pv development considerations for us universities€¦ · turningpoint energy current projects 1st...
TRANSCRIPT
Contributors, co-authors
Author:
JaredSchoch,TurningPointEnergy
Editors/Reviewers:
JaneCowan,MidwestRenewableEnergyAssocia@on
NickHylla,MidwestRenewableEnergyAssocia@on
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TurningPoint Energy Overview • Denver-basedclean-techdevelopment,advisoryand
investmentfirmwithafocuson:• Developingsolar,storage,andrelatedclean-techprojects
forcommercialandu@lityclients• Advisingu@li@es,publicsectoren@@es,solarcompanies
andemergingnewclean-techcompaniesongo-to-marketstrategies,mergersandacquisi@ons,organiza@onalsystems,processes,toolsandefficiencies
• Inves.nginsolarprojects,emergingclean-techcompaniesanduniqueopportuni@es
• Combined$1.7billion(540MW+)indeveloping,financing,installingandservicingsolarandenergyefficiencyprojectsoverthelast12yearsthroughoutNorthAmerica
• hZp://turningpoint-energy.com/
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TurningPoint Energy Current Projects 1st 1.98MW AC
Community Solar in TX
1MW AC NM with No ITC
25MW AC in NM DOE-backed MREA Solar for Universities
500kW AC Elementary
School in CO Developing 2017 – 2022 Pipeline of New Projects Across the US
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A PV Investment Roadmap for US Universities and Foundations
The Solar Endowment:
Ledbystudentteams,theprojectaimstoshowcaseinvestmentandprogramma@cpoten@alofsolarenergyprojectstouniversitygovernanceboardsinaneffortto:• Generateinvestmentthroughuniversity
founda@ons• Advancefavorableboardpoliciesthatgovern
investmentsinsolarassets• Developroadmapsforuniversi@estodeployPV
ontheircampusandmakeinvestmentsthatadvancefounda@onandsustainabilitygoals
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Agenda
Descrip@on
PVDevelopmentConsidera@onsforUSUniversi@es
Contentoutline
• Sec@on1–StructuringSolarDevelopmentTeams• Sec@on2–BestPrac@cesandRulesofThumbforPVDevelopment• Sec@on3–UniversityFinancialOp@onsforPVInvestment• Sec@on4–BestPrac@cesforPVProcurement
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What is the Solar Development Process?
Development Financing Operations & Maintenance
(O&M)
Engineering, Procurement & Construction
(EPC)
Origination
Solar Project Development Steps
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Our Focus to Start: Origination, Development & Financing
Development Financing Operations & Maintenance
(O&M)
Engineering, Procurement
& Construction
(EPC)
Origination
Solar Project Development Steps
What We Will Focus on For Our Efforts
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Origination
Site Selection
Economics Analysis
Permitting & Interconnecti
on Qualification
Feasibility Level
Layout / Design
Utility Solar Project & Building Energy
Analysis
Project Origination Steps
Origination
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Development
Local, State and Federal Permitting
Interconnection application, study process
and agreements
Stakeholder education and buy-in to the
Project/s
Land Development
Studies (geotech,
environmental, survey, etc.)
Project Development Steps
Development
Confirmation of Financing
Sources / Path to Success
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Financing
Financial Structuring Analysis / Validation
Procuring Solar Financing
Industry Utilizing All Development
Stage Documentation
Financing Company
Negotiations
Validation of Origination
Assumptions for Financial
Modeling
Project Finance Steps
Financing
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Skill Sets Required to Be a True Solar Development Company – Project Leadership
ProjectManagement/Leadership–Graduatestudent.Musthavetheabilitytounderstandandapplyallbelowstepsingeneral(notasexpertbutasmanager).WetypicallyhireMBAstojoinourteamsasanalystsintoourcompaniesthatsupporttheen@reorigina@onprocess.Verytypicalforthispersontobeinchargeororigina@onforaregionandtypicaltogointocompanyleadership/managementdowntheline.
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Skill Sets Required to Be a True Solar Development Company – Engineering & Construction
Engineering–theymustappreciatetheabstractandalsobegoodwiththedetailsofsolarengineering.
SiteLayout/FeasibilityDesign–TypicallyanengineerwithCADskills/[email protected]/designspecialistsinthisrole.
