application must contain: Customer identities Ownership interests percentages must be reasonable but are in your discretion; thus, the ownership percentages of the facility do not have to be identical to the output percentages but they do have to be reasonable /roughly the same 35

36 How do I apply (continued)? Contact person Specifications of each account to be net energy billed i.e., up to 10 within that same T & D territory Description of facility Copy of signed ICA 36

37 Interconnection Agreements ICA is required before applying for NEB MPUC Rules Chapter 324 establishes procedures for small generator interconnection Utility review procedures based on facility size Time Frames roughly 30 days Costs depends on size of WT/generator (usually $50-$200) 37

38 Additional Information Available on MPUC website Chapter Net Energy Billing Chapter Small Generator Interconnection Mitch Tannenbaum, PUC at or Mitchell.Tannenbaum@maine.gov 38

39 So, why is NEB so compelling? Because, in general NEB reduces financial risk; increases financial rewards The larger the WT, the higher the WT efficiency and better payback; NEB helps to promote use of larger, more efficient WTs Shared ownership allows parties to choose the best wind site among owners to get the best return Owners don t have to own a great wind site in order to get the benefits of self-generation; owners with poor wind sites can be involved via shared ownership Allows for limitless new ownership options and shared risk among individuals and groups 39

40 To further explore whether NEB will work for you. Sue Jones Windependence Community Energy Partners, LLC Freeport, Maine

41 Belfast, Maine Friday, October 18, 2013