connecticut self storage association presentation
TRANSCRIPT
Overview
Discuss economic benefits of investing in energy efficiency measures from both an investment and a tax perspective.
Discuss low interest financing options. Review a case study – i.e. take you
through an actual proposal and financial analysis for a CT storage facility.
IntroductionsPanelists • Stephanie Grubb, Cohn Reznick - Investment Considerations and
Tax Benefits
• Jessica Bailey, CEFIA Commercial & Industrial Property Assessed Clean Energy - C-PACE Financing
• Elena Cahill, Globele Energy - Audit Requirements and Benefits
• Nicholas Malagisi, Sperry Van Ness Advisors; Real Estate Benefits
• Scott Hainey, Storage Insurance Brokers - Insurance Requirements
• Tim McGrew, Connecticut Light & Power – CL&P Assistance to Improve Energy Efficiency
• Christy Bradway, Connecticut Light & Power – Discussion of ZRECs
• Ted Lawrence, Renewable Resources Inc. – Solar Process and Case Study
• Tom Loredo, Renewable Resources Inc. - Panel Moderator
“Fuel for Thought”UN Population Growth Estimate
to 9 Billion by 2040
What will the effect be on:
The Use of Energy?
The Cost of Energy?
The Environment, if we continue to use fossil fuel based energy?
World Energy Outlook by 2035
World primary energy demand will increase 36%
China’s demand for energy is rising by 75%
The US is now the second largest energy consumer behind China
The use of renewable energy will triple
Renewables account for 7% of all energy and will rise to 14%
Electricity Rates
On average, CT electric rates have increased 5% per year, over the last 10 years. (Source: US Energy Information Administration)
Currently, the average commercial cost is between $0.16 - $0.17/kWh in CT
Straight line projection of 5%/year = $0.27/kWh in 2023
CONSERVATION
How can you conserve energy in a building:1. Look at your process and learn if you can lean
out the process;2. Make process equipment more energy efficient;3. Look at the building systems and determine if
you can replace any systems with energy efficient technology;
4. Manage you process and building systems with technology.
5. An audit or benchmarking will help you determine the present situation and provide options for you
Next make sure you understand the economics of conservation.
As you will learn today there are many programs available to assist with funding for conservation projects.
Understand some monies are incentive monies to do the project, other programs can help you finance the project, and yet other benefits are federal tax credits or deductions.
The benefits are cumulative: you may be qualify for incentive dollars which requires less funding for the projects and then take the federal tax credit or deduction on your tax return.
CONSERVATION
Federal programs apply to every state.Every state and within the sate the utility
company may have their own programs for conservation or generation.
CT has the energy efficiency fund and CEFIA and now CPACE
MA has Massachusetts Energy and Utility Assistance,
National Grid has efficiency programs, etcNY has NYSERDA, Con ED has efficiency
programs, etcDSIRE website for the benefits in your state
CONSERVATION
Alternative electric and natural gas supply.Deregulation intended to save money and it
can but be knowledgeableCT utility companies can change their rates
January 1 and July 1 – this year UI will change their rate next in January 1, 2014 and CLP in July 2013.
Present 24 hr rates- UI -.076 CLP - .078Make sure the rate can not go up. Natural Gas utility companies change their
rates monthly on the 1st.
ELECTRICITY AND NAT GAS
You can generate energy through renewable technologies such as solar, wind, etc
You can generate energy with cleaner technologies such as fuel cell, co-gen etc
Federal tax credits available for projects through 2016
In CT - CPACE program can potentially fund the projects, you will learn more later-CPACE is in 27 other states
Cumulative benefits again- CPACE- Fed tax credits, etc
DSIRE will list renewable programs as well
GENERATING ENERGY
Why Solar Power?
Solar is a clean and renewable energy source
Every hour, enough sunlight shines on the earth to meet global energy needs for an entire year
The Economics of Solar
Avoided Cost of Electricity equals Lower Operating Expenses
Federal Tax Benefits – ITC and Depreciation
State/Utility Incentives - ZREC
Life of Solar System (25 Year Warranties)
30% Federal Tax Credit through 2016
5-year accelerated depreciation (MACRS)
50% bonus depreciation in 2013
Depreciable base is reduced by 50% of ITC credit value
Federal Solar Programs
Project Finance
Direct Purchase – Conventional financing
Capital Lease – 10 year term with $1 Buyout
C-PACE – Property Assessed Lending
Solar Project Development Timeline
Month 1 2 3 4
Week 1 2 3 4 5 6 7 8 9 10 11 12 13
Stage I II III
A. Agreements Completed
B. Physical Plan/Site Review
D. State Authorization
Municipal Permits
Assumes no zoning or variances
required
E. System Installation (Assumes good
weather conditions)
F. Municipal Inspection
G. Utility-Net Meter Install
C. Final Design
Utility Application/
Interconnection
H. State Inspection
Stage I - Design
Stage II - Applications
Stage III - Installation
Next Steps
Data Collection
12 Month History of Electric Use
Site plan
Blue Prints
Site review and structural analysis
Proposal
Financing Discussion
Preliminary Project Timing
Proposed Bill No. 203
AN ACT CONCERNING PROPERTY TAX EXEMPTIONS FOR RENEWABLE ENERGY SOURCES.Be it enacted by the Senate and House of Representatives in General Assembly convened:That section 12-81 of the general statutes be amended to exempt from property tax any Class I renewable energy source installed for the generation of electricity for commercial and industrial use, and to make such exemption applicable to assessment years commencing on or after October 1, 2012.
