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Mobilizing Capital to Transform

Vermont’s Energy/Economy

A Guidance Document

Prepared for

www.eanvt.org

By

Nancy Wasserman and Bob Barton

http://catalyst-‐financial.com/

October 2012

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Acknowledgements

We wish to thank a number of people and organizations whose assistance made this paper possible. EAN Board Chair Leigh Seddon spent countless hours developing and then refining the model for projecting 2030 energy. His efforts were assisted by input from Bob Griffin and his team at Green Mountain Power, Karen Glitman and, Jim Merriam from VEIC/Efficiency Vermont, Netaka White from the Vermont Sustainable Jobs Fund, and Adam Sherman from the Biomass Energy Resource Center. EAN Capital Mobilization team as well as the Finance and Funding Subcommittee of the Department of Public Service’s Thermal Efficiency Task Force provided review, comments, and input on our presentation and a number of the tables and appendices. George Twigg provided key information, while Ed Delhagen and Richard Faesy were particularly insightful in helping us convey a lot of complex information more understandably. Marianne Tyrrell was outstanding in her efforts to help us more clearly communicate our findings even as deadlines approached. She also provided expert editing. We also want to thank a number of people who provided comments on earlier drafts including Ken Perine, Janice St. Onge, and Gaye Symington. Last, but certainly not least, we want to appreciate the guidance and editorial suggestions provided by EAN’s Executive Director Andrea Colnes. She kept us on track, coordinated reviews and facilitated cooperation with other in-‐state efforts. She and Leigh Seddon both reviewed multiple drafts and provided critical feedback. This work was made possible through the generous support of the High Meadows Fund, Green Mountain Coffee Roasters, Maverick Lloyd Foundation, and Pomerleau Realty.

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Table of Contents

Acknowledgements .................................................................................................................................................................... i Table of Contents ....................................................................................................................................................................... ii Executive Summary .................................................................................................................................................................. 1 Introduction ................................................................................................................................................................................. 4 Methodology ................................................................................................................................................................................ 4 Context ........................................................................................................................................................................................... 5 Key Criteria ............................................................................................................................................................................. 5 Barriers to Adoption ........................................................................................................................................................... 6 Capital Mobilization -‐ What’s Included ....................................................................................................................... 7 It’s not Just Capital… ........................................................................................................................................................... 7

The Big Picture: Energy Needs, Costs, Gaps and Sources ........................................................................................ 8 Energy Use Assumptions ................................................................................................................................................... 8 Current Energy Use ........................................................................................................................................................... 10 Projected Change in Energy Consumption .............................................................................................................. 10 Funding and Financing Opportunities, Gaps and Costs ..................................................................................... 11

Potential Mechanisms ........................................................................................................................................................... 19 Government Policies ......................................................................................................................................................... 19 1. Government as first adopter ........................................................................................................................... 19 2. Tax levies ................................................................................................................................................................. 20 3. Tax breaks or rebates for certain types of investment ........................................................................ 21 4. Tolls and user fees ............................................................................................................................................... 22

Expanded Use of Government, Foundation and Endowment Funds ........................................................... 22 5. Green bonds ........................................................................................................................................................... 22 6. Private activity bonds ........................................................................................................................................ 23 7. Partnering with federal government on research, development and demonstration (RD&D) projects ............................................................................................................................................................. 23 8. Regional collaboration ....................................................................................................................................... 24 9. Greater use of state allocation of tax subsidy bonds (QECBs) ......................................................... 24 10. Lending/loan purchase program/secondary market ..................................................................... 25 11. Linked deposits ................................................................................................................................................ 25

Alternate Financing Structures and Products ........................................................................................................ 26 12. Alternate finance authority to provide debt, lease finance and equity (e.g., green bank, green bonds, green CDFI) ........................................................................................................................................... 26 13. Crowdfunding ................................................................................................................................................... 27 14. Auction mechanisms ..................................................................................................................................... 28

Better Promotion and Use of Existing Mechanisms ............................................................................................ 28 15. Energy-‐efficiency and energy-‐improvement mortgages ............................................................... 28 16. Energy-‐aligned leases/green leases ....................................................................................................... 29

Service Delivery Models .................................................................................................................................................. 29 17. Power Purchase Agreements (PPAs) / 3rd-‐party owner .............................................................. 29

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18. Managed Energy Service Agreements (MESA) and Efficiency Service Agreements (ESA) 30 19. Public purpose performance contracting (including aggregation) ........................................... 31 20. One-‐stop package – the Solar Tracker/Sun Commons approach .............................................. 32

Enhancements ..................................................................................................................................................................... 32 21. Efficacy insurance/ performance guarantees .................................................................................... 32 22. Repayment guarantees ................................................................................................................................. 33

Repayment Collection Mechanisms ............................................................................................................................ 33 23. On-‐bill financing (OBF) ................................................................................................................................. 33 24. Expanded Property-‐Assessed Clean Energy (PACE) districts ..................................................... 34

Local ownership .................................................................................................................................................................. 35 25. Community-‐based energy development ............................................................................................... 35 26. Cooperative ownership ................................................................................................................................ 35

Conclusions and Next Steps ................................................................................................................................................ 37 Additional Resources ............................................................................................................................................................. 41 Appendix A – Fitting Programs to Meet Market Segment ................................................................................ 42 Appendix B – Existing Sources of Financing by Projected Need .................................................................... 43 Appendix C – Existing Sources of Financing by Sponsor and Program ..................................................... 46

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EAN Guidance Document: Mobilizing Capital to Transform Vermont’s Energy/Economy

Executive Summary

The Energy Action Network (EAN) is a collaboration of over 40 leaders from Vermont’s private, non-‐profit, and public sectors with direct knowledge of and responsibility for energy planning, production, acquisition, distribution, financing, use and efficiency. In support of Vermont’s bold goal to have 90% of its energy needs met by renewables and efficiency, EAN’s goal is for Vermont to meet 80% of its 2030 energy needs through increased efficiency and renewable sources. The conversion to a renewable future does more than benefit the climate – it also offers major investment, savings, and economic development opportunities, which are estimated to be in excess of $28.7 billion between now and 2030. In order to take advantage of this opportunity, Vermont will need a comprehensive, bold, and coordinated energy strategy that includes creative financing. EAN commissioned this guidance document to help inform the discussion about the opportunities, capital requirements, and potential mobilization strategies needed for Vermont to reach this goal. Current energy use in Vermont including electrical generation and line losses is 126.27 trillion British thermal units (TBTUs).1 EAN projections designed to meet the 80% goal relied on an admittedly ambitious 36% reduction in overall energy use and a 300% increase in the use of renewable energy sources by 2030. The reductions in overall energy use were most pronounced in transportation – a 63% reduction due to substantial conversion to electric vehicles (EV) and biofuels. Other significant reductions include a 17% reduction in thermal uses and a net 12% increase in electrical energy use (after factoring in the 32% increased electrical use for transportation and geothermal heat) due to the greater efficiency of distributed renewable generation. Reaching these goals will require: (1) a substantial amount of project financing, (2) multiple new financing mechanisms, and (3) bold policy initiatives that drive behavior change and attract investment funds to Vermont.

1 Source is Energy Information Administration (EIA) Data, adjusted when more accurate VT information was available – see Table 1 for more details. Energy is lost during generation and when electricity is transmitted. As a result, there is a difference between “primary” electrical energy (total energy input to generation) and end-‐use electricity. In the Northeast, fossil/nuclear generation losses are about 65% of primary energy and “line losses” are estimated to be about 6.7%. A British thermal unit is the quantity of heat needed to raise the temperature of one pound of water one degree Fahrenheit at sea level. According to Efficiency Vermont, a Vermont home requires an average of 790 gallons of heating oil or 110,000,000 Btus (110 MMBtu) to meet its annual heating needs.

