Clean Energy Financing Advisory Council: Energy Storage. April 12, 2016

Transcription

1 Clean Energy Financing Advisory Council: Energy Storage April 12, 2016

2 Clean Energy Financing Advisory Council: Energy Storage April 12, 2016 Ryan Carney & Brian Breckin

3 Today s Program Welcome Program updates: CHEEF REEL and SGIP Mark Perutz, DBL Partners Amanda Li, Generate Capital Katherine Ryzhaya, Advanced Microgrid Solutions Robert Sanders, Clean Energy Group Panel Q&A 11:04 AM Break 11:35 AM Networking 11:40 AM-12:00 PM

4 Our Mission Accelerate the transition to a sustainable world powered by clean energy

5 We Are Experts In Renewable Energy Building Performance Emerging Technologies Clean Transportation

6 Our Services Management Technical Assistance Workforce Training

7 Clean Energy Financing Advisory Council (CEFAC)

8 CEFAC Partners

9 Thanks to our CEFAC Funders

10 Go Green Financing

11 Financing Finder Searchable database of financing options Filtered by zip code & city Filtered by property type Financing is organized according to type (secured, unsecured, PACE, etc.) Vendor profile pages

12 Financing Concierge System (FCS) Tool Decision-making software to help consumers understand how they prioritize financing decisions Marketing report provides insight into what is important to them Data system cross references preferences against loan products in the database to rank order the loan products

13 My Action Plan Quick questions to customize a virtual assessment Personalized to reach your goals Informs the Finance Concierge

14 Clean Energy Financing Advisory Council: Energy Storage Mark Perutz Partner, DBL Partners

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18 US Energy Storage market is projected to grow substantially over the next 5 years with further growth expected beyond that:

19 Lithium Ion Battery chemistry currently dominates energy storage deployments

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23 Clean Energy Financing Advisory Council: Energy Storage Amanda Li Associate, Generate Capital

24 GENERATECAPITAL Understanding Financing for Energy Storage CEFAC Forum and Webinar April 2016

25 What is Project Finance? If you googled it: Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. What it breaks down to: Owning a real asset or lending against a real asset s cash flows Investing in a developer s projects - not in the developer (it s not VC) Mitigating risk so that projected economics are actual economics 2

26 Project financing enables customers to purchase infrastructure as-aservice with zero upfront investment Profit Distributions Cash Investment FINANCE CO (e.g., Generate) CUSTOMER (e.g., Hotel X) Monthly payments Energy savings from storage system PROJECT COMPANY Profit Distributions and Fees BATTERY Asset Management and DEVELOPER / O&M Services VENDOR 3

27 There are four major types of risk to mitigate when evaluating storage projects for project finance Regulatory Technology Operations Customer Regulatory Changes Rebate Reliance Product Performance Warranty Coverage Servicing System Optimization Credit 4

28 Energy storage is a growing market with opportunities for product maturity and scale Driven by government mandates and federal rulings, utilities and ISOs/RTOs are increasing their procurement of storage and allowing storage to participate in wholesale energy markets Competition among experienced technology OEMs drives down costs, reduces technology risk and yields new business models Project finance drives standardization of products, contracts, and operations and allows for developers to scale Software providers are enabling the optimization of system revenue streams and degradation curves 5

29 Project finance drove the solar and wind industry - and has the opportunity to do the same for storage New Investments in Clean Energy by Asset Class - Q Q [$BN] 6