Statement of Purpose: To encourage the use of renewable energy sources, and to allow the commercial and industrial sectors to benefit from such sources by expanding current law that allows the property tax exemption for renewable energy sources only if the generation of electricity is for residential or farm use.
Commercial Business Case Study
Building OverviewBuilding Type: Pre-engineered, steelRoof Type: Metal, low pitchElectric Company: CL&PElectric Rate: $0.179/kWhElectric Consumption: Approx. 52,300 kWh/ yr.Anticipated Utility Rate Escalation: 3%
Commercial Business Case Study
Solar Installation• System Size— 46.08 kW• Panels— 192 @ 240 watts• System Production— 51,358 kWh (Year 1)• Percentage of Electricity Produced by Solar—
98%• System Degradation— 0.8%/year• System Mounting— S5 Metal Roof Clips• System Warranty— 25 year manufacturer’s
warranty
Investment – Financial Evaluation
Investment analysis considers ‘at-risk’ rule, therefore the project is financed at 80% maximum. Balance of system cost is invested by owner. Also, a 35% corporate tax rate is assumed.
Considerations• Project Cost— $175,104• Cost/Watt— $3.80• Avoided Electric Costs Savings— $0.16/kWh (with 3% yearly
escalator)• 30% ITC Value— $52,531• MACRS Value— $148,838• Loan Value— $140,083• Loan Term— 10 years• Loan Rate— 6%• Annual Loan Payment— $19,033 (assumes 1 yearly payment)
Investment – Financial Evaluation
Evaluation Without ZREC Income• Avoided Electric Cost Savings over 25 years –
$269,200 • $52,531 ITC—Year 1• $148,838 available MACRS• ROI— 77%• IRR— 9.21%
Investment – Financial Evaluation
Evaluation With ZREC Income• Avoided Electric Cost Savings over 25 years – • $269,200 • ZREC Income— $119,665; ZREC Value =
$164.22• $52,531 ITC— Year 1• $148,838 available MACRS• ROI— 121%• IRR— 21.77%
• What drives the Renewable Energy Market• What is the ITC• How to finance a renewable energy project• What are the benefits to you
A g e n d a
R e n e w a b l e E n e r g y M a r k e t D r i v e r s
• Renewable Portfolio Standards (RPS)• Financial incentives
- Renewable Energy Certificates (RECs), particularly for Solar (SRECs)- Feed-in Tariffs (FIT)- Rebate and grant programs- Federal tax incentives- State tax incentives
•Rising cost of electricity- Driven by fossil fuel prices and growth in demand- Electricity prices (average retail price) vary considerably across the
country• U.S average retail price for electricity is $0.0983/kWh• California costs are high, ~$0.13/kWh• New Jersey costs are higher, ~$0.147/kWh• Rates in Hawaii are among the highest, ~$0.25/kWh• Source (as of 1/30/2012): http://www.eia.gov/electricity/state/
Key Renewable Energy and Solar Terms
PPA – Power Purchase Agreement = Contract for sale of electricity
MW – Mega Watt - Utility Scale Power generation. Powers neighborhoods
kWh – Kilowatt-hour – smaller unit of power output – e.g., a solar panel’s electrical output
REC or SREC – Renewable Energy Certificate or “credit.” NOT a tax credit. Represents the green/clean aspect of actual energy that is separately produced. S in “SREC” means a Solar REC.
EPC – Engineering Procurement and Construction contractor
Off-taker – purchaser or user of the electricity
Host – person or place where a project is physically located (could be the buyer in a PPA)
COD – Commence Operations Date (aka “Placed in Service”)
Sponsor – Energy Project developer or project manager
PV – Solar Photovoltaic (PV) technology. Makes electricity directly from sunlight Light
SPE – a Special Purpose Entity (often an LLC) that plays a specific role in the renewable energy project such as owning and/or operating it.
ITC – Investment Tax Credit (more on this later)
PTC – Production Tax Credit (more on this later)
Net Metering – Excess electricity is fed into the electrical grid. Project owner is given a credit on their utility bill to use when the system generates less electricity than needed.