EAN Guidance Document

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In addition to the general financing that will be needed for businesses operating in these sectors, there will be an extraordinary need for project financing. Project financing is defined by Investopedia as “the financing of long-‐term infrastructure, industrial projects and public services based upon a non-‐recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cashflow generated by the project.” The focus of this guide is on the financing that will be needed to deploy known technologies and behaviors (e.g., deeper efficiency, increased distributed generation, smart grid, options to reduce vehicle miles travelled, district energy etc.) to meet EAN’s 2030 goal. Our assumptions result in a need for over $28.7 billion in financing including $14 billion for the purchase of electric vehicles; $5.9 billion to retrofit existing buildings ($3.77 billion for residential, remainder for commercial); $2 billion for utility-‐owned and in-‐state distributed solar, wind, biomass and hydroelectric generation; $1.95 billion for the purchase and installation of efficient pellet and wood burners; $1.7 billion each for small in-‐state distributed renewable energy systems and solar thermal systems; and $750 million for the purchase and installation of residential and commercial geothermal systems. While the cost of many of these needs may be offset by fuel savings and readily financed by existing players (e.g., vehicle finance companies), there is a profound need to consider and adopt new financing mechanisms. We highlight the attributes of over two dozen mechanisms including government policies, tolls and user fees, expanded use of existing funds managed by government and foundations, alternate financing structures and products, better promotion and use of existing financing mechanisms, coordinated service delivery models, enhancements and alternative approaches to both repayment collection and project ownership. We also caution policy makers and funders to recognize that it’s not just capital that is needed. To make even the best financing mechanisms effective, we must also move Vermont into a leadership position by adopting bold policy changes that entice more out-‐of-‐state and international private-‐sector investment and drive the kind of behavior change needed to reach these goals. Part of the package must address policies and regulation, program selection, and design and implementation strategies. There is also a need to recognize that different approaches are needed for each market sector – residential, small business, institutional, and industry. Our conclusions recognize that in order to meet EAN’s goal that 80% of Vermont’s 2030 energy needs be met through efficiency and renewables, we will need four conditions:

1. Vermonters will need to make significant changes in how we live, work, and play. 2. The state needs immediate, comprehensive, bold and coordinated statewide transportation

and energy strategies. 3. We will need to amass significant amounts of capital, in excess of $28.7 billion. 4. Adoption of an economic and infrastructure approach similar to strategies outlined by the

Vermont-‐based Clean Energy Group.2

2 Milford, L, R. Tyler and J. Morey, Strategies to Finance Large-‐Scale Deployment of Renewable Energy Projects: An Economic Development and Infrastructure Approach Commissioned by IEA-‐RETD, December 2011 -‐ http://www.cleanegroup.org/assets/Uploads/111205-‐FINANCE-‐RE-‐Final-‐Report.pdf.


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Overall, we have determined the state needs improvements in three broad areas in order to position itself to assemble the capital and financial expertise needed to fund future renewable energy, energy efficiency improvements, and the electrification of the transportation sector. These areas, and our related recommendations, are summarized as follows:

1. Broaden the financial resources used for funding transportation and energy projects. 2. Augment the knowledge of Vermont’s financial community regarding energy financing

needs and mechanisms. 3. Coordinate and expand policy directives.

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EAN Guidance Document: Mobilizing Capital to Transform Vermont’s Energy/Economy

Introduction

Formed in 2009, the Energy Action Network (EAN) is a collaborative of over 40 leaders from Vermont’s private, non-‐profit, and public sectors with direct knowledge of and responsibility for energy planning, production, acquisition, distribution, financing, use, and efficiency. In support of Vermont’s bold goal to have 90% of its energy needs met by renewables and efficiency, EAN’s goal is to enable Vermont to meet 80% of its 2030 energy needs through increased efficiency and renewable sources. This is an ambitious goal that will require changes in the way Vermonters live, work and play. In order to meet its goal, EAN has focused on examining four interrelated leverage points: public education, mobilization of capital, innovation and technology, and the legal and regulatory environment. As part of developing an implementation strategy for capital mobilization, the Energy Action Network commissioned Catalyst Financial Group, Inc., to prepare a guidance document to inform interested participants about the capital requirements and potential mobilization strategies needed for Vermont to reach this goal. This guide offers a compendium of information to open the discussion of how Vermont can best mobilize capital to dramatically reduce its reliance on carbon-‐based fuels. It includes:

• Projections about what changes in energy sources will be needed. • Detailed information about the types and amounts of projects that will need financing,

their capital needs, known financing gaps, and assumptions about the likely costs. • Identification of potential capital sources, financing mechanisms, and finance programs. • Options that could be successful in Vermont.

Methodology

Catalyst Financial began by assuming that, among other things, Vermont will demonstrate how known technologies and behaviors — deeper efficiency, increased distributed generation, smart grid, reduced single occupancy vehicle (SOV), district energy, etc. — can be deployed to achieve the goal of meeting 80% of Vermont’s energy needs in 2030 through renewables and increased efficiency. As a result, our focus is on the role Vermont institutions, government, and investors can play in securing capital for project development, technology transfer, and market transformation in Vermont. We deliberately did not include business financing for companies operating in this sector


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and funding for technology innovation because these are the focus of numerous economic development entities or are better suited to specialized venture funds and the federal government. Catalyst relied on both an extensive literature search and its own expertise to identify potential mechanisms that could be applied to financing renewable energy (RE) and energy efficiency (EE) projects. Concurrently, EAN’s Leigh Seddon developed a model template to project the 2030 energy scenario. The model considers all forms of fuels/energy required to meet Vermont’s electrical, thermal (including process), and transportation needs for the residential, commercial, and industrial sectors. Catalyst, EAN, and in-‐state energy industry experts were involved in defining the types and amount of changes that would be required. Catalyst, with input from numerous experts, then identified the types of capital needs and financing gaps, and made some assumptions about the probable costs. Catalyst also researched and inventoried existing sources of financing by the type of needed capital and the funding source. The results compiled here are meant to provide guidance to inform further discussion of the role Vermont and Vermonters can play in moving toward a fossil-‐free-‐energy economy.

Context

The conversion to a renewable future does more than benefit the climate – it also offers incredible opportunities for investment, savings, and economic development. Scaling building energy efficiency retrofits in the US offers a $279 billion investment opportunity that could yield savings of more than $1 trillion over the next 10 years.3 In Vermont, a comprehensive strategy to improve the energy efficiency of buildings is estimated to lower the state’s overall fuel bill by $1.6 billion over the lives of the installed measures.4 The conversion to plug-‐in hybrids and electric vehicles could reduce Vermonter’s annual transport-‐related energy costs by over $800 million.5

Key Criteria

EAN participants identified the following criteria that are necessary to successfully mobilize additional capital:

1. Financing mechanisms must meet the needs of diverse markets and sectors including residential, multi-‐family, commercial, industrial, public sector (e.g., state, county, city, and town governments), non-‐profit and institutional (e.g., universities and hospitals).

2. Programs and mechanisms must be of a sufficient scale and standardization to attract conventional equity and debt and minimize the demand on public-‐sector budgets.

3 Fulton, M., Baker, J. & Brandenburg, M., “United States Building Energy Efficiency Retrofits: Market Sizing and Financing Models,” Deutsche Bank Climate Change Advisors & the Rockefeller Foundation, March 2012, http://www.rockefellerfoundation.org/uploads/files/791d15ac-‐90e1-‐4998-‐8932-‐5379bcd654c9-‐building.pdf. 4 Affordable Heat: Whole-‐Building Efficiency Services for Vermont Families and Businesses, Regulatory Assistance Project, June 2011, http://www.raponline.org/document/download/id/4439, p. 17. 5 Sears, J. & Glitman, K., “The Vermont Transportation Energy Report 2010,” UVM Transportation Research Center, August 2011, http://www.uvm.edu/~transctr/research/trc_reports/UVM-‐TRC-‐11-‐007.pdf, p. 5.


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Participants also identified the following desirable criteria:

1. Public funds should be used to reduce risk and leverage private investment. 2. In-‐state projects that produce or save energy and meet other state-‐wide goals such as grid

stability and preserving the working landscape should be prioritized. 3. Projects that attract and engage community investment should be encouraged.

Barriers to Adoption

There are a host of well-‐known and documented reasons why efficiency and renewables are not being adopted as quickly as EAN might like. Some of the barriers are sector-‐specific while many impede adoption in all sectors. General barriers include:

• Systemic challenges o Energy pricing that does not reflect the full societal costs. o Industry bias in favor of centralized power supply. o High upfront capital costs with high degree of perceived risk regarding operating

savings. o The need to install complementary infrastructure. o An existing infrastructure that does not appear to be “broken.”

• Customer concerns o Lack of initial capital also known as the first-‐cost barrier (e.g., Can I afford this?). o Uncertainty and lack of knowledge about the best options, benefits, and the accuracy

of savings and cost estimates (e.g., Will it work? Are there emerging technologies that will be significantly better? Am I overpaying? Should I wait until prices drop?).

o Timing considerations related to losing the value of the investment such as concerns about future rebates and tax incentives or potential relocation (e.g., Will there be better incentives in the future? Will I be here long enough to recoup the benefits?).

o Project complexity (e.g., Do I have time to engage in this multi-‐step project? Who do I turn to for help?).

o Impact on cash flow and/or future ability to borrow for other needs (e.g., If I borrow for this, will I be able to borrow for something else later? Can I afford the payments on the loan?).

• Regulatory and permitting concerns. • Split incentives (i.e., where the investor is not the direct beneficiary).

Vermont-‐specific barriers include: • Lack of a market or sufficient capital pool due to the small size of many commercial, public-‐

sector, and institutional projects in the state. • Lack of in-‐state expertise/familiarity in providing equity or debt financing for energy

projects, purchase power agreements, or energy savings agreements.


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When seeking to increase efficiency and renewable energy adoption rates, it is important to be aware of these barriers, the degree they affect Vermonters, and how they can be mitigated.

