timothy p. runde, mai, leed ap - appraisal institute · timothy p. runde, mai, leed ap president,...

© Timothy P. Runde 2016 7/27/2016

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Appraisal Institute – Charlotte, NC July 27, 2016

Presenter:

Timothy P. Runde, MAI, LEED AP President, Runde & Partners, Inc.

.

© Timothy P. Runde 2016

© Timothy P. Runde 2016 7/27/2016

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Importance of AI Solar Course

Solar Basics

Determining Production Capacity

Valuing Production Capacity

Reconciliation Issues

Key Terminology

Real or Personal Property?

Any Intangible Value?

Anatomy of a Solar Contract

© Timothy P. Runde 2016 7/27/2016

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System

Array

Module (Panel)

Cell

Inverter

Mounting System

Tilt

Azimuth

Derate Factor (system loss)

Degradation


kW DC vs. kWh

Net Energy Metering (NEM)

Time of Use (TOU) Pricing

Owned vs. Leased vs. PPA

Leased system vs. leased roof


© Timothy P. Runde 2016 7/27/2016

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Tangible

Affixed

Continuity of ownership

Any intangibles?


First questions to ask:

‒Owned/leased/PPA?

‒Date of installation

‒Obtain copy of contract

‒Get access to monitoring software

‒ Inverter replaced?


© Timothy P. Runde 2016 7/27/2016

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3.5 % Annual Growth Rate


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Solar Installer Inc.

Property Owner Address of Property

Address of Property

Solar Installer Inc. Solar Installer Inc.

What info is needed to determine the production capacity of a

system?

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Sun hours

Orientation of improvements/site

Physical constraints of improvements and/or site

Shading issues



© Timothy P. Runde 2016 7/27/2016

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Is it optimally oriented?

Why might a system be sub-optimally oriented?

‒Unintended (mistake)

‒ Intended

»Physical issues

»Aesthetic reasons

»Arbitrage


Solar Installation Contract

PV Watts (NREL), PV Value

Comparables


© Timothy P. Runde 2016 7/27/2016

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Solar Installer Inc.

Contract should specify


Oversized: How (why?) does this

happen?

Right-Sized

Optimally sized


© Timothy P. Runde 2016 7/27/2016

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What’s the right $/kWh + growth rate?

What discount rate to use?

What happens if the array is oversized?

What’s the effect of Net Energy Metering?

How does the ITC affect valuation?

© Timothy P. Runde 2016 7/27/2016

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Energy Information Administration (EIA)

Subject historical electrical bills

‒ Separate volumetric from fixed charges

‒Use weighted average not “spot” price

Comparable electrical bills

‒Use Same Utility Territory

‒PG&E vs SMUD: 24% lower (Why?)


Source: “The Future of Electricity Prices in California: Understanding Market Drivers and Forecasting Prices to 2040”; Jonathan Cook, Ph.D; December 2013.

© Timothy P. Runde 2016 7/27/2016

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Source: “The Future of Electricity Prices in California: Understanding Market Drivers and Forecasting Prices to 2040”; Jonathan Cook, Ph.D; December 2013.

$7.97

$2.66

67% ↓

WHY?

NEM risk

$/kWh growth rate

Extended Projection Period

Lack of Reversion


© Timothy P. Runde 2016 7/27/2016

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Tariffs are subject to change

Initial = 1:1 for reimbursement

Future = Fixed Charges, Time-of-Use, not

1:1 reimbursements


Source: DSIRE (Database of State Incentives for Renewable Energy); http://www.dsireusa.org/resources/detailed-summary-maps/

© Timothy P. Runde 2016 7/27/2016

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Source: DSIRE (Database of State Incentives for Renewable Energy); http://www.dsireusa.org/resources/detailed-summary-maps/


© Timothy P. Runde 2016 7/27/2016

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Source: Sage Renewables: “SCE Rate Changes Highlight Tariff Risks Inherent in Solar PV Projects”; March 2016.

• TOU Energy Rates (kWh) ↓22%

• Maximum Demand Rates (kW) ↑13%

Source: Sage Renewables: “SCE Rate Changes Highlight Tariff Risks Inherent in Solar PV Projects”; March 2016.

(per kWh)

© Timothy P. Runde 2016 7/27/2016

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Understand volumetric vs. fixed

$/kW costs usually include fixed costs

Tariff trend is toward fixed + volumetric

Reimburse only volumetric

Growth Rates

‒Consider new costs: RPS, cap & trade

‒Risk (+/-) to fuel cost


Use current replacement cost

Gross cost versus net cost

Deduct all forms of obsolescence

‒ Physical Deterioration

‒ Functional Obsolescence

‒ External Obsolescence


© Timothy P. Runde 2016 7/27/2016

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Source: “Photovoltaic Pricing Trends: Historical, Recent, and Near-Term Predictions 2015 Edition”; energy.gov/sunshot

AVG=$3.69/WDC AVG=$1.96/WDC AVG=$2.97/WDC

Source: “Photovoltaic Pricing Trends: Historical, Recent, and Near-Term Predictions 2015 Edition”; energy.gov/sunshot

• RANGE = $2.40 - $3.90/WDC

• Modeled vs Reported

© Timothy P. Runde 2016 7/27/2016

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Physical

Functional

‒ Sub-optimal orientation

‒ Sizing

External (Economic)

‒Rebates

‒ Federal Investment Tax Credit (ITC)



© Timothy P. Runde 2016 7/27/2016

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Risk of relying solely on the Income Approach

Role of the Cost Approach

Energy Information Administration (EIA) PV Watts PV ValueTM

NC Clean Energy Technology Center: 50 States of Solar Report

GTM/SEIA: Solar Market Insight Report DSIRE DOE Sunshot, NREL, LBNL Appraisal of Green Commercial Real Estate

(expected early 2017) © Timothy P. Runde 2016

© Timothy P. Runde 2016 7/27/2016

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Timothy P. Runde MAI, LEED AP

Runde & Partners, Inc.

(415) 265-9914

[email protected]

@TimRunde

mailto:[email protected]



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