Key Renewable Energy and Solar Terms
Avoided Cost- is the cost the utility would have incurred had it supplied the power itself or obtained it from another source. It is the price at which an electric utility purchases the output of a Qualified Facility (QF)
Key Renewable Energy and Solar Terms
Ta x D e d u c t i o n v s . Ta x C r e d i t
Tax deductions are a reduction of a taxpayer’s total income that decreases the taxable income used in calculating the actual tax to be paid.
What is a deduction worth?- $1 Deduction = $1 x tax rate
- Assume 35% tax rate
- $1 x 0.35 = 0.35¢ of after tax value
Tax credits reduce dollar for dollar the amount of tax actually owed and payable to IRS.
What is a tax credit worth?- $1 tax credit = $1 of after tax value
Renewable Technology: Solar Electricity
Use of solar equipment (e.g. photo-voltaic (“PV”) or concentrated solar power) to generate electricity.
Eligible for 30% ITC (or 1603) through December 31, 2016, 10% thereafter.
IRC § 48 – Energy Investment Tax Credit (ITC)
• ITC is based on the percent of eligible equipment , not on how much electricity is produced and not on total project cost. Most ITCs are 30% with some 10% credits depending on technology.
• Unlike production tax credits (PTCs), there is no requirement that electricity be sold, only that the facility generates electricity, heating, cooling or lighting or meets other standards per the tax code.
• One year credit – generally claimed in year placed-in-service (PIS)
- End-user of tax credit must be an owner/partner in the deal before COD/PIS date
- 5 year compliance/holding period (like § 47 Historic Rehab Tax Credits)
- Credit vests and recapture period burns off 20% per year for 5 years from date of COD/PIS
• 5 year MACRS depreciation on most technologies (Bonus Depreciation applies when law allows)
• Basis reduction – Must reduce depreciable tax basis by 50% of the credit amount
• No governmental or tax exempt use allowed (“use” means ownership or lease)
• Credits are Allocated by profit/loss ratio (like Historic Rehab Tax Credit)
• May offset Alternative Minimum Tax liability (for tax years starting after 2008)
• Note, the ATRA of 2012 extended the election to claim the section 48 investment tax credit (ITC) rather than the PTC for eligible wind and other PTC facilities. Not all PTC eligible facilities are allowed this option. For those that are, the election now applies for projects where construction begins prior to January 1, 2014. This is a new rule.
IRC § 48 – Energy Investment Tax Credit (ITC)
Ta x E q u i t y C a l c u l a t i o n
$1,000,000 Eligible Cost of Energy Property
x 30% Applicable ITC Rate (sometimes 10%)
$ 300,000 ITC to standalone project
Solar Tax Credits: Eligible Property Defined
Equipment that uses solar energy to generate electricity
· Constructed/Purchased by the taxpayer
· Must be Depreciable or Amortizable (i.e., used in a trade or business)
· Acquired by the taxpayer and first used by the taxpayer
– Exception for sale-leasebacks - 90 day rule (Old IRC Section 48(b)(2))
Eligible Energy Tax Credit Basis – Solar ITC
Which costs are eligible for the credit?
• Solar panels, mounts, racks, wiring, inverters etc.• Hard construction costs in general• Direct and indirect costs of installation
· System integration/design/testing· Permits, fees etc.· Interest expense prior to PIS – Subject to Section 266 Election· Developer fee if Reasonable· Other soft costs properly capitalized
Practical Issue: The extent to which a support system (i.e., “racking”) for solar qualifies for the credit. Note– roof surfaces do not qualify, unless the solar panel is also the actual roof; See, PLR 201121005.
• Base for ground-mounted units that have no other uses do qualify
• Parking garage structures which support panels but provide shade?
- Portion of roofing repair?
- Parking garage/carport cost? What portion?
For Solar Walls – See, PLR 201043023
Eligible Energy Tax Credit Basis
B o n u s D e p r e c i a t i o n
ATRA Extended Bonus Depreciation
50% - Additional 1st year depreciation of 50% for qualified propertyacquired and placed in service before Jan. 1, 2014 (before Jan. 1, 2015 for certain longer-lived and transportation property). (Code Sec. 168(k)(2), as amended by Act Sec. 331(a)).
A conforming change is made to Code Sec. 460(c)(6)(B) (relating to 50% bonus depreciation not being taken into account as a cost in applying the percentage of completion method for certain long-term contracts).
Bonus depreciation may be allocated as of the placed in service date, so planning of Investor entry is important.
M A C R S D e p r e c i a t i o n
• Wind, solar and geothermal are generally classified as five-year property
• Biomass is typically classified as seven-year property• Ancillary components such as transmission lines are depreciated over
a longer period, generally not include in tax credit basis.• MACRS Permanent part of the tax code
Wind/Solar
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
MACRS 20.00% 32.00% 19.20% 11.52% 11.52% 5.76%
MACRS + 50% bonus depreciation
60.00% 16.00% 9.60% 5.76% 5.76% 2.88%
W h y F i n a n c e R e n e w a b l e E n e r g y ?