Capital Mobilization -‐ What’s Included

Proponents of renewables and efficiency often seek to support their adoption through the creation of both financing mechanisms (i.e., a commercial transaction between a provider of capital and an end-‐user) and financing programs. Both financing mechanisms and programs are included in this guide. Financing programs can aggregate and drive market demand toward one or more sources of capital. Government, utilities, and development organizations often fund and operate financing programs in order to market, develop, and package efficiency or renewable investments for a specific market sector.6 Financing mechanisms typically involve a source of capital, a financial structure, various enhancements designed to reduce risk, and a collection/repayment system. Potential sources of capital include banks, leasing companies, specialty finance companies, revolving loan funds, Community Development Finance Institutions (CDFIs), government programs, utilities, public benefit charges, private investors (through the bond market, venture funds, community investments or angel or other networks including crowdfunding sites), foundations, equipment manufacturers, installers, pension funds, and the sale of environmental attributes. Financing structures include equity (public and private market investment), equity-‐like sources (grants and incentives), debt (loans, bonds, and revenue-‐share and alternative financing), leasing (tax-‐exempt and taxable), and purchasing commitments including feed-‐in tariffs and purchase power agreements. Enhancements include guarantees, payment reserves, interest rate buy downs, relaxed repayment terms, rebates, subsidizing the transaction costs, and aggregation. Repayment can be through amortized lease or loan payments, service agreements (Managed Energy Services Agreement (MESA) or Energy Services Agreement (ESA)), shared savings, and sale of energy or thermal output. All of these can be combined in a wide variety of options.

It’s not Just Capital…

Mobilizing capital is absolutely essential to meeting EAN’s goal, but it is not sufficient by itself. Equal amounts of focus need to be paid to collaborating with other states, the federal government, and international players. Collaboration is necessary to ensure the development of complementary:

• Policies and regulatory mechanisms: this includes codes and standards, binding targets, commitments to purchase, and enabling policies that provide investors and funders with the confidence to make long-‐term investments and provide sustainable support mechanisms (both financial and technical).

6 We are indebted to John MacLean of Energy Efficiency Finance Corporation who outlines this further in Energy Efficiency Finance: Best Practices and Strategies and Recommendations for Scale Up, a Global Power Best Practices Report about to be published by the Regulatory Assistance Project.


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• Program Selection and Design: this includes the establishment of revolving loan funds, PACE and/or on-‐bill financing mechanisms, linked deposits, aggregating similar projects or using performance contracting for public or other buildings. Effective program selection and design requires a rigorous assessment of existing financing mechanisms and knowledge of why they are or are not being used, an estimate of market demand (i.e., numbers of those who will participate), and decisions about fund availability and risk tolerance. For more information, see Appendix A -‐ Fitting Programs to Meet Market.

• Implementation strategies: this includes determining appropriate partners, working with existing public or private financing entities, creating community engagement, developing a network of preferred installers, working with vendors to ensure adequate supply and support, and marketing and delivery approaches that reduce customer barriers.

The Big Picture: Energy Needs, Costs, Gaps and Sources

The goal of the Energy Action Network (EAN) is to enable Vermont to meet 80% of its energy needs through renewables and increased efficiency by 2030. EAN recognized the need to model current energy use and then develop a projection of what could be achieved by 2030. EAN’s Leigh Seddon developed a detailed model template to compile 2010 and project 2030 energy uses. The model looks at energy use broken out for transport, thermal, and electric needs in the residential, commercial, and industrial sectors. 7 These findings are summarized in Table 1. We used the findings from the 2030 projection to identify the uses and likely amounts of funding that will be needed.8 Appendix B details what we know about existing sources of financing by the projected need. It cross-‐references Appendix C, which provides detailed information about a number of existing sources of financing. Neither appendix is meant to be fully conclusive; both will benefit from additional review and input. Table 2 is a compilation of the most relevant information about capital gaps and opportunities. It builds upon the assumptions and results from Table 1 by outlining the projected uses, known financing gaps, and the amounts of energy (or impact) required. Table 2 also provides an estimate of what it will cost to meet Table 1’s 2030 energy scenario.

Energy Use Assumptions

EAN began this exercise by striving to see what was required to achieve 80% renewables by 2030. Findings indicated the need for a very aggressive approach in order to meet this goal.9 Information

7 Details about the 2030-‐scenario model and assumptions will be shared at the October 2012 REV conference. 8 We originally sought to identify existing funding sources but found the complexity of trying to describe the interplay between energy uses, type of energy/fuel, consumer sector, type of financing, and funding source was too complex for a two-‐dimensional representation. 9 These aggressive assumptions were developed with input from Green Mountain Power (Bob Griffin), VEIC/Efficiency Vermont (Jim Merriam and Karen Glitman), Vermont Sustainable Jobs Fund (Netaka White), and Biomass Energy Resource Center (Adam Sherman).


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in Tables 1 and 2 are based upon the following assumptions about the expected outcomes for 2030:10

TRANSPORTATION SECTOR • Vermont’s working-‐age population will remain constant. • The number of light vehicles will fall by about 15%.11 Plug-‐in and hybrid electric vehicles

(PHEV) will represent 70% of the light vehicle fleet by 2030, which will increase electric consumption by 3.27 TBTU (910 GWH).

• Electrified rail will account for 35% of commercial (non-‐aviation) and industrial transport (2.21 TBTU).

• The remainder of the transportation fleet will increase fuel efficiency by 25%. • There will be a 25% reduction in vehicle miles traveled due to behavior change,

telecommuting, car sharing, and improved public, bike, and pedestrian transport. • Biofuels will constitute 70% of all liquid transport fuels for the remainder of the light fleet

and 50% for commercial vehicles.

THERMAL SECTOR • There will be an average of 33% reduction in energy use for all types of buildings due to

savings resulting from energy efficiency investments in 300,000 buildings.12 • Thermal energy needs will be met by increased use of solar thermal, geothermal and

biomass heat (especially pellets), and reduced use of natural gas. This scenario is based on Vermont Public Interest Research Group’s (VPIRG) Clean Heat report, with adjustments to solar thermal and biomass use suggested by experts in those fields.13

ELECTRIC SECTOR • Assumptions about electric generation are based on VPIRG’s Vermont Yankee replacement

scenario with modifications suggested by GMP energy planners and other experts.14 The EAN scenario envisions added generation (about 33%) based on new electric demand for

10 The energy use projections used 2010 as the base year. 11 “Light vehicles” is defined in federal regulations as trucks or vehicles with gross vehicle weight rating of 8,500 pounds or less. The term includes cars, SUVs, vans, and light-‐duty trucks. 12 This is 15,000 buildings per year. Although deemed “unrealistic” by at least one reader, policies, higher fuel prices, and easy financing could trigger this type of demand. In Germany, the government-‐supported KfW (Kreditanstalt für Wiederaufbau) development loan bank supported the energy efficient refurbishment or construction of 1.4 million flats and more than 600 municipal buildings from 2006-‐2009. For more information about this program, see http://sticerd.lse.ac.uk/case/_new/research/weakmarketcities/cityreformers/2010_03/3.1_thomas_kwapich.pdf. 13 See http://www.vpirg.org/resources/clean-‐heat-‐comfortable-‐homes-‐affordable-‐future/#. 14 See http://www.vpirg.org/resources/repowering-‐vermont-‐replacing-‐vermont-‐yankee-‐for-‐a-‐clean-‐energy-‐future/.


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vehicles and heat pumps. Vehicle charging is assumed to occur mainly at night, during off-‐peak hours.

• Addition to 2030 generation includes solar, wind, hydro and some use of biomass (although less than projected by VPIRG due to supply limitations).15

• In order to meet the state’s increased electrical needs and the 80% renewable goal, there will be a need to purchase renewably generated power from outside Vermont. By 2030, the amount that will need to be purchased will be approximately 2,000 GWH (in addition to existing contract with HydroQuebec).

• Continued investment in Vermont’s smart grid infrastructure beyond the on-‐going replacement of electric meters.

Current Energy Use

Information from various sources16 was analyzed to determine Vermont’s current energy use. This analysis showed the 2010 total energy use (including generation and line losses) of 126.27 trillion British thermal units (TBTU) of which only 15% was from renewable sources. Approximately 59% of the total use was for households (includes residential and all light vehicles), 26% was commercial, and 15% was industrial. Transport use was 41% of the total, thermal use was 35%, and electrical (including generation and line losses) was 24%.

Projected Change in Energy Consumption

The EAN model built upon 2010 information to develop a format for projecting a 2030 scenario. The results indicate that, using current technologies, the best-‐case scenario results in 81% of our end-‐use energy use coming from renewable energy (or 75% if generation and line losses are included). This scenario reflects a 30% reduction in overall primary energy use due to efficiency investments, electrification of the transportation sector, and the greater efficiency of distributed renewable energy generation. Reductions in primary energy use are projected to be 49% for the residential sector (includes all light-‐vehicle use), 18% for the commercial sector, and 55% for the industrial sector. The changes are as follows for each major energy sector: transportation – 63% reduction, thermal – 17% reduction, and electrical – 12% increase (after factoring in a 32% increase in electrical end-‐use energy for transportation and geothermal heat).

15 EAN scenario assumes 200 GWH small CHP and 200 GWH from new base load facility. 16 The current energy use information is based on US Energy Information Administration (EIA) Vermont data for 2009 with some modifications. The electrical needs figures are based on net retail electric sale data for 2010 (as reported by the Vermont Public Service Board), plus 6.67% average line loss and EIA figures for “primary energy” station losses. Vermont fuel sales are based on UVM Transportation Research Center data for 2010, which is lower than the EIA data.