Interconnec>on–engineeringrequiredbutcanbeleadbypermigng/landdevelopment,legalorothersthatcansimplyleadtheprocessforward.Engineeringwilllearnthemosthere.
Permi?ng/LandDevelopment–commercialrealestateprofessionalskillsetifUniversityhassuchexper@[email protected],engineering,construc@on,etc.aretypicalskillsetsforthisspace.
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Skill Sets Required to Be a True Solar Development Company – Business Finance / Analytics
Energyanalysis–analyzingu@litybills,ratetariffs,exis@ngsolarprograms,etc.Business,finance,legal,math,spreadsheetgurusaregoodinthisarea.
BusinessFinance–financialmodeling,spreadsheetanalysis,etc.Similartoenergyanalysisskillset.
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Skill Sets Required to Be a True Solar Development Company – Legal Legal–Analyzingexis@ngsolarprogramsavailable,
upcomingpolicychanges,contractnego@a@ons/naviga@onrelatedtofinance,permigng,etc.Notamusthaveforthisteambutanicetohaveforsure.Maymakesenseforthistypeofproject.University-dependent.
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Development Best Practices – Start with the End in Mind 1. Knowyoureconomicprofilebeforeyoustart2. Maximize/standardizedesignefficiencies3. Selec@ngtherightsite/s4. Development/permigng5. Interconnec@on6. Standardtemplate/formforsitevisits7. Otherareaswhereprojectssurvive….ordie
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Know your economic profile before you start – Back into your projects (instead of force fitting them)
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Know your economic profile before you start – Back into your projects (instead of force fitting them) Understandwhatisallowedforsolargenera@onperstateandlocallawand
u@litycommissionrule/sCollectratetariffand24monthsofbillsforallbuildings
• Somebuildingsmayhavemul@plemetersAnalyzeratetariff/sandverifythepart/por@onofthetariffthatsolarcan
supportValidateanyfederal,stateorlocalincen@vesoraddi@onalrevenuesources
available(paymoreforcoveredparking?)Modelpricingthatisacceptableforthehostclient(buildingowner/energy
user)• Savingsrequirement?• Breakevenrequirement?• Howmuchmorewilltheypay?
Financialstructures/projectinvestorsthatsupportrequiredpricinginconceptDeterminewhatprojectdesignswillworkwiththeseeconomics
• Roof,groundand/orcanopies?
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Maximize / standardize design efficiencies Select“standard”inverterandmoduleforgroundmount,rooftopand
canopySelect“standard”sizesforprojectsthatmaximizedesignefficiencies
• ALWAYSsizeprojecttoinverterspec• NEVERcreateoddconfigura@ons• RARELYwillbreakingupthearrayonarooforgroundmakeeconomicsense
Select“standard”PVSystdatasetfromthestartandagreeonsystemlossesupfront(whatwilltheinvestor’sindependentengineeraccept?)
Scaleeconomiesandefficienciesarecri@caltogoodeconomicsforasolarprojectmostofthe@me
• <100kW=loseallscaleefficiencies• >1MW=starttomaximizescaleefficiencies• Porqoliosprovidepar@alscale(financingandprocurementefficienciesgained)
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Selecting the right site/s Knowhowmuchspaceyouneedfirst
• 10–15Ksquarefeetrequiredper100kWrooftop• 4–5acresrequiredper1MWofgroundmountspace• 40-50parkingspacesper100kWparkingcanopies
Qualify/disqualifybuildingssecond• Roofmounts–5yearoldrooforlessORreadytore-roofnow• Groundmounts–adjacenttobuildings/metersANDSouthfacingANDrela@velyflat
• Parking/shadecanopies–SouthfacingNIMBissues,visualdesiresorrelatedmarke@ngvalue(orlackthere-of)DisqualifyallsitesthatdonotprovideefficientscaleimmediatelyOtherbestprac@ces
• Photographsites• Measureavailablespaceasexactlyaspossible• Keepthinkingaboutdesignconfigura@on• Talkwithfacilitymanageraboutsiteandaskabouttheirbuildingstandards/requirementsupfront
• Discusslongtermplansforsiteswithclientrealestate/planningteamupfront
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Development / Permitting Confirmwhichfederal,stateandlocaljurisdic@onshave
oversightofyourprojectloca@ons
Confirmthepermigngprocessforyourproject• Roofmountstypicallyeasiestandstraightforward• Canopyprojectsrequiresomefloodplainandrelatedanalysisefforts• Groundmountscanbecomplexandrequirespecialusepermitsandheavyanalysisonlanddevelopmentstudiesandpropertytaxrequirementsthatcantakemonthsandcost$100K+
Developmentrequirements• Typically5–10differentstudiesforground-mountedprojectsthatwilltake60–90days
• RoofmountsrequireliZlemorethanqualifyingtheroofintegrity,structure,designcapabilityandroofwarrantyrequirements
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Interconnection
Engageyouru@lityearlyandqualifytheinterconnec@onprocessandallrequirementsupfront