For investors – · Tax incentives:
– Solar - 30% Investment Tax Credit (ITC), and for certain other technologies, owners can elect Production Tax Credits (PTC) or a 30% immediate Investment Tax Credit depending on technology.
– Five year tax depreciation (with some exceptions) on the equipment.· Yields can be considerably higher with shorter holding periods than
LIHTC and other tax credit investments.For owner-operators – · Cash flow from the sale of energy to tenants or utilities under long
term agreements and renewable energy certificates (REC’s)For energy user or “off-takers” –· Lock in their energy costs for 10-20 years• Bloomberg Energy estimates the US energy tax credit equity market is
at $7B (source http://www.cohnreznick.com/sites/default/files/The%20Return%20%E2%80%93%20and%20Returns%20%E2%80%93%20of%20Tax%20Equity%20for%20US%20Renewable%20Projects.pdf)
H o w t o F i n a n c e R e n e w a b l e E n e r g y P r o p e r t y
•Educate Lenders
•Be aware of “At Risk Rules”
W h o C a n U s e E n e r g y Ta x C r e d i t s ?
Corporate investors (widely-held corporations)
· An estimated 15-20 active investors; expiration of the Sec.1603 grant will create demand for much more tax equity from investors
Individuals (and closely-held corporations)
· There are several rules that may come into play here.
Tax-exempt and government entities
· Qualified allocations
– Not eligible for tax credits, but won’t affect other partners if there are “qualified allocations.” A technical rule.
– Section 168(h) election required for wholly-owned subsidiaries of tax-exempts
· PPA needs to be respected as sales/service contract… or lose / defer incentives
W h e r e c a n I f i n d m o r e i n f o r m a t i o n ?
CohnReznick – Renewable Energy· http://www.cohnreznick.com/industries/renewable-energy
Energy Tax Credits – DSIRE· http://www.dsireusa.org/
– Information on federal tax credits and incentives– Provides links to relevant state websites
Solar Energy Industries Association · http://www.seia.org/
American Wind Energy Association · http://www.awea.org/
C o h n R e z n i c k C a n H e l p Yo u
Stephanie Grubb, CPAManager
CohnReznick LLP525 N. Tryon Street
Suite 1000Charlotte, NC 28202
Main (704) 332-9100Direct (704) 837-7252
www.cohnreznick.comwww.cohnreznick.com/industries/renewable-energy
The LREC/ZREC PROGRAM
An Opportunity to Develop Behind-The-Meter Renewable Generation in Connecticut
Christie BradwayManager, Renewable Power ContractsNortheast Utilities
Why are People Interested in Renewable Generation?
Drivers: • To “Go-Green”• To reduce, or better predict, spending on energy
Barriers:• Cost of Systems• No clear long-term revenue streams to support capital
investments
• Public Act 11-80 created a billion dollar opportunity for developers and installers of small renewable systems
• CL&P and UI will enter into 15 year contracts to purchase “RECs” from new small renewable projects
What is a REC? = Renewable Energy Certificate• How is a REC Created?
Each time a renewable generation unit produces, the energy is considered “renewable” LREC: Low – emission RECs = e.g Fuel Cells ZREC: Zero – emission RECs = e.g Solar, Wind, Small Hydro
Each megawatt hour of energy produced = 1 REC
• Why Should You Care About RECs?• RECs have a value (commodity) and are used by electric companies to
satisfy regulatory requirements (RPS)
How Many RECs & How Much Are These RECs Worth? RECs from Zero Emission units (solar, wind, hydro) may be worth up to $350 each* (cap) :
However, average price of selected medium zrec bids from 2012 = +/- $150 each
Example 1: Residential Home = 5 kW Solar System= 6 RECs/year Annual Payment = $900.
$150/REC x 6 RECs/year =+/- $900. per year Total Payment over 15 years = $13,500.
$900 x 15 years = $13,500
Example 2: Commercial Business = 100 kW Solar System = 114 RECs/year Annual Payment = $17,100. Total Payment over 15 years = $256,500.