30 About Generate Capital WHO WE ARE WHAT WE DO Generate Capital, Inc. is a specialty finance company that builds, owns, operates, and finances infrastructure assets involving the world's critical resources: energy, water, agriculture and basic materials. We believe the world's fourth industrial revolution -- a "resource revolution" -- is underway, where the world is finding new, profitable ways to do more with less of our precious or constrained natural resources. Unlike traditional capital sources, Generate Capital has the people, systems, and flexibility that make us the trusted capital partner for technology manufacturers, project developers and contractors driving this resource revolution. Generate Capital partners with project developers and solution providers to finance resource-related projects. We have developed a financing product enabling end customers to use their technologies in a pay-as-you-go model we call Infrastructure-as-a-Service. Our financing options provide our Partners easy access to capital, which shortens sale cycles and enables higher sales volumes. Generate Capital offers shorter and longer-term equity and debt capital. BENEFITS TO 1. Substantially increase revenue by using a zero down offering to raise closing rates with end users and PARTNERS reduce the closing timeline. 2. Having a true capital partner for growth Flexible financing solutions to meet evolving developer and customer needs over time Industry expertise enabling rapid feedback and efficient underwriting Extensive transaction experience provides standardized documents and processes which creates streamlining and reduces costs BENEFITS TO 1. No upfront expense - Customer recognizes benefits (i.e., energy savings) over time, as they accrue, without CUSTOMERS making a large expenditure on an uncertain technology or pay-back proposition 2. No Risk - Generate Capital and the solution provider take the risk on the economic benefits of the solution CONTACT Jigar Shah jigar@generatecapital.com 7

31 Clean Energy Financing Advisory Council: Energy Storage Katherine Ryzhaya Chief Commercial Officer, Advanced Microgrid Solutions

32 CEFAC WORKSHOP ENERGY STORAGE PROJECT FINANCING Katherine Ryzhaya April 12, 2016

33 01. MARKET OVERVIEW

34 WHO IS ADVANCED MICROGRID SOLUTIONS? AMS INSTALLS ADVAN THAT LOWER ENERGY AND PROVIDE CLEAN TO ELECTRIC UTILITIES Owner and operator of onsite energy storage Purveyor of Storage-as-a-Service - zero upfront cost plus guaranteed energy bill savings Developer of Hybrid Electric Building hardware/software platform Technology partnership with Tesla to procure 500 MWh of Powerpacks

35 FAST FACTS BEHIND THE METER (BTM) ENERGY STORAGE DEPLOYMENTS INCREASED BY 405% IN 2015 TOTAL ENERGY STORAGE DEPLOYMENTS WERE UP 243% IN 2015 (UTILITY, C&I, RESIDENTIAL) TOTAL MWs DEPLOYED EXPECTED TO GROW FROM 221 IN 2015 TO 1,662 BY 2020 ENERGY STORAGE GROWTH

36 EVOLUTION OF ENERGY STORAGE PROJECT FINANCE DOES THIS LOOK FAMILIAR? PAST o Heavily reliant on incentives o Operating revenues depend exclusively on demand charge management o Premium charged for relatively ill-understood technology (lithium ion) o Cost of capital in the mid to high teens PRESENT o Additional operating revenues from utility contracts o Project economics still reliant on incentives but improving quickly o Lithium ion batteries increasingly seen as safe and bankable, while other energy storage technologies remain challenging to finance o Cost of capital in the high single digits to mid teens FUTURE o Further monetization of the stacked benefits of storage o Project economics stand on their own without incentives o Additional energy storage technologies may become bankable as deployment grows (alternatively, Li-ion economies of scale may prevent significant penetration by other technologies) o Cost of capital in the mid to high single digits

37 FINANCING BEHIND THE METER ENERGY STORAGE IMPORTANCE OF CASH FLOW CERTAINTY UTILITY CONTRACTS o Fixed payments from high credit counterparties are low risk and thus bankable (e.g., AMS capacity contract with SCE) o Numerous other utilities preparing behind the meter energy storage procurements INCENTIVE CERTAINTY o SGIP has been essential in establishing CA as the leading behind-themeter energy storage market o ITC extension should be a huge boon to storage (solar + storage) STANDARDIZED HOST AGREEMENTS o 10+ year contracts o Fixed payments from host à increases percentage of capital stack that can be contributed by debt, reducing the overall cost of capital o Asset management and O&M agreements provide security that projects will perform as promised o Termination provisions that don t encumber utility contracts