Obtaininterconnec@onagreementsandformsupfront
Takephotosofthecurrentmeter,locateonyoursitemapandthinkabouthowthewirewouldgetfromyoursolarprojectinvertertothatmeter
Interconnec@on(I/C)requirementscankillaprojectquickly(newtransformerrequired,upgradedservice/s)
Combiningmul@plemeters/accountsonasitecancreatescaleefficienciesandsavemoneyinsomeinstances
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Standard template / form for site visits – Create Institutional Memory for Your Project
CreateanExcelspreadsheetformupfronttoincludealltheaboveitemsandfillinforeachbuildingsoyoucan:
• Gainalignmentonprojectrequirementswithyourhostclientandprojectteamupfront
• Keepalogofallsitesqualified/disqualifiedandwhy• Comparebuildings/projectsquicklyandefficiently• Capturealltherequiredinforma@onthatprojectdevelopers,investors,EPCfirmsandhostclientswillwanttoreview
• Sharewiththeen@reteamefficientlyandquickly
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Other Ways Projects Survive…Or Die
• Contracts,lawyersandwhatisallowedperuniversitycharter/bylaws/locallaw/statelawvs.whatsolarindustrycanaccepttofinancecontracts
• Expecta@onsandpoli@csnotaligned(orchangemid-process)fromfacultytostafftoadministra@ontoexecu@veteam
• Everchangingpolicyandprogrambytheu@lity,u@litycommission,stategovernment
• Notselec@ngtherightcompanythatcanactuallydeliverthroughprocurement
• Unknownstateandlocaltaxrequirementsforaproject
• Ever-changingpriceofelectricityandforecasts
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Solar Project Structure Options
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
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Solar Project Structure Options – Third vs. First Party
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
Third party owned-solar project financing structures
First party owned-solar project financing
structures
First big decision is ownership decision and what level of complexity and risk your
culture will allow for. 38
Solar Project Structure Options – Third vs. First Party
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
Third party owned-solar project financing structures
First party owned-solar project financing
structures
• Off-campus project • Commodity purchase
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Solar Project Structure Options – Third vs. First Party
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
Third party owned-solar project financing structures
First party owned-solar project financing
structures
On-campus project
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Solar Project Structure Options – Third vs. First Party
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
Third party owned-solar project financing structures
First party owned-solar project financing
structures
• On-campus project • Off-campus project – community solar • Off-campus project – deregulated market
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Solar Project Structure Options – Third vs. First Party
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
Third party owned-solar project financing structures
First party owned-solar project financing
structures
On-campus project
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Solar Project Structure Options – Third vs. First Party
Lease Land / Roof Only
Buy Solar Electricity
Only
Solar as an Investment
for University Endowment
Fund
Energy Generation Asset for
Operations
Buy Solar RECs on the Open Market
Only
Easiest (& Lowest Value) to Most Complex (& Highest Value)
Third party owned-solar project financing structures
First party owned-solar project financing
structures
• On-campus project • Off-campus project – community solar • Off-campus project – deregulated market
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Complexity of Financing Structures
BuySolarElectricityOnly
• ThirdPartyPPA• On-campus• Off-campus
• Pre-paidPPA
• PACEhybridPPA
(3-6monthstonego@ate)
SimpleTransac.ons• 15–25yearpropertylease(rooforground)• PurchaseSRECS(solarrenewableenergycredits)(1-3monthstonego@ate)
BuySolarAssetforOpera.onsand/orInvestment
• Pre-paidPPA• PACE• Performancelease• Capitallease• Loan(6-24monthstonego@ate)
Complexity, Time Commitment & Cost to Structure
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Solar Financing Realities and Success Factors • Financialmodelsareproprietaryinthesolarindustry…nooneshares
• Validateyourinternalreturn/pricetargetsandrequirementsupfront
• Getacrediblethirdpartytoaccuratelymodelyourprojectearly.It’sworththeconsul@ngfeeastherestoftheprocesswilldemonstrate.
