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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

sebergan@stoel.com

Thank You!

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