38 INCREASING ENERGY STORAGE RETURNS MONETIZATION OF NEW PRODUCTS OVER TIME IT WILL BE CRITICAL FOR MARKETS TO RECOGNIZE THE STACKED BENEFITS OF ENERGY STORAGE HOST CUSTOMERS o Time of use bill management o Backup power o Increased PV self-consumption à especially valuable as net metering rates decline UTILITIES o Capacity o Distribution deferral o Transmission deferral ENERGY MARKETS o Frequency regulation o Voltage support o Spinning / non-spinning reserves o Energy arbitrage POLICY FRAMEWORKS ARE BEING CREATED TO UNLOCK THESE NEW PRODUCTS

39 02. AMS OVERVIEW

40 STORAGE AS A SERVICE AMS INSTALLS, OWNS AND OPERATES ENERGY STORAGE SYSTEMS AT HOST CUSTOMER SITES Energy Savings Host Customer Services Fee HOST CUSTOMERS RECEIVE ENERGY AND DEMAND CHARGE SAVINGS ON THEIR BILLS IN ADDITION TO OPERATIONAL EFFICIENCIES Battery Storage Own & Operate AMS AMS FINANCES THE SYSTEMS WITH A COMBINATION OF SHARED SAVINGS, UTILITY REVENUES AND INCENTIVES Utility Contract HOST CUSTOMERS CAPTURE ADDITIONAL BENEFITS INCLUDING MULTI-RESOURCE INTEGRATION, REDUCED GHG EMISSIONS, BACKUP POWER CAPABILITIES AND ENHANCED DEMAND RESPONSE Utility ECONOMIC MODEL

41 1 DEMAND CHARGE REDUCTION Forecasting software predicts demand spikes and seamlessly switches buildings from grid to battery power, thereby avoiding large peak charges UP TO 40% REDUCTION IN DEMAND COSTS ENERGY COST SAVINGS 2 TIME OF USE RATE ARBITRAGE Battery storage systems charge overnight when the cost of grid power is low and discharge during peak hours when it s more expensive, displacing costly on-peak electricity UP TO 15% REDUCTION IN ENERGY COSTS

42 BATTERY PERFORMANCE MODEL 1 DEMAND CHARGE REDUCTION 2 LOAD SHIFTING 3 UTILITY SERVICES % :00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 0% Pre-AMS Elec (kw) Battery State (%) Post-AMS Elec (kw) Battery In, Out (kw)

43 THE AMS ADVANTAGE WE INSTALL LARGE ENERGY STORAGE SYSTEMS THAT GENERATE MEANINGFUL ENERGY BILL SAVINGS FOR HOST CUSTOMERS STORAGE PROVIDER A AMS AVERAGE SYSTEM SIZE kw 250-1,000 kw FUNCTION Peak Shaving Load Shifting & Demand Reduction ANNUAL SAVINGS $500-$10,000 $50,000-$200,000

44 PROJECT FINANCE VENTURE INVESTORS PROJECT INVESTORS DBL Engie Other Equity Investor Debt Investor AMS LLC1 LLC1 Utility LLC4 PPA LLC2 LLC3 Incentives Host Contract Other Revenues PROJECT ENTITIES PROJECT REVENUES

45 CASE STUDY 01 IRVINE COMPANY 26 commercial office buildings 25% peak demand reduction 10 MW of firm, disptachable capacity to the utility 8% reduction in energy costs to the building owner (~$900,000 annually) Zero emissions No distribution upgrades

46 CASE STUDY 02 INLAND EMPIRE UTILITIES AGENCY 6 regional water recycling & pumping facilities 14% peak demand reduction Powered from the grid and onsite generation assets o 3.75 MW energy storage (AMS) o 3.5 MW solar o 1 MW wind o 2.8 MW fuel cell 5-10% reduction in annual energy costs(~$550,000)

47 ENERGY STORAGE, SOLAR PV AND SMART GRID TECHNOLOGIES EXPERIENCED INCREDIBLE GROWTH IN 2015, AND WE EXPECT THAT THEY WILL PLAY AN INCREASINGLY IMPORTANT ROLE IN REACHING THE NATION S CLIMATE AND CLEAN ENERGY GOALS IN THE COMING YEARS. DAVID DANIELSON US DEPARTMENT OF ENERGY

