solunesco...• irs plr: allowed market index in lieu of cost of service • hearing examiner...

SolUnesco

Project development for large-scale solar energy

•  Utility-scale solar development: real estate developer for large scale solar

•  Community Energy: positioned to develop Community Solar model in VA

•  Real estate investor: land with attractive renewable energy lease

Management Team

1

Four plus decades of – •  Utility plant

management •  Energy Project

Development •  Corporate Leadership

Delivered over 1GW of power generation projects and 15 MWs of solar generation

Leads solar policy and legislative efforts in the Mid-Atlantic and Virginia for the last five years

Delivering de-risked projects at lowest cost

VA Creating a New Market Structure?

•  180 MW installed by the end of 2016, additional 200 MW by end of 2017 •  Legislator ! 500 MWs in public interest and provided rate recovery, Dom = 400 MWs •  Current Dom IRP plans (under SEC review) for 200 to 800 MWs from 2020 – 2024 •  Dominion publically supports planning for CPP •  Utility-scale solar: 136 MW under review, PJM queue = ~2.5 GW; distribution queue = 1.4 GW? •  IRS PLR: Allowed Market Index in lieu of Cost of Service •  Hearing Examiner supports 56 MWs and the Market Index

$50.0

$70.0

$90.0

$110.0

$130.0

$150.0

$170.0

1 3 5 7 9 11 13 15 17 19

Market Price In Lieu of COS: Revenue Requirement per $1,000 CAPEX U+lity7.3IRR.NPV=$1,071.1

[email protected]%Escltr.NPV=$547.9

U+lityLevelized

3rdPartyLevelized

2

37%

CPP Provides Trading Options and Choices For the States

Rate Based Compliance Mass Based Compliance

AA

BB

CC Model Rule

DD

R2 Multi-State EE

FF

GG II

HH

R3

Multi-State

LL

JJ MM

KK

M2 Solo or Multi-State

Model Rule

Source: Sarah Jackson and Patrick Knight (September 22, 2015) Synapse Energy Economics, Tricks of the Trade: Who Can Sell Emissions Credits to Whom in the Clean Power Plan (Part 2 of 2)

3

2-3 Decades of Experience With Emission Trading

4

New source offset

Acid Rain

Program

OTC Nox Budget

Nox Budget

CAIR

CSAPR

REC-LAIM

RGGI CA AB32

Carbon Cap & Trade 1990 Clean Air Act

2010s

2000s

1990s

1980s

1970s

Lead phase

out

RFS

RPS

Source:

EPA

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Benefits of States Taking Early Action

5

•  EPA’s Clean Energy Incentive Program –  Makes Energy Rate Credits (ERCs) available to states –  Will help ensure that momentum to no-carbon energy continues and

gives a jumpstart to EPA compliance programs –  Program moving forward despite the CPP Stay

•  Investment Tax Credit – get it before it’s gone •  Existing state policies help to continue advancement of renewable energy

M.J. Bradley & Associates, LLC (978) 369 5533 / www.mjbradley.com

EPA’s CPP – CEIP The Clean Energy Incentive Program Paul J. Allen Senior Vice President September 13, 2016 S O L A R P O W E R I N T E R N AT I O N A L


Clean Energy Incentive Program

The program was established in the final Clean Power Plan to incentivize the development of renewable energy and energy efficiency projects in 2020 and 2021.

2

Established in the final Clean Power Plan (not for comment)

Voluntary Program in 2020 and 2021

Two Reserve Types: •  Renewable Energy Projects •  Low-income Projects

Available State Credits 300 million tons

EPA’s Matching Pool Size: 300 million tons

Matching Allowances: 1-to-1 for RE Projects 2-to-2 for Low-income Projects


CEIP: Program Size

3

150 150 300

187.5 187.5 375

RE Reserve Low-Income Community

Reserve Total

National Annual Average Interim Period Emission

Reductions

325

406

Allowances (tons)

ERCs (MWh)

Total Available Early Action Credits


CEIP: Potential Program Results

EPA’s Projected Increase in Renewable Energy and EE

4

40 GW

4 GW DC

39 million MWhs

Wind, Solar, Geothermal and Hydropower

Distributed Solar

Electricity Savings


CEIP: Proposed Design Details

5

Design Details Proposed in June 2016 (Available for Comment, due November 1, 2016)

Expansion of eligible RE technologies: •  Hydroelectric power •  Geothermal

Expansion of eligible low-income projects: •  Rooftop solar •  Community-based solar projects

Proposed Apportionment between Pools: 50% Renewable Energy 50% Low-Income Communities

Definition of “Low-Income” •  Existing state definition •  Existing federal definition

Definition of “Commence Construction Operation” of renewable energy projects

“to have begun to generate electricity for sale, including the sale of test generation”

Definition of “commence operation” for energy efficiency projects:

The date that the project is delivering quantifiable and verifiable electricity savings

Eligible renewable energy project start date: On or after January 1, 2020

Eligible energy efficiency project start date: On or after September 6, 2018

Treatment of wind and solar projects that receive ITC/PTC benefit:

Proposed mechanisms to reduce early action credits to wind and solar projects


CEIP: Proposed Design Details

6

Some commenters suggested that the extension of the ITC and PTC reduce the need for incentive from CEIP. EPA proposed the following mechanisms asked for comment on whether and how to limit early action credits for projects that also receive ITC or PTC credit:

•  Exclude projects that benefit from ITC or PTC credit from the CEIP

•  State could require certification on the wind or solar project’s CEIP eligibility application that it is not benefitting from the PTC or ITC

•  Apportion less than 50% of allowances to renewable energy projects to account

for ITC/PTC for those projects

•  Establish a floor on the portion of allowances/ERCs available to each technology group

•  Other state defined mechanisms?


