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Making Minnesota Solar Pencil
Solar Power SeriesSara Bergan
September 24, 2013 ● St Paul, Minnesota ● Solar Power Series
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Development and Finance
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Bringing $ Into the Project
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Tax Equity
• Federal Investment Tax Credit– One time credit against income tax based on
amount invested in facility• Energy property/qualifying equipment • 30% of tax basis of qualifying property• Entirely in year placed in service
– Placed in Service before January 1, 2017
• Accelerated Depreciation
$
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Tax Equity
• Threshold Questions: – Can the Owner Use the Credits and Losses?– How Does Ownership Affect Project?
$
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• Tax Equity Investor– Late Stage Development/Placed in Service – Ownership stake for a Minimum of 5 Years
• Investor takes portion/all credit & depreciation benefits
• Meet Required IRR
– Size/Portfolio
Tax Equity$
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Developer
Consumer
Power Sales
SPV/SPE
Tax Equity: Sale Lease Back
Developer Sells System
Leases back
Installation
Investor
$
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Partnership ITC + Depreciation
Developer1% pre-flip95% post-flip
99% pre-flip5% post-flip
Power Purchaser
Investor
Tax Equity: Partnership Flip$
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Tenant99% TI, 1% MM
Managing Member/Developer Affiliate
Dep
reci
atio
n
Energy Sales/Use income
Power Purchaser/User
Investor
Tax Equity: Inverted Lease
Owner 51% MM, 49% MT
SP1
SP5
SP2
SP6 SP7
SP4SP3
SP8
Rents
Credits & Depreciation
Capital Contribution
DeveloperGuaranty?
Capital c
ontributio
n
Tax Cre
dits
$
nve
stm
en
t
Lender/Sponsor
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Debt
• Construction/Permanent
• Dependent on project revenues for debt service
• Longer Term Involvement in Project
• Coordination with Tax Equity
$
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Energy
• Behind the Meter– Net-Metered Facilities Contract
• Under 40 kW, retail: 40-1,000 kW, avoided cost
– Value of Solar• Optional alternative to Net Metering
– (Community Solar Gardens)
• Wholesale Sales to Utility – PPA
$
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Energy (Contracts)
• Term
• Price
• Maintenance/Curtailment/Abandonment
• Buyer Termination Rights/Purchase Option
• Damages
• Cross Defaults
• Ability to Assign/Transfer of Ownership
$
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SRECs
• The attributes associated with 1 MWh of energy generation from solar facility
• As part of a PPA may be part of a broader Environmental Attributes transfer
• For the purposes of tracking systems, follows state policy
$
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SRECs
• Revenue Stream – $100-300/MWh
• New England States Critical to Project Development
Source: http://www.srectrade.com/srec_prices.php
$
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SRECs
• Minnesota:– Net-Metering
• Not addressed in Legislation/ Assigned to utility?
– Value of Solar• Incorporated • In addition to other EA valuation/calculations?
– Bilateral Negotiations/PPA– Market for Unbundled SRECs?
$
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Incentives
• Smaller Scale Distributed Projects– Made in Minnesota
• 40 kW and under• Production incentive
– Solar Energy Production Incentives• 20 kW and under• 5 program years (5,000,000), 10 payment years
$
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Reducing Transaction Costs
• Consider Finance Goals at the Beginning
• Prepare for the Process & Costs – Coordination Tax Equity & Debt
$
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Sara E. Bergan
Minneapolis, Minnesota
612-373-8819
Thank You!
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