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Table 1 -‐ Vermont's Current and Projected Energy Use17 Green shading = renewable sources Total Energy (Trillion BTU)

Fuel/end use Total 2010

Total 2030 change Key Assumptions

Building Efficiency 33% efficiency achieved; savings of 18.04 TBTU

Natural Gas 10.94 4.54 -‐6.40 Reduction primarily in commercial and industrial (C&I) use

Distillate Fuel Oil 27.30 2.23 -‐25.07 Replaced by other thermal for residential, by biofuels & electrified rail in C&I

Jet Fuel 2.90 1.09 -‐1.81 Replaced by biofuels & greater efficiency Liquified Petroleum Gas (LPG) 8.60 1.50 -‐7.10 Replaced by renewables Gasoline & Ethanol 34.02 1.46 -‐32.56 ~15% reduction in light fleet -‐ 70% electrified;

25% increase in efficiency; biofuels at 50% of C&I; 35% of non-‐aviation commercial transport is electrified rail

Other oil 2.22 0.40 -‐1.82 Nuclear 7.05 0.99 -‐6.07 GMP Seabrook contract runs through 2030 Biomass 7.46 19.77 12.31 Increased thermal (pellets and efficient

biomass) Biodiesel & Biogas 0.00 12.91 12.91 Increased use in thermal and transport Ethanol 3.78 1.68 -‐2.10 Replaced by bio-‐fuels and electrification of

fleet Solar 0.10 3.81 3.71 Approx sixty 2 MW PV plants; Increased use

for domestic hot water heating and commercial A/C (starting 2020);

VT Wind 0.04 4.03 3.99 Approx 6 plants; average size 50 MW Hydro 7.73 9.98 2.26 68 MW new small-‐scale plants, continuation

of HydroQuebec contract Out of State RE 0.00 7.03 7.03 Mostly large-‐scale wind, possibly off-‐shore;

Approx 3-‐4 100-‐200 MW plants Market Power (Natural Gas) 2.28 1.49 -‐0.79 Total End-‐Use Energy Use 114.43 72.92 % Renewable 16.7% 81.2% Generation Losses from Non-‐RE sources (65% primary energy added for fossil and nuclear)

11.84 6.62 -‐5.22 Transmission and distribution line loss in 2030 factored at 5% of end-‐use consumption

Total Energy 126.27 79.53 -‐46.74 % Renewable 15.1% 74.5% Reflects a 30.5% reduction in end-‐energy use 17 Based on EAN 2030 Scenario Workbook developed by Leigh Seddon of EAN.


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Funding and Financing Opportunities, Gaps and Costs

The 2030 EAN scenario presumes a number of needs that are detailed in Table 2. The table further outlines the types of need, known gaps and projected volumes (based on Table 1 assumptions and results), and estimates the costs that will be required to meet Table 1’s projected energy use. The costs of adopting the measures and behavior changes that will be required to meet the 2030 scenario are based on financial projections for the 2013-‐2030 period. EAN and Catalyst Financial developed these projections using assumptions corroborated by domain experts for each sector, including consultants, equipment vendors, developers, and third-‐party reports authored in the last 12-‐18 months. Major assumptions are detailed in the appropriate column in Table 2. EAN retains the underlying spreadsheets and can adjust assumptions if and when they are warranted. Our models show that the total capital required to achieve these changes exceeds $28 billion. While significant amounts of this financing will come from existing financial sources and mechanisms (e.g., vehicle financing companies, home equity lines of credit, mortgages, etc.), there will be a significant need for funding incentives, technical assistance, providing financing (including options that do not require any down-‐payment) and to subsidize low-‐income households, among others. As detailed in Table 2, the changes that require the largest sums of capital are:

• $14 billion for electric vehicles • $5.9 billion to retrofit existing buildings; • $2 billion for in-‐state larger renewable energy electric generation; • $1.95 billion for efficient biomass burners; • $1.7 billion each for small in-‐state renewable electric and solar thermal systems; • $.75 billion for the purchase and installation of residential and commercial geothermal

systems.


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Table 2 -‐ Uses, Needs and Sources of Capital

Energy Sector

What is needed to achieve 2030 scenario

Type of Capital Needs Known Gaps Amount Needed

& unit Assumptions

Total Capital Needed 18 (X 1,000)

Larger in-‐state distributed electric generation – utility and RE developer-‐owned, typically SPEED-‐eligible

VT Solar

RE systems: pre-‐development $ and TA, project-‐based financing, long-‐term contracts (feed-‐in tariff), incentives for optimum sites.

Lack of in-‐state capacity for project-‐based financing; No pre-‐development $. Business Tax Credit has expired. Difficult and expensive permitting process.

108 MW $3,600/kW (2012 $); 15% capacity factor,

2% inflation

$367,981

VT Wind 300 MW $2,300/kW (2012 $); 33% capacity, 2%

inflation

$873 ,362

VT Biomass 85 MW $3,500/kW (2012 $); 80% capacity, 2%

inflation

$363,854

VT Hydro 68 MW $4,600/kW (2012 $); 40% capacity, 2%

inflation

$409,693

VT Small Renewables (includes net metering)

432 MW $4,320/kW (2012 $); 16% capacity, 2%

inflation

$1,761,810

Smart grid infrastructure – T&D

Infrastructure at T&D level Estimate from GMP – based on use of

public, standards-‐based networks

$250,000

18 Nominal dollars for the period from 2013-‐2020.


14

Energy Sector



& unit Assumptions


Smart grid infrastructure – end users

Funding for end user interfaces

Estimate from GMP – to support

distributed IT-‐based smart grid ecosystem

$300,000

New zero-‐emission commercial construction

New commercial space – incentives needed for added cost of exceeding building codes

Lack of knowledge in financing community

Continue at current Efficiency Vermont annual budget level

of $3.02 million

$64,665

New zero-‐emission residential construction

New Homes – incentives needed for added cost of exceeding building codes

Lack of knowledge in financing community


of $3.02 million

$44,538

Retrofit existing residential buildings

Incentives and financing: grants for lowest-‐income, first $s for moderate income, financing and TA for all. Financing for marketing and capacity building for businesses entering and operating in this sector

All funds are limited and much is restricted to electrical, while the need is for thermal! Existing financing terms are often not long enough to allow consumers to repay investment with the energy savings (i.e. cash flow positive)

250,000 Homes 30% of homes to 25% savings at 2012 cost of $10,038; 50%

to 40% savings at 2012 cost of $18,786; 30% to 60% savings

at 2012 cost of $27,534; 2% inflation

$3,776,356

Retrofit existing commercial buildings and processes – all sectors

Incentives and financing. Need to retrofit 50,000 buildings

All funds are limited and much is restricted to electrical

50,000 Buildings 30% to 25% savings at 2012 cost of

$27,942; 50% to 40% savings at 2012 cost of $52,293; 30% to 60% savings at 2012 cost of $76,645; 2%

inflation

$2,102,403


15

Energy Sector



& unit Assumptions


Retrofit existing buildings – efficient products

Incentives for more efficient HVAC, lighting , appliances, processes

Stricter codes limit availability of $s


of $6.12 million

$131,043

District energy infrastructure

Development of district energy systems and conversion

Pre-‐development $, lack of existing governance infrastructure, lack of project-‐based financing capacity, lack of experience with project execution also impedes capital investment

10 New systems including Montpelier

40 MMBtu output, cost per facility is

$20 million

$231,336

District energy infrastructure – end user connections

Incentives to encourage connection, financing for costs

No existing sources focused on this need

TBD

Solar thermal Incentives, TA & financing Minimal existing sources

focused on this need 3.18 TBTU by

2030 24,850 MMTBU add

in 2013, grows 20%/year; cost is $800/sq. meter

$1,757,187

Geothermal Incentives, TA & financing No existing sources focused

on this need 2.6

residential; 2

commercial

TBTU by 2030

2012 Cost/residence = $12,500;

commercial = $37,500

$723,138

Efficient wood burning – distributed

Financing for pellet manufacturing facilities


8 new 75K ton/year

$12 million/facility $109,878


Financing for pellet delivery infrastructure



Incentives, TA & financing for purchase of efficient pellet and wood burners

100,000 Residential heating devices

Add 800 in 2013, grows 20%/year;

cost is $2,500/residence

$326,129


16

Energy Sector



& unit Assumptions




12,500 Commercial facilities – average. 30K sq ft

Add 100 in 2013, grows 20%/year; cost is $100K/30K

sq. ft of space

$1,630,647

Biofuels production In-‐state biofuel production facilities – oil seed

Funding is limited and currently very small-‐scale

40 100,000 gal/yr facilities

Cost of $57,000/farm $2,280

Biofuels production In-‐state biofuel production facilities – algae production

Funding is limited and currently very small-‐scale

Produce 500,000 gallons starting in

2020, grow 24%/year, cost of $1/gallon output

$20,119

Biofuels infrastructure

Incentives and financing to convert infrastructure to handle cold-‐weather issues – aviation, transport & heating fuel


TBD

Vehicle Miles Traveled (VMT) reduced by 20% – improved Public transit

Funding for equipment and operating expenses. Incentives to get consumers to switch

Limited funding, match formula (20% local) is challenging in Vermont

New Northwest facility; Increase

current state funding by $500,000/year

$11,506


17

Energy Sector



& unit Assumptions


VMT reduced by 20% – education re: car sharing, telecommuting, carpools, etc.