RECs from Low Emission units (Fuel Cells) may be worth up to $200 each* (cap) However, average price of selected bids from 2012 = +/- $90 each
Example 3: Commercial Business = 400 kW Fuel Cell = 3,154 RECs/year Annual Payment = $283,860 Total Payment over 15 years = $4,257,900
REC Contract directly with customerCustomer
Utility
The REC purchase is a separate transaction
Utility purchases excess energy under existing tariff
LREC & ZREC EligibilityGeneral Project Eligibility Criteria
• Must be located behind contracting utility distribution meter • Must not have received funding/grants from Clean Energy Finance Investment
Authority, or its predecessor the CT Clean Energy Fund (other than low cost financing)• Projects must be in service on, or after, July 1, 2011
LRECs• No larger than 2,000 kW• Must have low emissions
• <0.07 lbs/MWh NOx; <0.10 lbs/MWh CO; 0.02 lb/MWh VOCs, 1 grain per 100 standard cubic feet
• May include fuel cells and other low emission Class I resources, as well as all zero emission Class I resources
ZRECs• No larger than 1,000 kW• Must have zero emissions• May include solar, hydro and wind
Procurement Processes1) Competitive Solicitation - (RFP)
2) Tariff
Project Type
Size Annual Budget
Renewable Energy Credit Price Cap*
RFP Timeframe and Frequency
Large ZRECs
≥250 kW to 1,000 kW
~$2.13 M Max. $350/REC Annual in April for 6 years2013 will be year 2
Medium ZRECs
>100 kW < 250 kW
Approximately $2.13 M
Max. $350/REC Annual in April for 6 years2013 will be year 2
LRECs Up to 2,000 kW
$4 M Max. $200/REC Annual in April for 5 years2013 will be year 2
Project Type
Size Annual Budget
Renewable Energy Credit Price Cap
Tariff Availability and Frequency
Small ZRECs
Up to 100 kW ~$2.13 M Weighted Average of the Medium ZREC price + 10% up to $350/REC- Year 1 Avg = $164.22/REC
Annually, after the approval of the RFP and the filing of the medium ZREC rate + 10%Expect to offer Yr. 2 Q4 2013 or Q1 2014
Final Results of 1st RFP
• Final Selected Projects weighted average price/REC = $89
1. Average prices were about 1/3 of the cap • LREC Cap = $200 and Avg. Weighted Price/LREC = $65.94• ZREC Cap = $350 and Avg. Weighted Price/ZREC = $121.13
2. RFP contracts will result in approximately 27 MW of installed renewable capacity in CT• LRECs = 5.6 MW – fuel cells• ZRECs = 21 MW - solar
Category Size # Bids # Bids Selected
Average Weighted Price/REC
Committed Budget ($M)
Uncommitted Budget ($M)
% of Budget Uncommitted
15 Year Contract Value ($M)
LRECs Up to 2 MW 43 12 $65.94 $3.0 $162K 5% $45.6
Medium ZRECs
100 – 250 kW
113 47 $149.29 $2.0 $78K 4% $29.8
Large ZRECs
250 – 1,000 kW
140 21 $101.36 $2.1 $145K 7% $30.8
Total 296 80 $89.13 $7.0 $386 k 5% $106
Small ZREC Tariff• Instead of competitive bidding - projects less than or equal to 100
kW are eligible to enroll in a tariff
• Price takers = $164.22/REC • Program establishes the price as the average of the selected Medium ZREC
projects +10%
• Schedule - Small ZREC Tariff Program must open 30 days from approval of Medium ZREC Contracts• Medium ZREC Contracts approved 11/21/13 • Opened Small ZREC Program 1/8/13 (with PURA approval for extension due to
holidays)• Initial two-week window closed 1/22/13
Small ZREC Tariff
• At the close of the Small ZREC 2-week , CL&P received 479 completed Small ZREC Applications, which totaled over $5.6M in requested Small ZREC funding - more than 138% above CL&P’s available Small ZREC budget of $2.36M for this round of the Small ZREC Program.
• Based on the volume of applications received during the two-week window, CL&P conducted a random selection process of completed Applications submitted during the 2-week window, which process was observed by a representative of the State of Connecticut Office of Consumer Counsel (OCC). The random selection process resulted in a numerical rank of all completed Applications received during the two-week window.
• Based on the queue and available budget, we expect to enter into contracts with approximately 200 applications
• PURA approval of these individual contracts is not required
• PURA approved the Small ZREC Tariff and the price of tariff = $164.22/REC
• Small ZREC Tariff will be open until all available budget has been allocated, or at the time when a new Small ZREC price has been established for the next year Small ZREC applications.
• Expect this round of the Small ZREC Program will result in an approximately 9 MW additional installed solar in CT
Category Size # Applications Received
Approx. # of Contracts to be
awarded
Price/REC Available Budget
($M)
Total Annual Value of
Applications
15 Year Contract Commitment
Value ($M)
Small ZREC
0 – 100 kW 479 200 $164.22 $2.36 $5.6 $35.4
Timeline and Next StepsAction Date Comments
Small ZREC Tariff Service Attachment Execution
January – July 2013 Execution of ~200 Service Attachments
LREC and Medium/Large ZREC RFP – Year 2 Opening
April, 2013 Year 2 RFP to open in April 2013
For additional information visit:
Website: CL-P.com, and Click on Renewable Energy Credits under the “Going Green” tab
Email: [email protected]
UI: www.uinet.com/powerprocurement
Email: [email protected]
Energy Efficiency Programs for Business
Customers
Conservation & Load Management Connecticut
Light & Power and Yankee Gas
Energize Connecticut: New name, same great programs
• Energize Connecticut is the state’s new branding initiative to help consumers save money and use clean, affordable energy.