MJB&A – EPA Clean Power Plan IPM Modeling

•  Multiple runs using ICF’s IPM model •  Scenarios included mass-based and rate-based

cases with national trading •  Assumptions included effects from ITC/PTC,

moderate gas price increases in future

7


8

Total U.S. ERC/CO2 Price

Code Assumptions 2025 2030

MB03 Existing + New, National, Current EE $0.00 $6.05

MB04 Existing + New, National, 1% EE $0.00 $2.97

MB05 Existing + New, National, 2% EE $0.00 $0.00

MB07 Existing Only, National, Current EE $0.00 $4.14

Note: This analysis does not assume banking of allowances and the CPP goals are assumed to remain constant post-2030.

Allowance Prices (2012$/ton)

Code Assumptions 2025 2030

DR01 Dual Rate, Current EE $1.26 $20.79

DR02 Dual Rate, 1% EE $0.00 $11.69

DR03 Dual Rate, 2% EE $0.00 $3.18

ERC Prices (2012$/MWh)

Note: Nationwide trading of RE, EE, Nuclear, and GS-ERCs (except California and RGGI).

Current EE Scenarios


9

Current Renewable Cost Assumptions

Note: Capital cost multipliers are used to adjust region specific capital cost assumptions. For example, the Capital Cost Regional Multiplier for Solar PV in Northern California (WEC_CALN) is 1.11. *EPA's analysis includes three different landfill gas build options with varying capital costs (LGLo, LGvLO, LGHi). The costs shown above are for the mid range LGLo.

Renewable Technologies First Year Vintage

Overnight Capital Costs in2016-2054 (2012$/kW)

Heat Rate in2016-2054 (Btu/kWh)

VOM (2012$/MWh)

FOM (2012/kW)

Biomass BFB 2018 2018-2040 4,111 13,500 5.2 103.8 Landfill Gas* 2016 2016-2040 8,554 13,648 8.5 381.7

2016 2,182 - - 7.4 2018 1,880 - - 7.4 2020 1,579 - - 7.4 2025 1,448 - - 7.4 2030 1,053 - - 7.4 2040 1,053 - - 7.4 2016 5,015 - - 42.2 2018 4,935 - - 42.2 2020 4,857 - - 42.2 2025 4,660 - - 42.2 2030 4,463 - - 42.2 2040 4,059 - - 42.2 2016 1,724 - - 46.5 2018 1,717 - - 46.5 2020 1,711 - - 46.5 2025 1,701 - - 46.5 2030 1,697 - - 46.5 2040 1,696 - - 46.5 2016 5,243 - - 101.4 2018 4,970 - - 101.4 2020 4,697 - - 101.4 2025 4,141 - - 101.4 2030 4,032 - - 101.4 2040 3,929 - - 101.4

Offshore Wind 2016

RE Potential Build Cost and Performance - EPA v5.15

Solar PV 2016

Solar Thermal 2016

Onshore Wind 2016

For the purpose of this analysis, the Solar PV costs in 2030 were reduced to $1,053/kW based on updated data from the National Renewable Energy Laboratory (NREL).

Otherwise the renewable cost assumptions are consistent with EPA’s Base Case version 5.15.


200 158 153 151

184 241 236 200

6028 28

28

191168 168

168

59 166 170 215

7 47 71

0

100

200

300

400

500

600

700

800

900

2012 2020 2025 2030

200 151 145 145

184 232 227 200

6049 49

49

191168 168

168

59 162 166 198

7 47 71

0

100

200

300

400

500

600

700

800

900

2012 2020 2025 2030

200 166 162 162

184 232 228 209

6033 33 33

191168 168 168

59 162 167 197

7 44 65

0

100

200

300

400

500

600

700

800

900

2012 2020 2025 2030

10

Western States Generation Fuel Mix: Select Scenarios

RCb [Current EE] – 2012-2030

TWh

MB04 [E+N, National, EE1] – 2012-2030

Note: RCb assumes additional energy efficiency savings beyond what is reflected in the AEO 2015 demand growth forecast. States are assumed to achieve their current (2013) annual savings rates between 2018 and 2030.

DR02 [DR, EE1] – 2012-2030

Coal Existing NGCC New NGCC O/G Steam CT Nuclear Hydro Renewables Other EE


Questions?

Thank You!

