# Presentation: 303688

## State, Municipal & Tribal Renewable Energy Financing

***Accessing Financing Opportunities for Government Renewable Energy Projects***

## Discussion Points

- Definitions
- Benefits of Renewable Energy
- Financing Strategies
- Examples
- Beginning the Process

## What is Renewable Energy?

- •	*Energy *resources that are constantly replenished in contrast to fossil fuel sources that have a finite supply.  Examples are solar, wind, geothermal, hydro, and ocean (tide, wave & temperature differential).  Solar energy can be in the form of photon or heat capture (*photovoltaics/ solar thermal*).
- Current Renewable Generation Share (2002)
**National  ****	**** ****	****  9.1%, ****	****2.3% non-hydro**
**Arizona ****	****  ****	****  8.0%,  ****	****0.2% non-hydro **
**California ****	****	****29.8%,   12.9% non-hydro**
*(Energy Information Administration, Renewable Energy Outlook 2003 & Annual Energy Outlook 2005)*

## Benefits

- Diversify Fuel Sources
- Reduction of pollution and liability exposure (coal, especially)
- – Greenhouse Gas & Mercury Emissions
- Security/ Surety and on-site power generation
- Coal Imports & Transportation risks
- Aging Distribution Infrastructure (especially in “downtown”)
- Nonexistent Distribution Infrastructure
- Abundant Local Renewable Resources
- Local Economic Development

## Financing Strategies

- Self-Fund
- Regulatory Renewable Energy Requirements & Funding
- Existing Bonding
- Third Party Financing
- Clean Energy Bonds
- Financing “Suites”

## Self Financing Strategies

- Self-Fund
- 1% for Solar – *“ the Restructuring dividend”*
- Existing Government Financing

## Regulatory Requirements & Funding for Renewable Energy

- State regulators of electric utilities in 25 states require minimum percentages of renewable energy
- Funding source available to meet requirement.
- Funding is often made available to customers and other renewable energy developers.
- To see what is available in your state:
- Database of State Incentives for Renewable Energy  _[http://www.](http://www.ies.ncsu.edu/dsire/)__[ies](http://www.ies.ncsu.edu/dsire/)__[.](http://www.ies.ncsu.edu/dsire/)__[ncsu](http://www.ies.ncsu.edu/dsire/)__[.](http://www.ies.ncsu.edu/dsire/)__[edu](http://www.ies.ncsu.edu/dsire/)__[/](http://www.ies.ncsu.edu/dsire/)__[dsire](http://www.ies.ncsu.edu/dsire/)__[/](http://www.ies.ncsu.edu/dsire/)_.

## Green Tag Sales

-  The Sale of Renewable Energy Certificates (RECs)
-  RECs are the renewable attributes unbundled from the energy produced from renewable energy systems
- Current Market Value of $155 to $185 million
- Current Price Range is wide: $.70 to $49 per Mh
- Fragmented Market, used for compliance and voluntary commitments
- As market matures and consolidates could be an additional source of financing

## Existing Bond Funding

- Industrial Revenue “Special Purpose” bonds
- Municipal Bonds

## Third Party Financing

- Capital Cost Financed through a third party rather than customer or vendor financed
- Customer pays for energy produced by the renewable energy system and/ or shares the energy cost savings
- Third party is responsible for design, build, operations, maintenance and overall performance of system.
- Variations
- Leasing
- Energy Savings Performance Contracts
- Independent Energy Producer Purchase Agreements

## Clean Energy Bonds

- Monetize tax aspects for non tax paying entities (municipalities, tribes, coops, other nonprofits)
- Federal Energy Policy Act of 2005

## Federal Investment Tax Credits

- 30% up to $2,000 per system residential
- 30% no cap for commercial
- Energy Policy Act of 2005
- Begins 1/1/2006
- Ends 12/31/2007 (but could be extended)

## Accelerated Depreciation

- Five Year Accelerated Depreciation
- Effective incentive (at 35% tax rate) of 12-15% of capital costs

## Financing “Suites”

- Combining the strategies
- Who coordinates?
- Internal coordination
- Third Party Financier
*integrates tax credits, accelerated depreciation, and other sources into a single financing package*

## Special Considerations for Government & Tribal Entities

- Do procurement protocols permit.
- Lease or Ground lease mechanism.
- Facilities Use Agreement for Tribal Entities.

## Examples

- City of San Diego up to 5MW of PV
- City of Tucson, 5 municipal pools & Solar AC pilot
- City of Long Beach
- San Diego City Schools (1 MW)
- Staples Distribution Facility, Rialto, California 280kW
- Moscone Convention Center, San Francisco, California
- US Postal Service, Sacramento, California, 593kW

## Beginning the Process– all strategies

- Securing the Support of Elected Officials and Government Staff
- Identify potential projects/ sites *(select)*
- Running the numbers
- Select the Financing Approach
- Convene the Technical Team
- Identify & Assign Tasks

## Securing the Support of Elected Officials and Government Staff

- Elected Officials
- Advisory Bodies
- Recognized Stakeholders
- Relationship
- Staff
- Advisory Bodies
- Relationship
- Support
- Preliminary
- May need Resolution, Direction or Ordinance later

## Identify potential projects/ sites

- Identify *select* sites
- Comprehensive or Targeted Review
- Physical Capacity
- Roof space  (10 watts = 1 sf for PV, Solar Thermal, less)
- Protected space (Ground Mounted)
- Loads
- What load level and when?
- seasonally and daily
- What kind of existing energy use ?
- Natural gas, Electricity
- Intersecting the two

## Running the numbers

- Cash Flow Forecast *10 to 20 Years*
- Capital Costs
- Energy Production
- Tax Credits and Incentives
- Green Credit Sales/ Buy-downs
- Projected Discount Rate
- Operating Costs, *maintenance, insurance, etc.*
- Current Price of Energy
- Projected Energy Price Increases

## Selecting the Financing Approach

## Convene the Technical Team

- Financial Staff
- Procurement Staff
- Facilities Staff
- Energy Manager
- Technical Advisors

## Identify & Assign Tasks

- Secure Sample Request for Proposals and/ or Quotations
- Revise RFP/ Q
- Publish Request.
- Establish Evaluation Committee.
- Select Contractor & Establish Scope of Work.

## Resources & Documents

- Solar Financing Website:
- _[http://energy.sandia.gov/](http://energy.sandia.gov/)_
- SunEdison:
- _[http://sunedison.com](http://sunedison.com/)_
- RWE Schott:
- _[http://rweschottsolar.us](http://rweschottsolar.us/)_
- Email Valerie Rauluk:  vajra@vecat-inc.com