• A partnership of the Energy Efficiency Fund, the Clean Energy Finance and Investment Authority, and local electric and gas utilities
• Energy efficiency is a valuable resource for Connecticut, it:– Reduces air pollutants and greenhouse gases– Saves customers money– Reduces need for more energy generation– Creates jobs
• Program funding:– Electric customers pay 3 mills per kilowatt-hour– Natural gas programs are funded through gas utility bills and approved by
the Public Utilities Regulatory Authority
2013 Program Incentive Budgets & Caps
Project caps• CL&P $1,000,000 per federal tax ID• YGS/CNG/SCG projects with an incentive amount greater
than $100,000 require PURA approval
BudgetsCL&P C&I $ 35.2 M
YGS $ 2.4 M
CNG $ 2.3 M
SCG $ 2.1 M
New Construction & Equipment• Captures electric and natural gas
savings where they are most cost-effective: during design
• Covers up to:– 95% of the incremental
cost of installing measures in new construction
– 75% of the incremental cost for equipment replacement projects
Energy Efficient Lighting
Lighting Controls
HVAC Equipment
Building Envelope
Refrigeration
Process Equipment
Gas Boilers VFDs
New Construction Major Renovation Equipment Replacement
Prescriptive Rebates
• HVAC Unitary Equipment
• Heat pumps• Infrared heaters• Water heaters• Food service
rebates
• Gas heating equipment– Condensing boilers– Non-condensing
boilers– Condensing
furnaces– Condensing unit
heaters
Existing Buildings
• Incentives to replace functioning equipment with more energy-efficient options
Covers up to:• 40% of installed
cost• 50% of installed
cost for comprehensive projects
Energy efficient lighting
Lighting controls
EMS/ Programmable Thermostats
Process Equipment VFDs HVAC
Refrigeration
Controls
Gas Measures
Small Business Energy Advantage (SBEA)
• Turnkey energy-saving program• Pay nothing upfront• Existing business, municipal, and government
customers • Average 12-month peak demand between 10
kW and 200 kW• All possible energy efficiency measures• On-bill, 0% financing to qualifying customers
Business & Energy Sustainability (BES)
• The next level after all or most major capital improvements have been completed
• Maximize operational strategies with existing capital equipment & people
• Develop management practices
BES Programs
• Retro Commissioning: Optimizes operation of customer’s facility without installing capital equipment
• PRIME: Focuses on industrial manufacturing processes
• Operations & Maintenance: Improves efficiency through changes and repairs that can be classified as maintenance or operational procedures
• Training & Outreach
FinancingType Min Max Rate Term
MaxPymt Source
SBEA/ Muni
$500 $150,000 0% 4 yrs On-Bill Utility
C&I $2,000
$1 Million (1st $100,000 w/ subsidy)
2.99% or 4.99%
5 yrs 3rd Party 3rd Party
PURA Loan (>50 kW savings)
$1 Million
1% below rate/no more than prime
10 yrs 3rd Party 3rd Party
Residential ProgramsHome Energy Solutions
HES – Income Eligible
Residential New Construction
Retail Products
Heating & Cooling
CL&P Contacts• New Construction (ECB): Rich Asselin (860) 665-3292• Retrofit (EO): Glen Eigo (860) 665-5084• Business & Energy Sustainability: Dave McIntosh (860)
665-3531• Cool Choice: Dennis Beauregard (860) 665-4758 • Express Lighting Rebates: Dennis Beauregard (860) 665-
4758 • Small Business: Randy Vagnini (860) 665-4753• Financing: Gentiana Darragjati (860) 665-4757• Residential Programs: Lomont White (860) 665-3790• Natural Gas Programs: Matt Fox (860) 665-3749 • Your Account Executive
UI Contacts
• New Construction (ECB) : Peter Aufdemorte (203) 499-4715
• Retrofit (EO) : Peter Aufdemorte (203) 926-4715• Cool Choice ( CCH) : Will Riddle (203) 499 -2407• Express Lighting : Will Riddle (203) 499 -2407• Your account manager
Property Assessed Clean Energy
▪ An innovative financing structure that enables commercial, industrial, and multi-family property owners to access financing for qualified energy upgrades and repay through a benefit assessment on their property tax.