• BecauseofthefederalITC,mostprojectsarethirdpartyowned(90%+)andrememberthatmeansratesofreturninthe7-9%pre-tax,12–15%+post-tax
• Bereadytosharethreeyearsauditedfinancialsandyourcreditra@ngwiththesolarmarket
• Solarprojectinvestorsaredifferentfordifferentprojectshapesandsizes
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One More Solar Financing Reality
Aggregators Actual investors Developers
Financing Arrangers
• Pension funds • Banks • Large IPPs • Yield Cos…for now
• Respond to RFPs • Develop projects • Sometimes build • A few remaining
vertically integrated groups do 2 of 3 steps • Vertically integrated shops
• Hedge funds • Pure finance shops
Project Finance Process
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The Rules of Good Procurement
Knowthyself.
Beupfrontandbrutallyhonestwithyourstakeholdersandsolarindustry.
Ifyoudothis,youwillgetwhatyouwant,oratleastbeefficientwithyour>meandfindoutwhat
youcanhave.
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Best Practices for PV Procurement
• Thefurtheryourprojectisdeveloped,thelesschangeyouwillseefrombeginningprocurementtosignedcontract
• Knowyourobjec@veandoutcomespre-RFI,pre-RFQorpre-RFPupfront
• Assembleaprocurementreviewteamthatmatchesyourdevelopmentteam
• No@fyabroadenoughspectrumofthesolarindustrytogetbestresults(butnotsobroadyougetchaos)
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The further your project is developed, the less change you will see from beginning procurement to signed contract • Thisiswhereyourworkfromselfdevelopmentpaysoff
(fromSec@on2)
• Thelessdevelopedyourproject,themoreassump@onsandthemoreriskforpriceincreasesfromprocurementbeginningtosignedcontractend
• Developersclassicallystartpricinglowwithpileofassump@onsandmovepriceupasprocessgoesforwardandassump@onsarevalidated
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Know your objective and outcomes pre-RFO, pre-RFQ or pre-RFP upfront • Whatareyoutryingtoaccomplish?Knowitandwhat
procurementproductmakessenseasastar@ngpoint• RFI=requestforinforma@on…dippingyourtoeinthewater.• RFQ=determiningtherightsolardeveloperstoworkwith.• RFP=gegngtheprice,terms,condi@ons,designandrelateddealparametersright.Veryseriousaboutyourproject.
• Whatisyourreturn/pricemaximum,minimumandtarget
• Whatotherstrategicgoals,scopeandlegalrequirementsdoyouhave?Telltheindustryupfronttogetwhatyouwant
• Yourprocurementprocesswilldetermineyourreputa@onandpercep@onquicklywiththesolarindustry
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Assemble a procurement review team that matches your development team • Includeyourinternaldevelopmentteaminyour
procurementprocess–atleastasadvisorsforinput• Theyshouldnotbethefinaldecisionmakersbutdoprovidedataandrecommenda@onstothedecisionmakingteam
• Greatlearningprocessifstudentsinvolved(butyouhavetorespectconfiden@alityandprocurementprocesslimita@onshere)
• Opera@ons,financeandlegalteammembersallhavetobuy-offeventually…includingthemupfrontcancuttothechase
• Solarexper@se–internalorexternal–willensureyougetthebestpossibledeal
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Notify a broad enough spectrum of the solar industry to get best results (but not so broad you get chaos) • Doyouwant100proposalsfromallovertheplanetthat
won’tmatchwhatyouwantor10reallygoodproposalsfromtherightcompanies?
• Targetthosecompaniesthatmeetyourqualifica@onscriteriatotransactwithonly
• Usesolarmediachannelstospreadtheword…orregionalorlocalchannels…dependingonyourloca@onandneeds
• Solarindustryexpertonyourteamcanhelptoachievethis
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Thank You
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Jared Schoch Principal
Turning Point Energy 303-913-2478
[email protected] www.turningpoint-energy.com