11

Clean Power Plan: The Path Forward

Rick Umoff Regulatory Counsel and Director State Affairs Solar Energy Industries Association

Overview •  EPA estimates 32% reduction in carbon emissions from

2005 levels by 2030 under CPP •  EPA projects that the CPP will drive 20+ GW of

incremental solar capacity by 2030 –  Increase in variable RE from 7.3% in 2014 to 21% by 2030

•  States choose how to meet their targets –  States can use any combination of renewables, nuclear, natural

gas, energy efficiency, demand response, etc… –  States can act separately or participate in multi‐state/regional

plans –  Implementation on hold until stay resolved

•  CPP will impact all solar markets… •  CPP implementation embraces and bolsters current

industry and policy trends driving renewables September 15, 2016 © 2014 Solar Energy Industries Association® 2

Increased Role for Solar •  Solar is Central to Final Clean Power Plan

–  CPP projected to drive 20GW of incremental utility scale solar by 2030 (before ITC extension)

–  Projections do not include DG, although DG allowed for compliance

September 15, 2016 © 2014 Solar Energy Industries Association® 3

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Proposed Final

MW

EPA Projected Solar Capacity in 2030

No CPP CPP

EIA Early AEO 2016


EIAAEO2016-Solarcapacityis20%higherintheReferencecasethanintheNoCPP caseby2030

CPP Outlook

•  Litigation –  Oral argument in DC Circuit set for September 27 –  Likely that case goes to Supreme Court in 2017

•  Rulemaking –  Clean Energy Incentive Program deadline pushed to 11/1/16 –  MTR/FP comment period closed; awaiting rules

•  Implementation –  Many organizations involved in state outreach during stay –  20 states are still planning or are reviewing the development

of their implementation plans –  California issued draft compliance plan in August –  Many states are already on track for compliance, including

CO, AK, AZ, GA, RGGI States –  46,000 MW of coal planned for retirement by 2020 due to

other Clean Air Act rules (45 plants in Southeast and Midwest)


CPP Already Driving Shift to Renewables •  AEP cut CO2 emissions by 39% from 2000 level, with plans to add

5,500 MW of wind, 3,000 MW of solar, and 3,000 MW of natural gas in the coming years

•  FirstEnergy Corp. noted in a July 2016 SEC filing a goal to reduce carbon emissions 90% below 2005 levels by 2045.

•  MidAmerican Energy has announced a goal to provide 100% renewable energy. MidAmerican’s just approved $3.6 billion project to add 2,000 MW of wind—called the “largest wind energy project in US history”—will expand wind energy to become 85% of the company’s sales.

•  Berkshire Hathaway Energy on SC Stay: “We wish that hadn’t happened…Rather than litigating, we are leading.”

•  Xcel Energy reported in a recent SEC filing that its Integrated Resource Plan for subsidiary NSP-Minnesota will “allow for a 60 percent reduction in carbon emissions from 2005 levels by 2030,” and that it “anticipated compliance with the [Clean Power Plan] while maintaining reasonable costs for customers.”


The Clean Power Plan What Solar Companies Can Do

About Standard Solar, Inc.

•  Founded in 2004 •  Headquartered in Rockville,

MD •  Leading solar developer and

EPC contractor •  Nearly 1300 PV installations

around the country •  Full service support includes

design, engineering, installation, financing and maintenance

Standard Solar was named one of the Fastest Growing Private Companies in America by Inc. magazine for four consecutive

years.

Things Solar Companies Should Know About CPP

- Regulates utilities by shifting generation to clean resources ~ Utilities will seek market/investment opportunities ~ Seek partnering opportunities with utilities ~ Be wary of utility competition - Guided by state enviro offices and then to regulatory processes ~ Usually appointed by the governor ~ Monitor this activity and get to know the players - CPP is a long-term play , but big players have already started ~ Certain states, utilities and big solar companies ~ CPP likely to be the foundation for carbon regulation ~ State and utility CPP policies must be good for solar

Things Solar Companies Can Do Now - Understand how CPP is being implemented in your state(s) ~ What processes and gov’t agencies…and engage with them ~ Engage through SEIA, regional SEIAs, local groups ~ Participate in workshops and regulatory proceedings

- Use CPP to advocate for foundational solar policy ~ CPP is the writing on the wall regarding carbon ~ Strong solar policy will result in a strong solar market ~ Will help states reduce emissions cost effectively over time ~ Emphasize existing policy tools like RPS and interconnection

Things Solar Companies Can Do Now (Cont’d) - Explore the Clean Energy Incentive Program (CEIP) ~ Support SEIA efforts working with EPA to expand CEIP ~ Support EPA proposal to include community solar and DG in

low income areas ~ CEIP could start as early as 2020

- Watch for discussions of regional compliance markets ~ CPP will likely be achieved through regional trading (RGGI) ~ Follow trend in your state(s) ~ Allowances and emission reduction credits will bring

additional value to your projects

Things Solar Companies Should Do Now (cont’d)

- Do NOT rely on an ITC extension as key to your business strategy ~ Another extension is unlikely ~ If we’re vigilant, we’ll keep the permanent 10% ITC

- Consider a solar-friendly CPP key to your long-term strategy

~ It Is!

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