2016 deloitte alternative energy seminar · cars into the electricity grid, using their batteries...
TRANSCRIPT
Copyright © 2016 Deloitte Development LLC. All rights reserved. 3
Agenda
Introductions
• Global Energy Landscape
• Intermittent Energy Sources and their Potential Disruption
• Emerging Regulation and Corporate Commitment
• Accounting Implications
• Q&A
Copyright © 2016 Deloitte Development LLC. All rights reserved. 5
While the International Energy Agency reports that renewables account for only a small portion of total global electricity generation (i.e., 22% in 2013), it is unlikely this will be the case for long
Global Trends – Electric Generation and Capacity OPTION 1
Copyright © 2016 Deloitte Development LLC. All rights reserved. 6
While the International Energy Agency reports that renewables account for only a small portion of total global electricity generation (i.e., 22% in 2013), it is unlikely this will be the case for long
Global Trends – Electric Generation and Capacity OPTION 2
Copyright © 2016 Deloitte Development LLC. All rights reserved. 7
While some countries are looking for ways to leverage alternative energy, there is a large amount of the world that needs to simply get on the grid in the first place
What Does The Energy Map look Like for Developing Countries
Copyright © 2016 Deloitte Development LLC. All rights reserved. 8
“Renewables are poised to seize the crucial top spot in global power supply growth, but this is hardly time for complacency”
–IEA Executive Director Fatih Birol
Copyright © 2016 Deloitte Development LLC. All rights reserved. 9
Intermittent Energy Sources and their Potential Disruption
Copyright © 2016 Deloitte Development LLC. All rights reserved. 11
Growing solar investments pave the way for increases in alternative energy demand
Copyright © 2016 Deloitte Development LLC. All rights reserved. 12
Community solar programs allow customers to invest in solar power by sharing the resource with others in their vicinity – it broadens the market for solar power
What are Community Solar Programs?
Benefits to project participants:
• Reduced investment cost when compared with individual installations
• Reduced solar generation cost when compared to same source generation from standard utilities
• Increased opportunity for individuals to support carbon reduction through renewable energy source
Community solar programs have been increasing in popularity and will continue to do so
As published by Solar Power Europe
• Almost 60 % of consumers globally – especially those between 18 and 34 years – show interest in investments that increase their self-sufficiency
• 55% of customers interested in purchasing or signing up for solar products within a period of 5 years and this trend has increased over the last two years
Copyright © 2016 Deloitte Development LLC. All rights reserved. 13
Community solar programs allow utilities to
• Grow solar generation portfolios through direct sales
• Enhance grid optimization and technologies offered to consumers for efficient energy consumption
• Diversify product portfolio through bundled sale arrangements of renewable energy supply
Grid considerations include
• Planning for changes in the mix of energy sources and its impact on grid reliability
• Devising innovative capacity and stability plans for grid stability
• Developing a dedicated policy framework for consumers-level renewable generation and its interaction with the grid to enhance resiliency
Community Solar Opportunities and Challenges
Copyright © 2016 Deloitte Development LLC. All rights reserved. 15
Growing supply of renewable energy sources make Grid integration a priority
Reliability
• Challenges in the availability of energy for the grid
Was widely believed that intermittent sources of electricitygeneration would threaten grid reliability once they surpassed 10% penetration
Several countries, states and provinces have now far exceeded that threshold.
Stability
• Challenges in balancing energy through the grid
A host of new technologies are making existing electricity grids more flexible, which is key to integrating intermittent power sources.
Renewables currently deliver 28% of Germany’s total gridpower (and up to 40% in some regions).
Resiliency
• Challenges in recovering from grid outages
While resiliency efforts used to focus on preventing outages, states and utilities are realizing that alternative energy sources can speed recovery times after an outage occurs.
Copyright © 2016 Deloitte Development LLC. All rights reserved. 16
Enhancing forecasting and planning
• Advanced analytics, which enhance forecasting accuracy (e.g., predicting load on the grid as well as the output of solar and wind installations on a given day).