Funding for incentives, TA and education campaigns as well as infrastructure to implement

Limited existing infrastructure to provide TA, coordinate riders and implement

TBD

Pedestrian/Bike way infrastructure

Funding and financing for construction and maintenance of pedestrian and bike paths

Limited funding; match formula can be challenging in Vermont

Fund all Vermont projects in pipeline19

$100,000

(with

impact on electric)

Electric vehicle (EV) purchases

Incentives for incremental cost of electric vehicles & home-‐based charger; financing


278,400 Vehicles by 2030

Grow EV % of new vehicle purchases

(32k/yr) from 2% in 2013 to 25% by

2018, 50% by 2022 then increase at

5%/year; incremental cost is $10,000 in 2013, drops 1,000/year

$306,254

Total cost = $14 billion

(with

impact on electric)

Electric vehicle purchases

Incentives, TA & financing for incremental cost of conversion of combustion vehicles


56,800 Vehicles by 2030

Start in 2016 with 5/100% of existing vehicles; # doubles each year to 2019,

then 7/10% in 2020 and 1% per year

thereafter. Cost is $10K; incentive value is $5K in 2013, drops

$500/year.

$75,922

Total cost = $716

million

19 Per Jon Kaplan, Bike & Pedestrian Program Mgr at VTrans.


18

Energy Sector



& unit Assumptions


(with

impact on electric)

Vehicle-‐to-‐grid infrastructure

Incentives and financing for Level 3 electric recharging stations


30 Sites by 2030

5 sites by 2017. Initial cost of $50K each, price drops

2%/year

$1,494

(with

impact on electric)




450 Sites by 2030

Need 1 for every 750 EV. Initial cost of $18K each, price drops 3%/year

$14,600

TOTAL > $28.7 billion


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Potential Mechanisms

The funding and financing mechanisms detailed below are those that have potential for Vermont. Mechanisms that are already in place (e.g., net metering, SPEED, banks) are NOT described unless there are significant expansion opportunities. The potential tools are described within the following broad categories:

• Government policies • Expanded use of government, foundation and endowment funds • Alternate financing structures and products • Better promotion and use of existing mechanisms • Service delivery models • Enhancements • Repayment collection mechanisms • Local ownership

Each mechanism is named and described. Following the description, there is information about potential sources of capital, the likely target market, potential uses, the advantages and challenges of each mechanism, and links to potential examples and additional information.

Government Policies

1. Government as first adopter

Description As a large consumer and visible consumer of energy, government sets an example in procuring, purchasing and demonstrating the use of renewables, enabling and entering into energy services performance contracts, adopting energy savings or renewable targets for all state-‐owned buildings, and requiring efficient fleets. Government can also play a role in aggregating purchases.

Sources of Capital

General obligation bonds; revenue bonds; debt, tax credit bonds like Qualified Energy Conservation Bonds (QECBs), Qualified School Construction Bonds; tax-‐exempt leases; private sector when using third-‐party ownership – like solar, wind, landfill gas PPA’s.

Target Market MUSH (municipalities, universities, schools and hospitals). Potential Use Most advantageous when savings offsets the cost. Possibilities include electrifying the

state fleet; reducing energy consumption in all existing buildings; requiring net-‐zero in all new construction; anchor customer for district energy systems; distributed renewables.

Advantages Can facilitate the deployment of new commercial and industrial technologies including distributed renewables, use of district energy and fleet conversion.

Challenges Policies need to be adopted and funds committed for these purposes. Uses must compete with all other government capital needs or increase the cost of government and taxes.


20

Examples & Links

The US Federal Energy Management Program specifies energy-‐efficient procurement.20

California has an Executive Order requiring state agencies and departments to reduce their energy consumption by 20% from 2003 levels by 2015.21 The Order mandates that Energy Star equipment be used whenever it is cost-‐effective, all new building and major renovations meet LEED-‐NC Silver or higher, all existing state buildings over 50,000 square feet meet LEED-‐EB standards no later than 2015, and leases for state offices be restricted to Energy-‐Star-‐rated buildings.

New Mexico‘s State Finance Authority has issued revenue bonds to fund retrofits in schools and at state agencies. Ninety percent of the savings must be used to pay off the bond principal and interest until it is repaid.

Washington State has engaged in over $200 million in performance contracts for state buildings and public schools via state-‐run, performance-‐contract, fee-‐based consulting services (see #20 below).

Hawaii has purchased eight electric vehicles for its state fleet and installed five charging stations at state-‐owned buildings.

2. Tax levies

Description The adoption of a tax to support efficiency or renewables. Can be placed on consumption or emissions.

Sources of Capital

Taxpayers.

Target Market Infrastructure development. Potential Use Funding increased weatherization and all types of needed infrastructure development.

Advantages Can be tied directly to the end use. Application can be based on consumption, building size, fuel economy, miles driven or purchase of inefficient products.

Challenges Can usually be rescinded or redirected by legislative action. Can often be regressive since those least able to pay are often the last adopters.

Examples Vermont charges a .5% gross receipts tax on all non-‐transportation fuels sold in the state and directs the money to the State’s Weatherization Trust Fund, which supplements federal weatherization funds and is used to retrofit homes occupied by eligible low-‐income households.

Vermont’s tax on wind and nuclear generation are also examples of tax levies. Seattle charges a commercial parking tax to fund more efficient transportation

infrastructure. British Columbia has a carbon tax that applies to fossil fuels used for transportation in

industry and to create heat for households. The tax rate was initially $10/ton of GHG emissions. It is set to increase by $5/ton annually until 2012 when it will be $30/ton. The tax is revenue neutral, with 100% of revenues from the tax being returned to citizens through tax reductions and tax credits.22

20 See http://www1.eere.energy.gov/femp/technologies/eep_resources.html. 21 EO S-‐20-‐04, which is available at http://www.dot.ca.gov/hq/energy/ExecOrderS-‐20-‐04.htm. 22 See http://www.fin.gov.bc.ca/tbs/tp/climate/A4.htm.


21

3. Tax breaks or rebates for certain types of investment

Description Allowing special tax treatment or an exemption or substantial reduction on the taxes that would have otherwise been owed. Variations include sales tax reductions on the purchase and installation of clean energy products or services, property tax abatements on the design and construction of energy efficient buildings, credits or exemptions for clean energy investments, and alternate tax treatment such as accelerated depreciation schedules for these investments.

Sources of Capital

Foregone government revenues.

Target Market All tax-‐owing taxpayers – can be households and commercial. Potential Use Can encourage adoption of energy retrofits, purchase of efficient products (vehicles

and wood burners). Can also be used to encourage business investment in infrastructure, especially conversions made before the end of an existing asset’s useful life.

Advantages Easy to administer. Useful where end-‐use customers have been reluctant to make the investment.

Challenges Most useful in a healthy economy. Need to ensure a quality-‐assurance mechanism. Program duration periods are often limited making it hard to plan on their availability for projects with lengthy pre-‐development requirements. Government can decide to change the program with little notice, particularly if the programs become oversubscribed.

Examples Vermont provides a sales tax exemption for: renewable energy systems up to 250 kW, micro combined heat and power (CHP) systems up to 20 kW, and solar hot water systems.23 Vermont also allows municipalities to offer an exemption from municipal property taxes for renewable energy systems.24

Hawaii offers rebates of up to 20% of the cost of an electric vehicle purchase (up to $4,500/vehicle) and up to 30% (up to $500) of the cost and installation of a charging station.25 The state also offers tax credits for photo voltaic (PV) systems, the maximum allowable credits are:26 single family residential -‐ 35% of the actual cost or $5,000, whichever is less (reduced if also used for required solar water heating in new residential construction); multi-‐family residential property -‐ 35% of the actual cost or $350 per unit, whichever is less; and commercial property is eligible for a credit of 35% of the actual cost or $500,000, whichever is less.

The US Production Tax Credit (PTC) and Investment Tax Credit (ITC) result in very attractive returns for investors in eligible renewables. Vermont provides a tax credit equal to 24% of the ITC for eligible businesses, which is effectively a 7.2% tax credit on eligible solar, fuel cells and small wind.

The US currently offers a tax credit of $7,500 for purchase of an electric vehicle.27 New Jersey exempts renewable energy systems used to meet on-‐site electricity,

heating, cooling, or general energy needs from local property taxes.28 23 32 V.S.A. § 9741(46) -‐ http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=32&Chapter=233&Section=09741. 24 32 V.S.A. § 3845 -‐ http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=32&Chapter=125&Section=03845. 25 See http://energy.hawaii.gov/programs/transportation-‐on-‐the-‐move/ev-‐ready-‐program. 26 See http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=HI01F&re=1&ee=1. 27 See http://www.fueleconomy.gov/feg/taxevb.shtml. The credit begins to phase out after the manufacturer produces 200,000 eligible vehicles.