48 Clean Energy Financing Advisory Council: Energy Storage Robert Sanders Senior Finance Director, Clean Energy Group

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50 Who We Are

51 Resilient Power Project Increase public/private investment in clean, resilient power systems Engage city officials to develop resilient power policies/programs Protect low-income and vulnerable communities Focus on affordable housing and critical public facilities Advocate for state and federal supportive policies and programs Technical assistance for pre-development costs to help agencies/project developers get deals done See for reports, newsletters, webinar recordings

52 Value of Solar

53 Value of Battery Storage

54 Customer Value: Peak Shaving Peak reduced from 100 kw to 65kW = 35 kw $10/kW = $4,200 annual $20/kW = $8,400 annual savings

55 Utility/Grid Value

56 Energy Storage Early Adopters Energy storage companies have largely targeted C&I customers to reduce utility bills (not for resilience). It s important to bend the technology trend for solar+storage systems to also meet public needs, such as affordable housing and other essential services in low-income communities.

57 Resilient Power Projects Housing TA Fund: grants pay for 3rd party TA to determine project feasibility, design resilient solar+storage systems Demonstrate viability of clean energy + storage in affordable housing Working with project developers in CA, NYC, Chicago, DC, Newark, Austin Via Verde (Bronx) could be 1 st solar+storage project for resilient power applied to affordable housing

58 Resilient Power Projects Community Facilities Demonstrate viability of clean energy + storage in critical community facilities MA DOER 3 rounds of state funding for the deployment of municipal-led systems in its Community Clean Energy Resiliency Initiative (CCERI). 28 critical facilities - including schools/shelters, communications centers, first responder facilities and hospitals - will have resilient power. Working with municipalities to develop resilient power plan for critical facilities Municipal solar+storage project planning underway in San Francisco, Baltimore, Salt Lake City, Los Angeles, Duluth, DC

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60 Resilience for Free - Findings Analysis of project economics in different markets Findings: Solar+storage can reduce operating costs Financing can be repaid with electricity market revenues Energy storage can improve economics of stand-alone solar In certain markets, resilient solar+storage can be developed at little to no net cost over the life of the project Essentially resilience for free Similar analysis is now being done for CA affordable housing

61 How Solar+Storage Projects are Financed Today Utilities - direct ownership or third-party ownership under long term contract for services (rate based) Green Mountain Power - 4 MW of battery storage, 2.5 MW of solar PV, provides resilient power to a school community emergency shelter PSE&G Hopewell Valley High School (community emergency shelter) Large energy services companies - access to capital markets targeting specific sectors (Schneider Electric, municipal water/sewer treatment facilities, MUSH) New solar+storage companies - using project finance funds, venture capital & private equity Green Charge Networks, Stem, AF Mensah

62 How Solar+Storage Projects are Financed Today State incentives for demonstration projects MA DOER MD Energy Administration Federal tax credits ITCs For affordable housing, can be combined with LIHTCs to fully fund projects Bond financing for municipal projects, schools, large nonprofit institutions Solar+storage systems are increasingly structured with third-party ownership and leased to customers.

63 Integrated Approach is Needed Getting the market rules right is a big facilitator for project financing. Important to be able to stack multiple cost savings and revenue streams Investment in resilient power in community projects won t get traction without an adequate policy & regulatory framework, access to experienced technical services, data collection & analysis, and information sharing 63

64 Sign up for the RPP e-distribution List to get notices of future webinars and the monthly Resilient Power Project Newsletter: More information about the Resilient Power Project, its reports, webinar recordings, and other resources can be found at

65 Contact Information Robert Sanders Senior Finance Director Clean Energy Group Phone: (215)

66 Clean Energy Financing Advisory Council: Energy Storage Question & Answer

67 Clean Energy Financing Advisory Council: Energy Storage Thank You!

68 Networking Round Robin 1. Name 2. Job Title & Organization 3. What is hindering your efforts to advance clean energy? 4. What do you need to increase your contribution to clean energy?