Private capital provides 100%
upfront, low-cost, long-term funding
Repayment through property taxes
A senior PACE lien is put on the property
and stays regardless of ownership
CRE Owners Face Barriers to Upgrades
REFERENCESEE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)
PACE Addresses Key Barriers
REFERENCESEE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)
Why C-PACE
▪ Zero up-front cash investment▪ Immediate positive cash flow▪ Long-term financing (up to 20 years) and low interest
rates▪ PACE assessment stays with the property upon sale▪ Ability to pass payments through to tenants▪ Higher rents and greater long-term property value
because of energy efficiency▪ Preservation of borrowing capacity through off-balance–
sheet financing
Connecticut Special Session Public Act 12-2 (June 2012)
▪ Commercial, industrial & multi-family property
▪ Requires the consent of the existing mortgage lender
▪ Requires SIR>1; permanently affixed
▪ Enables municipalities to opt-in
▪ Enables CEFIA to administer a statewide program
CEFIA’s Role in C-PACE
•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)
Design Program
•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage Lenders
Administer Program
•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)
Attract Private Capital
CEFIA’s Role in C-PACE
•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)
Design Program
•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage Lenders
Administer Program
•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)
Attract Private Capital
Municipalities Opted into C-PACE
Coming Soon: Cheshire, Clinton, East Granby, East Hartford, Fairfield, Hamden, Manchester, Meriden, New Haven, Plymouth, Torrington, Waterbury, Wethersfield
▪ Beacon Falls▪ Bridgeport▪ Durham▪ Hartford▪ Middletown▪ Norwalk▪ Old Saybrook▪ Putnam
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
▪ Simsbury▪ Southbury▪ Stamford▪ Stratford▪ West Hartford▪ Westport▪ Wilton▪ Windham
C-PACE Opportunities in Connecticut
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
Customers Apply Into C-PACE
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
CEFIA’s Role in C-PACE
•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)
Design Program
•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage Lenders
Administer Program
•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)
Attract Private Capital
C-PACE Partners do Technical Underwriting
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
3rd Party Administr
ator: Buonicore Partners
Program Expertise: Buonicore Partners• Milford, CT• Modeled Energy Profile of CT• Nationwide PACE experience
Technical Expertise:
Celtic Energy• Glastonbury, CT• $1bn of energy-
related projects• Experience with large
commercial end-users, utilities, and government
Real Estate Expertise:
Sustainable Real Estate Solutions
• Trumbull, CT• Benchmarking
Database• Industry leader in
building energy performance assessment
Upgrades: What’s Eligible
Anything that saves energy from baseline
▪ High efficiency lighting▪ HVAC upgrades ▪ New automated building and HVAC
controls▪ Variable speed drives (VSDs) on motors
fans and pumps ▪ High efficiency chillers, boilers, and
furnaces▪ High efficiency hot water heating systems
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
… as long as it isn’t going anywhere
▪ Combustion and burner upgrades▪ Fuel switching▪ Water conservation▪ Heat recovery and steam traps▪ Building enclosure/envelope
improvements▪ BMS▪ Renewable energy systems
Upgrades: What’s Not
▪ Appliances, e.g., refrigerators, dishwashers, etc.
▪ Plug load devices▪ Vending machine controls▪ Any package of measures with a
weighted average effective useful life (EUL) that does not meet or exceed the life of the loan
▪ Any package of measures that does not achieve an energy savings (over the life of the loan) to [total project] investment ratio > 1
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
▪ Any measure that is easily removed/not permanently installed
▪ Any measure that does not result in improved energy efficiency
▪ Extending natural gas lines to the property line to enable a PACE-eligible gas conversion project.
CEFIA’s Role in C-PACE
•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)
Design Program
•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage Lenders
Administer Program
•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)
Attract Private Capital
Capital Partners
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
Qualified Capital Providers
▪ CEFIA qualified 8 capital providers through a RFI.
▪ “Lending tree” model
Owner Arranged Financing
▪ Property owner is free to choose their capital provider from the private market. There is no government financing required.
Construction and Term Financing from CEFIA
▪ CEFIA authorized $20M short term facility for construction and term financing.
Requirements
▪ Building must be commercial, industrial, or multifamily▪ Non-profits eligible if municipality allows▪ Building must be located in a municipality which has
opted in▪ Feasibility study required for renewables▪ Mortgage lender must consent
Application Review: Two Paths▪ Full Assessment – Whole Building Analysis
– Begin with a Level I screening step (by CRE owners consultant), designed to cost effectively identify projects with compelling savings & ROI
– Proceed to Level II/III audit when significant savings potential exists. Determine the optimized bundle of ECMs, calculate project cost, projected energy savings & key financial metrics
▪ Fast Track – Designed for buildings where prior energy audits have been
completed including ECM recommendations, but failed to get implemented due to owner inability to self-fund the project