22

4. Tolls and user fees

Description Charging the end users for the right to make use of a product or service. This can include road access, rider fees, franchise fees, system benefit charges, vehicle registration surcharge, licensing fees, parking site tax, commuter taxes, and the assessment of fees for providing energy efficiency services.

Sources of Capital

End users.

Target Market All users. Potential Use Vermont already uses a system benefit charge to fund Efficiency Vermont. Could add

a use fee to vehicle registration, parking, or road access with proceeds used to support public transit, bicycle, and pedestrian infrastructure.

Advantages Incentive to reduce vehicle use and single-‐occupancy vehicles. Can be applied to both commercial and private vehicles. Can also be assessed on tourists.

Challenges Generally disliked by business, particularly those in downtown core. May conflict with local zoning requirements. Vehicle registration and parking fees are not directly related to vehicle miles.

Examples & Links

Seattle has used a vehicle licensing fee to pay for transit investments. Vancouver uses a parking tax to fund transportation infrastructure.

Expanded Use of Government, Foundation and Endowment Funds

5. Green bonds

Description Issuing state general obligation or revenue bonds to finance renewable energy infrastructure.

Sources of Capital

Private investors interested in tax-‐exempt and taxable offerings.

Target Market Government and MUSH. Potential Use Infrastructure investments; retrofits and distributed generation on all government,

institutional, and non-‐profit properties. Advantages Familiar mechanism that is readily purchased and traded in the capital markets. Challenges Can be limited by government’s willingness to incur debt. Examples & Links

California is financing the first phase of its high-‐speed rail project through the issuance of state bonds.

Oregon’s SELP Program has issued general obligation bonds totaling over $766 million and funded almost $600 million with taxable and exempt bonds since 1981.29

Delaware SEU: $70 million offering combining Recovery Act (ARRA) and Regional Greenhouse Gas Initiative (RGGI) funds to enhance bond offering for public entities.

28 N.J. STAT. § 54:4-‐3.113a et seq. http://www.dsireusa.org/documents/Incentives/NJ25F.htm. 29 Oregon Secretary of State’s 2012 Audit report on the Program, p. 15, which is available at http://www.oregon.gov/energy/LOANS/docs/Audit_Report_2012-‐SOS.pdf and http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=OR04F&re=1&ee=1.


23

6. Private activity bonds

Description Up to 10% of a state’s tax-‐exempt bonding can be used for specific qualified “private activities,” including: clean energy projects, mass commuting facilities owned by the government, local district energy facilities, and facilities for the local provision of electric energy. Bonds not subject to the cap can also be used for qualified green building and sustainable design projects. These are typically structured as revenue bonds. VSAC’s recent downsizing has led to a dramatic reduction (>$100 million) in the state’s use of private activity bonds. Vermont currently has significant excess capacity to issue these bonds. Unused volume capacity can only be carried forward for 3 years. If not used in 3 years, the allocation will be lost.

Sources of Capital

Private investors interested in tax-‐exempt offerings.

Target Market Commercial and industrial. Potential Use Distributed generation, utility-‐scale generation, and district energy systems. Advantages Familiar mechanism that is readily purchased and traded in the capital markets. Challenges Can be limited by government’s willingness to issue private-‐activity bonds; application

process can be expensive and time consuming; many IRS reporting and compliance requirements.

Examples & Links

Illinois Finance Authority has the authority to issue industrial revenue bonds (IRBs) to finance clean energy including new construction.

7. Partnering with federal government on research, development and demonstration (RD&D) projects

Description Encouraging partnerships between private industry and government to co-‐fund promising RD&D. Applying for and obtaining competitive federal grants to support clean energy RD&D.

Sources of Capital

Federal budget.

Target Market All – especially business, agriculture, academic, and community development projects.

Potential Use Support the development of algae-‐based biofuels; encourage the development and deployment of new and promising technologies.

Advantages Can be significant source of funding. Challenges Need the ability to translate concepts into reality. Securing competitive federal grants

requires dedicated and skilled pursuit of all applicable opportunities. Vermont often does not have the capacity to monitor and pursue these opportunities.

Examples THE UK Carbon Trust Offshore Wind Accelerator combines public and industry financing to conduct research on topics related to reducing the cost of offshore wind energy.

The Vermont Sustainable Jobs Fund has received over $3 million in USA DOE funding over the last five years to support the Vermont Biofuels Initiative for bioenergy research, development, and demonstration projects.

Montpelier was awarded a highly competitive DOE grant of $8 million.


24

8. Regional collaboration

Description Cross-‐jurisdiction alliances to promote incentives, attract additional investment and build large enough financial offerings.

Sources of Capital

Private investors interested in tax-‐exempt offerings.

Target Market Governments. Potential Use Infrastructure investments, cross-‐jurisdiction energy and public transit systems,

electric charging infrastructure, wood pellet infrastructure, market development for renewables.

Advantages Attracting and leveraging more from conventional capital markets due to improved size of offering and reduced risk due to more diverse portfolio. Allows for certain economies of scale and reduced administrative costs.

Challenges Navigating the goals and requirements associated with multiple jurisdictions. Examples & Links

Illinois Finance Authority has the authority to issue industrial revenue bonds (IRBs) to finance clean energy including new construction.

9. Greater use of state allocation of tax subsidy bonds (QECBs)

Description Under ARRA, the federal government authorized a number of tax subsidy bonds to support clean energy and its infrastructure. Each state has a specific allocation of the amount of these bonds it can issue. The federal government makes a cash payment to the state issuing agency to offset a significant portion of the interest (up to 70%). This reduces borrowing costs for the state while ensuring competitive rates for the bondholders. QECBs can be issued by government bodies to support renewable energy and energy efficiency projects including public transit energy reduction programs. They do not expire. Vermont’s QECB allocation of $6.4 million has not yet been allocated.

Sources of Capital

Private investors.

Target Market Governments and limited private sector (e.g., 30% of QECB allocation can be to the private sector while 100% can go to the private sector for “green community programs”30).

Potential Use Funding loan funds; supporting PACE programs or transit infrastructure. Advantages Lower-‐cost funding than would otherwise be available. Challenges Limited market that understands and is willing to invest in tax-‐subsidy bonds. Examples & Links

DOE page on QECBs -‐ http://www1.eere.energy.gov/wip/solutioncenter/financialproducts/qecb.html and primer on CREBs and QECBs -‐ http://www1.eere.energy.gov/wip/pdfs/qecb_creb_primer.pdf.

Boulder’s ClimateSmart Loan Program and St. Louis County, MO’s SAVES residential retrofit program both used a QECB issuance to seed their lending programs.

LBL report on aggregating QECBs to support private-‐sector investment, including a Massachusetts Case Study -‐

30 See http://www.irs.gov/pub/irs-‐drop/n-‐12-‐44.pdf.


25

tp://www.benchmarkemail.com/c/l?u=15C8AD5&e=1D9494&c=1B929&t=0&l=14094AD&email=BhwqPjIICPU3uzfvVKSvmbxytUmDUSH6.

10. Lending/loan purchase program/secondary market

Description The State treasury or other sources of capital agree to purchase bundles of loans that meet certain criteria after origination by a private lender.

Sources of Capital

State treasuries, foundations, finance agencies.

Target Market Residential, small business and agricultural (i.e., typical consumer lending markets). Potential Use Funding revolving loan funds, supporting PACE programs, capital for on-‐bill financing. Advantages Can demonstrate viability of a specific market if lending institutions are reluctant to

pursue it. Can be used to finance owner needs (e.g., retrofits; purchase and installation of distributed generation, solar thermal, geothermal or efficient wood burning equipment; accessing district energy systems; and purchase of electric vehicles. Less administrative burden than having government operate a revolving loan fund.

Challenges Must find sufficient capital to induce the banks to make loans. May earn lower rates of return than other investment options. Minimal leveraging value.

Examples Pennsylvania’s Keystone Home Energy Loan Program (HELP) administered by AFC First Financial has made over 10,000 energy efficiency loans to homeowners totaling over $63,000,000 since 2006.31 Loans are underwritten, processed, aggregated and sold to the Pennsylvania Treasury but serviced by AFC First. The treasury made an initial commitment of $20 million, in 2006, and has invested almost $45 million to support the program.32 Returns have been approximately 5%. The program has been expanded to allow for larger secured loans, which can be used for retrofits or renewables. The program is now trying to sell these loan portfolios on the secondary market.

Oregon SELP program provides low-‐interest loans for projects that save energy, produce renewable energy, use alternative fuels or recycled materials to create products.33 The program has secured over $700 million in bonds for energy improvements for residential and commercial sector. Loan repayments cover the state’s cost for borrowing and administration of the program.

11. Linked deposits

Description Pools of state, municipal, or other funds are deposited with a financial institution at lower rates and used to leverage greater or more flexible lending.

Sources of Capital

State treasuries and foundations for linked deposit; banks and other lenders for loan capital.

Target Market Residential, small business and agricultural (i.e., typical consumer lending markets). Potential Use To encourage existing financial institutions to lend for RE & EE projects.

31 See http://www.patreasury.gov/keystoneHelp.html. 32 State Clean Energy Financing Guidebook, NGA Center for Best Practices, January 2011, p. 21. 33 See http://www.oregon.gov/ENERGY/loans/selphm.shtml.