• Demand response programs, which involve paying commercial, industrial, and even residential customers to reduce electricity demand given advanced notice
Adopting new technologies
• Grid-control gear and interconnections that link national systems, allowing power from wind and solar farms to be spread over wider
• Smart technologies, which allow two-way communication across the grid, between generators, storage providers, and electricity users, thus enabling more efficient transmission, distribution and load balancing
Utilizing alternative sources to speed up recovery times
• Distributed generation
• Batteries, flywheels, molten salt, pumped hydro and other energy storage mechanisms for time-shifting renewable generation and enhancing frequency response
Once the nemesis for utilities, a host of new techniques and technologies are quickly making integration of intermittent power sources into the grid a problem of the past
What is Being Done to Address Grid Connectivity in the Future
Copyright © 2016 Deloitte Development LLC. All rights reserved. 18
Electricity Supply – grid scale to add
reliability during peak periods
Renewables Integration –allows for time
shifting and management of
intermittent capacity
Ancillary Services – such
as surge capacity, load-balancing and
voltage support
End-User –primarily
associated with distributed generation
Grid Support –relieves
congestion on grid and provides on-site power for
sub-stations
Energy storage is not a new concept – it has been has been around since the inception of the power and utilities industry
Electricity storage includes five broad families of applications
Across these diverse applications companies are able to capture excess energy produced at one time for use at a later time
Copyright © 2016 Deloitte Development LLC. All rights reserved. 19
Past misconceptions about energy storage
• Not viable
• Not affordable
• Particularly for utility-scale, large commercial applications
Key advantages of energy storage
• Tool to manages intermittent energy sources
• Reduces costs
• Connects isolated areas
• Decreases reliance and stress on the grid
• Aids in disaster recovery plans
• Enhances corporate citizenship
Energy storage technology is advancing and making renewable energy more viable by eliminating the issue of intermittency
Recent Corporate Projects
Announced a pilot project in
the UK that will
plug 100 of its Leaf cars into theelectricity grid, using their batteries as extrastorage French oil
giant, Total, recently announced aUSD 1.1 billion scheme to buy battery groupSaft
Created the Tesla Powerwall, a home batterydesigned to charge using electricity generatedfrom solar panels, or when utility rates arelow
TOTAL
TESLANISSAN
Copyright © 2016 Deloitte Development LLC. All rights reserved. 20
Emerging Regulation and Corporate Commitment
Copyright © 2016 Deloitte Development LLC. All rights reserved. 21
Far-reaching regulations at global, national and local levels are driving increased adoption of renewable energy
US Environmental Protection Agency’s Clean Power Plan
• Calls for reducing greenhouse gas emissions in the US electricity sector from their 2005 level by 32% by 2030
• Expanding renewables is one of the Plan’s three key pillars
• The US Energy Information Administration estimates that under the Plan renewables will account for as much as 400 GW of generation by 2040
• The Plan requires states to develop their own plans to curb carbon pollution
• Ultimate impact will be in the hand of the States and the Courts
UN Paris Climate Change Agreement
• More than 175 countries endorsed the Agreement at the climate change conference, formally known as COP 21, held in 2015
• All-time high for signing an international treaty on climate change; a historic “meeting of the minds”
• Collective goal: “Keeping global warming below 2*C compared to pre-industrial time, and to pursue efforts to limit the temperature rise to 1.5*C”
• Requires participating countries to submit plans and update every 5 years
• Positive momentum for renewables
Copyright © 2016 Deloitte Development LLC. All rights reserved. 22
Canada
− Provincial leaders have agreed to a framework for clean growth and climate change.
− The framework addresses clean technology, innovation and jobs, carbon pricing and mitigation, and it encompasses all Canadian provinces.
− Actions, such as working to supplant usage of diesel generation with renewable, clean energy in indigenous and remote communities, and doubling its investments in clean energy, research and development over five years.
Rooftop requirements
− March 2015, France decreed all new rooftops in commercial zones must be covered in plants or solar panels.
− Green roofs are already popular in Germany and Australia, and Toronto
− Canada, mandated them in new industrial and commercial buildings larger than 2000 sq. meters
What Else Is Being Done Globally to Mandate the Use of Alternative Energy?
Copyright © 2016 Deloitte Development LLC. All rights reserved. 23
The business case grows
− can lead to cost savings and improved resiliency to major weather events
− can be appealing for operators in remote locales
− Are consumer demanded! As Millennials increasingly become an economic force to be reckoned with, they could drive exponential growth in alternative energy
RE100 Sustainability Program
− RE100 is a collaborative, global initiative of influential businesses committed to 100% renewable electricity, working to increase corporate demand for renewable energy
− As of 2015, 58 multinational corporations, which hail from all over the world, made the commitment to go 100% renewable through the Program
Companies are embracing alternative energy options
− 39% reported installing solar panels or other electricity-generating assets at their facilities
− 26% said they had installed batteries to store electricity as a hedge against peak demand times, when electricity prices are higher
− As of 2015, corporations had signed power purchase agreements for large-scale, off-site renewables covering 2 GW of power, up from 1.2 GW for all of 2014.
What Are Corporations Doing Outside of the Regulations?
As the business case grows, global companies are launching voluntary movements to generate all of their energy from renewables in the next two decades. US market over the last 5.
Copyright © 2016 Deloitte Development LLC. All rights reserved. 24
YieldCos
− Introduced into sector in 2013
− Publicly traded companies formed to own operating assets that produce cash flows, which are then distributed to investors as dividends
− Offer public equity investors an attractive total return proposition of growth plus yield
Green Bonds
− Corporate bonds with proceeds ring-fenced for clean energy investments
− International Finance Corporation was one of the earliest issuers of green bonds; as of 2015 it has issued USD 4.3 billion in green bonds
Other
− Extension to US Investment Tax Credit
− Crowd sourcing
Innovative financing vehicles for renewable energy consumptions have lowered the cost of capital and improved access to it
Copyright © 2016 Deloitte Development LLC. All rights reserved. 26
What are the potential impacts of these trends?
Asset Impairment and Useful Life
• Uncertainty of future costs associated with coal-fired units due to pending regulation and continued depression in low natural gas prices may impact assert value of convention generating assets
• Future capital expenditure requirements may lead to expedited decisions for conventional generating asset retirements and mothballing
Industry Transactions
• Long-term Contracts: accounting implications of unique structures
−Lease
−Revenue
−Derivative
• YieldCos: proper SEC and GAAP considerations during the development of and changes in Yield Co organizational structures and asset portfolio
• Development Activities: start-up v. development costs and timing of capitalization
Revenue and Lease Considerations
• Innovative sales structures of emerging alternative energy technologies, such as solar panels and energy storage units may blur the line between a sale or a lease
− Is there continuing involvement with the sold good?
− Is there a buy-back option included in the contract
−Does the seller assume certain risks or costs due to external factors (such a weather)?
Copyright © 2016 Deloitte Development LLC. All rights reserved. 27
Teresa ThomasDeloitte & Touche [email protected]
Brian MurrellDeloitte & Touche [email protected]
Contact
This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering
business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for
any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional
advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL
and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see
www.deloitte.com/about for a detailed description of DTTL and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP
and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
Copyright © 2016 Deloitte Development LLC. All rights reserved.