– Less technically complex projects (single ECM)– Pre-approved projects under utility EE incentive/rebate programs
▪ Developed in light of other PACE and leading CRE energy retrofit finance programs around the country
▪ Incorporates three established industry protocols– ASTM Building Energy Performance Assessment (BEPA) Standard
E2797-11 for baseline energy use data collection and analysis– ASHRAE Level 1, 2, 3 Energy Audit Guidelines to identify ECMs
and project energy savings– International Performance Measurement & Verification Protocol
(IPMVP) for energy savings measurement and verification
▪ Underwriting methodology is technically sound, standardized, reliable & fully-transparent
Application Review: Technical Standards
$$
$$$$$$C-Pace Capital Provider ContractorProperty Owner
$$
CEFIA Town Tax Collector
Town Land Records
Property/ECMs
Lien$$$
Mortgage Holder
Notification & Consent
Assessment & C-PACE Services Contract
Funding Agreement
Funding: Capital Flow Process
“M&V”
Financial Conduit
Agreement
Property Audit/ Energy Assessment
ContractorProperty Owner
$$
$$
$$$
Funding: Capital Flow Process
$$$
ContractorProperty Owner
$$
$$
$$$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification & Consent
ContractorProperty Owner
$$
$$
$$$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification & Consent
CEFIA Program Administrator
Technical Review
ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Funding Agreement
Notification & Consent
ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Assessment & C-PACE Services Contract
Funding Agreement
Notification & Consent
ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Financial Conduit Agreement
Funding Agreement
Notification & Consent
ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Funding Agreement
Property/ECMs Financial Conduit Agreement
Notification & Consent
Assessment & C-PACE Services Contract
ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Assessment & C-PACE Services Contract
Funding Agreement
Town Land Records
Property/ECMs
Caveat
Financial Conduit Agreement
Notification & Consent
$$$$$$
Equipment &Services
ContractorProperty Owner
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Assessment & C-PACE Services Contract
Funding Agreement
Town Land Records
Property/ECMs
Caveat
Financial Conduit Agreement
Notification & Consent
CEFIA
$$$$$$ ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Funding Agreement
Town Land Records
Property/ECMs
LIEN
Assessment & C-PACE Services Contract
Financial Conduit Agreement
Notification & Consent
CEFIA Town Tax Collector
$$$$$$ ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital Provider
Assessment & C-PACE Services Contract
Town Land Records
Property/ECMs
LIEN
Financial Conduit Agreement
Funding Agreement
Notification & Consent
CEFIA Town Tax Collector
$$$$$$ ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification & Consent
CEFIA
C-Pace Capital Provider
Assessment & C-PACE Services Contract
Funding Agreement
Town Land Records
Property/ECMs
LIEN$$$
Financial Conduit Agreement
$$
CEFIA Town Tax Collector
$$$$$$ ContractorProperty Owner
$$
$$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification & Consent
CEFIA
C-Pace Capital Provider
Assessment & C-PACE Services Contract
Funding Agreement
Town Land Records
Property/ECMs
LIEN$$$
Financial Conduit
Agreement
$$
$$$$$$C-Pace Capital Provider ContractorProperty Owner
$$
CEFIA Town Tax Collector
Town Land Records
Property/ECMs
Lien$$$
Mortgage Holder
Notification & Consent
Assessment & C-PACE Services Contract
Funding Agreement
Funding: Capital Flow Process
“M&V”
Financial Conduit
Agreement
130
Recap:▪ Audit
▪ Notification to Mortgage Holder / Consent
▪ Project Review by Program Administrator
▪ Referral out to Qualified Capital Providers
▪ Capital Provider Selected by Owner
▪ Negotiations Funding Agreement
▪ Assessment & C-PACE Services Agreement & Financial Conduit Agreement (CEFIA – Owner – Cap Provider)
▪ Caveat on the Property (CEFIA – Town/City)
▪ Funding Disbursement(s) & Project Work Commences
▪ Project Completion
▪ Finalization of the Lien on the Property, Payment Schedule, etc.
▪ Owner Enjoys More Efficient Building & Repays Funding via Tax Bill
Funding: Capital Flow Process
▪ Full Assessment & Fast Track project data are entered & tracked in CEFIA’s Data Management Platform (CDMP)
M&V: Data Management Platform
CDMP is powered by SRS’s cloud-based software platform
CDMP facilitates key project data & analytics management across the entire project life cycle (project development through M&V)
Benefits to Other Stakeholders
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
Capital Providers
• Low risk investment opportunity• Senior lien• Secure repayment
mechanism (taxes)• Legal and technical
structure administered by CEFIA
Mortgage Lenders
• Improves Building Financials/Risk• Lowers OPEX• SIR>1• No acceleration
• Creates a more attractive building for occupants and owners
• Finances deferred maintenance needs
Municipalities
• Creates economic development & jobs
• Reduces energy costs for businesses
• Reduces pollution
The Customer (Building Owner):PACE Addresses Key Barriers
HartfordWest Hartford
BridgeportNorwalk
SimsburyStamfordStratford
Southbury
Near term plan to sell?
Lack of funding?
Cannot assume more debt?
Insufficient payback/ROI?
Split incentives?
Uncertain savings/technical expertise?
Tax obligation fixed to property
100% upfront, 20 year financing
PACE assessments qualify as OPEX
Positive cash flow in year 1
Assessment/savings pass to tenants
Technical underwriting / SIR>1
PACE Project Example$1,500,000 add to Building Value (8.9%)
134
30 Year Old, 200,000 ft2 commercial
building
Jessica Bailey, Director C-PACE
Clean Energy Finance and Investment Authority