26

Advantages Can be used to finance owner needs (e.g., retrofits; purchase and installation of distributed generation, solar thermal, geothermal or efficient wood burning equipment; accessing district energy systems; and purchase of electric vehicles). Less administrative burden than having government operate a revolving loan fund.

Challenges May earn lower rates of return than other investment options. Need to find lenders who are interested in this approach. Current low interest rates makes this option questionable or of minimal value for leveraging.

Examples The Vermont State Treasurer partnered with TD Bank to provide retrofit loans for homeowners.

Alternate Financing Structures and Products

12. Alternate finance authority to provide debt, lease finance and equity (e.g., green bank, green bonds, green CDFI)

Description Government-‐sponsored development financing entity designed to encourage private-‐sector investments in energy efficiency measures. Options include independent entities and those designed to stimulate conventional investment and lending by local banking and finance institutions.

Sources of Capital

Government funds; tax-‐exempt and taxable bonds; private investors.

Target Market All. Potential Use Most useful where there is a lack of existing financing capacity or a reluctance to

provide funds for clean energy projects due to lack of expertise, perceived risk, or lack of capital.

Advantages Public–private partnership; likely to attain lots of positive PR; provides potential one-‐stop shop for information resources.

Challenges Can be expensive to establish and maintain. Need to tread carefully if there is already a strong financing infrastructure.

Examples & Links

Germany’s federally-‐owned KfW development bank operates Europe’s largest financing program for energy efficiency. Homeowners can borrow up to €75,000 (US $100,000) per unit for comprehensive measures and up to €50,000 (US $67,755) per unit for individual measures including replacement of heating systems and windows, thermal insulation of the exterior walls of buildings. Terms include low and fixed-‐rate interest, long terms, 100% financing and no commitment fee. Loans are promoted nationwide by KfW and are originated through applications at local banks. In 2009, KfW committed €8.9 billion (US $12.4 billion) in loans for residential energy efficiency construction and retrofits.34

Connecticut created the Clean Energy Finance and Investment Authority (CEFIA), a quasi-‐public green bank designed to combine public funding and private sector capital to support clean energy projects.35 It receives at least $30 million annually from a system benefit charge of .1¢/kWh, RGGI proceeds, private capital, and special obligation bonds. Its mission is “to support the Governor’s and legislature’s strategies to achieve cleaner, cheaper, and more reliable sources energy through

34 See http://www.kfw.de/kfw/en/Domestic_Promotion/Our_offers/Housing.jsp. 35 See http://www.ctcleanenergy.com/CEFIA_2_Page_Brochure.pdf.


27

clean energy finance.” CEFIA provides both grants and creative financing (non-‐recourse loans and unsecured loans) to support the development and demonstration of clean energy technology, as well as incentives, loans, and loan guarantees for clean energy projects.36

The government of the UK announced the creation of a Green Investment Bank, which has since been incorporated as a public company. As of mid-‐September 2012, Parliament still needed to sanction the bank’s activities and formally approve state aid to the company. Beginning in April 2012, the UK Government made £775 million ($1.26 billion) available for investing in green infrastructure.37

13. Crowdfunding

Description Crowdfunding makes use of the internet and social media to attract relatively small investments from many investors. The recently-‐approved US JOBS Act permits and defines parameters for crowdfunding of “emerging growth companies” (EGCs), which is defined as those with less than $10 million in assets, $1 billion in sales, and less than 2000 investors. This dramatically changes the way EGCs can raise capital. Key changes resulting from the bill, which is currently subject to a 90-‐day SEC review, include: permitting companies to use the internet, advertising, and publicity to solicit equity; allowing crowdfunding without SEC registration for amounts up to $1 million ($2 million if audited financials are provided); and defining annual permissible individual investments through crowdfunding. Investors with annual income or net worth under $100,000 will be able to invest up to $2,000 or 5% of their annual income or net worth, whichever is greater. Investors with annual income over $100,000 or net worth over $1,000,000 will be able to invest up to 10% of their annual income or net worth, up to a maximum of $100,000.

Sources of Capital

Individual investors including those that are not accredited.

Target Market All. Potential Use To provide financing for utility-‐scale and distributed generation projects, clean energy

manufacturers, and new clean energy delivery models. Advantages Allows unaccredited investors to support increased use of renewables and provide

them with equity returns. Challenges Crowdfunding sites will be subject to more rigorous requirements. It is a new concept,

so there may be initial resistance and/or transaction-‐related costs. Still awaiting final SEC guidance on how crowdfunding may proceed.

Examples & Links

In the UK, Energy Share is providing matching funding and a platform, peoplefund.it, to encourage crowdfunding of solar and wind projects -‐ http://www.energyshare.com/community-‐fund/.

Solar Mosaic – http://solarmosaic.com/ – appears to be using a similar model in California, with plans to expand.

36 CEFIA Comprehensive Plan FY 2013-‐2015, which is available at www.ctcleanenergy.com/Portals/0/FY13%20Comprehensive%20Plan.pdf. 37 See http://www.bis.gov.uk/policies/business-‐sectors/green-‐economy/gib/faq#1.


28

14. Auction mechanisms

Description Auction-‐based mechanisms that value specific energy attributes including efficiency, use of new technologies, percentage of renewables, and other environmental or societal attributes.

Sources of Capital

Utilities, regional transmission organizations, and system operators.

Target Market Utility-‐scale projects; distributed generation. Potential Use Utility-‐scale renewables, smart grid infrastructure, efficiency programs. Advantages Provides supply-‐side generators and operators of efficiency programs with a revenue

stream for future resources. Does not require government funding. Challenges Complex transactions. Requires a sophisticated evaluation, measurement, and

verification. Examples ISO New England’s (ISO-‐NE) annual capacity auction seeks to procure all of the

projected needed capacity for three years into the future. ISO-‐NE allows new and existing resources from “qualified” supply and demand-‐side providers to compete on an equal basis.38 Procurements for the 2014-‐2015 market included 33.2 GW of supply, including 3,468 MW of demand-‐side resources, of which 263 MW were for new demand-‐side resources. New capacity can set the market-‐clearing price and obtain a price commitment of up to five years. The floor price was US $3.21 per kW-‐month.39

Better Promotion and Use of Existing Mechanisms

15. Energy-‐efficiency and energy-‐improvement mortgages

Description Mortgages that consider energy savings as “income” in calculating the debt-‐to-‐income ratio. As a result, buyers can borrow a higher amount to cover the costs of a highly energy-‐efficient home or the additional funds needed to implement energy retrofit improvements at the time of purchase. These typically require a third-‐party home-‐energy rating.40

Sources of Capital

Banks, FHA, VA, Freddie Mac, Fannie Mae.

Target Market Residential homebuyers and small businesses. Potential Use To encourage the purchase of energy efficient properties and the adoption of retrofits

at the time of purchase. Jurisdictions with energy use disclosure policies can help push lenders to adopt and buyers to use this mechanism.

Advantages Can be delivered by the existing financing infrastructure. Allows improvements to be financed over the 15-‐ to 30-‐year term of mortgages rather than 5-‐ to 10-‐year term typical of home-‐improvement loans.

Challenges Homebuyers are often cash and time-‐constrained at the time of purchase, making it difficult to accommodate efficiency improvements. These offerings are most successful when coordinated with independent home energy ratings, a qualified

38 See http://www.iso-‐ne.com/markets/othrmkts_data/fcm/index.html. 39 See http://www.marketwatch.com/story/new-‐england-‐procures-‐the-‐power-‐system-‐resources-‐needed-‐for-‐2014-‐2015-‐2011-‐06-‐27. 40 The most established residential rating system in the US is HERS. For more info see http://www.resnet.us/professional/rater/what-‐is-‐a-‐hers.


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contractor network, and contractor management support. Lenders are often unaware of these options and may be reluctant to complete the necessary paperwork.

Examples & Links41

VEIC operated Energy-‐Rated Homes of Vermont for a number of years but suspended the program when they received the first EVT contract.

Rating systems (HERS and CHEERS) and utilities with energy savings obligations have been strong advocates of these options, but there does not appear to be a sustained program.

16. Energy-‐aligned leases/green leases

Description Commercial leases that align building owners and tenants to achieve the goal of energy (as well as water and waste) reduction. The leases typically specify how benefits and costs of energy improvements will be shared. They also provide disclosure about the efficiency of the main engineering plant (e.g., HVAC, plumbing, lighting, etc.), water conservation, waste reduction and other environmental standards. There are often provisions detailing hours of operation, use of Energy Star equipment and separate metering, benchmarking energy and water use, procuring renewable energy, sharing costs allocations (owner may secure initial capital but costs are itemized and recovered in lease payments).

Sources of Capital

Can be accomplished using existing capital markets.

Target Market Typically tenants of commercial buildings; could be applied to residential. Potential Use The State and other major users of leased space could require all leases to be energy-‐

aligned. Advantages Effectively addresses the split incentive barrier. Challenges Owners still need the first cost capital required for investing in RE or retrofit. Examples & Links42

The online Green Lease Library provides a one-‐stop shop of green-‐leasing resources including case studies and toolkits, available at http://www.greenleaselibrary.com/index.html.

New York City has developed model language for an energy-‐aligned lease clause, which creates a pass-‐through structure within gross commercial leases, available at http://www.nyc.gov/html/gbee/html/initiatives/clause.shtml.

The California Sustainability Alliance has produced a Green Lease Toolkit, available at http://sustainca.org/green_leases_toolkit.

Service Delivery Models

17. Power Purchase Agreements (PPAs) / 3rd-‐party owner

Description Third party or installer obtains, installs, and operates a renewable energy system on or in a host site. Host generally commits to purchase all of the energy produced for a long period of time (10-‐25 years).

Sources of Capital

Private equity markets and tax-‐equity investors for equity; banks and other lenders for debt.

41 RESNET -‐ http://www.resnet.us/energy-‐mortgage and http://www.mortgageloan.com/environment/. 42 Toolkit -‐ http://sustainca.org/green_leases_toolkit.


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Target Market Optimum solar, wind, biomass or geothermal sites; participants in district energy system. Can be residential or commercial or MUSH projects.

Potential Use To encourage installation of distributed renewables on optimum sites especially in cases when the owner is unable or unwilling to invest in the installation.

Advantages Investor has guaranteed power purchaser; host site has predictable electric rates and can support renewables without incurring upfront cost or operating and maintenance obligations.

Challenges Requires negotiations for each site, which can be complex and increase transaction costs and complexity.

Examples Boston Community Capital (a CDFI) operates Solar Energy Advantage as a 3rd-‐party owner of solar PV on affordable housing developments and other facilities in low-‐income communities.

Maryland Generating Clean Horizons program has led to long-‐term purchase power agreements for the state and the University of Maryland for large-‐scale solar and wind projects.

Companies that provide PPAs include, among others, Tioga (http://www.tiogaenergy.com/), SunEdison (http://www.sunedison.com), and Sungevity (http://www.sungevity.com/solar-‐lease).

Morris County, New Jersey has pioneered an innovative way to combine the benefits of third party PPAs with the advantages of private activity Bonds. The “Morris Model” is a bond-‐PPA hybrid, where a public entity issues a taxable private activity bond (at much lower interest rates and longer term than a private party could obtain) and transfers the bond proceeds to a developer under a lease-‐purchase arrangement in exchange for a lower PPA price. Though the financing structure is complicated and has only been used in New Jersey and only for solar PV, it appears that the model can and will be used in other states and for other technologies. The Morris Model has resulted in end-‐customer PPA Kwh costs that are 60% lower than PPAs in other counties in the state. (from 10.6 cents to 3.0 cents).43

18. Managed Energy Service Agreements (MESA) and Efficiency Service Agreements (ESA)

Description These are similar to PPAs, but instead of owning the renewable energy generation system, the third-‐party owns the new energy efficiency equipment (ESAs) and charges the building owner a fee based on the net savings resulting from the new equipment. Typical costs of the installation project are at least $1 million. With MESAs, the third-‐party actually takes over the energy management for a specified period with the building owner paying energy fees based on current use. The energy management provider contracts for installation of new equipment and retains any savings for the term of the agreement (typically 10 years). MESAs provide building owners with new equipment, off-‐balance sheet treatment (a MESA is a services agreement not a debt); deferred access to savings (after the term expires), and minimal risk. The new efficiency equipment is typically installed by another party (a major energy services company or ESCO) whose contract includes penalty provisions if the savings do not

43 Kreycik, Claire, Financing Solar PV at Government Sites with PPAs and Public Debt, NREL Fact Sheet, published December 2011 -‐ http://www.nrel.gov/docs/fy12osti/53622.pdf.


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materialize as planned. Sources of Capital

The companies offering these services are structured as financial services companies and provide needed capital as part of their client offering.

Target Market Commercial, industrial, and MUSH properties with older equipment and no capital. Potential Use Typical clients are large users that can benefit from new big-‐ticket items like boilers

and furnaces. Advantages The building owner has no obligation to provide the upfront capital and benefits from

improved energy delivery. Challenges Vermont may need an aggregator to pool projects into a large enough package. Examples & Links

Metrus Energy (http://metrusenergy.com/) is a private company that develops, owns, and finances comprehensive energy efficiency retrofits for commercial, industrial and institutional clients using ESAs.

Transcend Equity (http://www.transcended.com/mesa_solution.asp) is the originator of the MESA approach. Transcend builds, owns, and operates the energy efficiency retrofits. They also act as the utility, that is, they receive a monthly client utility payment and pay all client utility bills.

19. Public purpose performance contracting (including aggregation)

Description Performance contracting is the process whereby an energy services company (ESCO) contracts with a building owner to install energy efficiency equipment for a specific price and then guarantees that the annual energy and maintenance savings will offset the investment cost. Traditional ESCOs find most Vermont properties to be too small for their interest. To reach this market, a third-‐party entity (could be EVT) could act as the ESCO to aggregate smaller projects, particularly properties that serve a public purpose.

Sources of Capital

Bond proceeds, tax-‐exempt lease purchasing (for government agencies), conventional sources of debt secured by a future stream of energy savings.

Target Market Federal and state properties, MUSH, and larger multi-‐family properties that are publicly owned; could also be expanded to serve commercial and industrial sector.

Potential Use Any building or operations that have energy savings potential but are too small to be of interest to private performance contracting companies.

Advantages Can be structured to ensure that energy savings pays the costs. Third-‐party involvement allows for quality assurance.

Challenges An aggregated transaction involves numerous players, requires similar timing, and can be quite complicated and cumbersome.

Examples The State of Washington’s Department of Enterprise Services has an energy savings performance program that provides audits, project management, procurement, construction oversight, and low-‐cost financing from the State Treasurer’s office for public purpose institutions.44

Vermont’s Municipal Bond Bank already aggregates small bond offerings although these are typically for infrastructure not energy savings.

44 See http://www.ga.wa.gov/eas/epc/espc.htm.


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20. One-‐stop package – the Solar Tracker/Sun Commons approach

Description A highly user-‐friendly approach to the installation of efficiency and renewables. A single entity provides customers with a one-‐stop solution that assesses viability, determines the optimum technology, secures permits, manages the installation, procures any available benefits (including rebates, net metering or feed-‐in tariffs), acquires financing, and lets the customer obtain renewables through a regular payment arrangement typically structured as a lease.

Sources of Capital

Banks and other traditional lenders.

Target Market Residential – single and multi-‐family and small business. Potential Use For home-‐based solar and wind systems (although the latter is not yet cost-‐neutral).

May also have application for home retrofits, plug-‐in hybrid electric vehicles (PHEV), installation of biomass thermal systems, and hook-‐ups to a district energy system.

Advantages Remarkably seamless for the customer. Challenges Provider needs to fully understand the implication of current policies. It also helps to

have sufficient scale. Requires excellent administrative systems and a degree of certainty regarding the availability of rebates and other utility or government-‐sponsored incentives.

Examples & Links

AllEarth Renewables make extremely effective use of this approach in selling their AllSun trackers in Vermont.

Sun Common (http://suncommon.com/faq/) is following a similar model for solar PV in Vermont.

Next Step Living (http://nextsteplivinginc.com/), in Massachusetts, is offering a similar approach for energy efficiency retrofits and solar.

NeighborWorks of Western Vermont’s H.E.A.T. Squad program (http://heatsquad.org/) is using a similar model to promote residential energy efficiency in Rutland County.

Enhancements

21. Efficacy insurance/ performance guarantees

Description Insurance companies, governments, or others guarantee the output of a renewable energy system or otherwise mitigate the risk of installing promising, new clean energy technologies that are likely to have a market breakthrough.

Sources of Capital

Insurance companies, government budgets (particularly for new technologies that have economic development potential), and foundations.

Target Market Commercial and industrial properties, MUSH, innovative infrastructure, manufacturing plants for biofuels or wood pellets.

Potential Use Dramatically reduces the risk associated with a system not delivering the projected level of energy and revenues. Performance guarantee policies can be used to cover costs associated with the design, use, components, and other factors that could result in a lack of revenue for the project.

Advantages Helps secure financing for renewable energy projects in general, but also adds tremendous value for early adopters of renewable energy technology or new efficiency measures or products.


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Challenges Most useful with larger projects or first use of innovative technology. Examples & Links

PowerGuard Specialty Insurance (http://www.powerguardins.com) offers wind turbine and solar warranty programs that guarantee the performance of the entire system.

SolarInsure (http://www.solarinsure.com) Product Performance Guarantee Program protects both project owners and lenders if a solar installation does not meet its projected generation of power or revenue.

22. Repayment guarantees

Description Governments or others commit to backstopping lenders who provide debt to clean energy manufacturers or projects willing to be first adopters of promising, new clean energy technologies.

Sources of Capital

Government budgets and foundations.

Target Market Commercial and industrial properties, MUSH, innovative infrastructure, manufacturing plants for biofuels or wood pellets.

Potential Use Traditional funders like to be the first to fund the fourth or fifth use of new applications. This type of guarantee could be used to support the initial installations of any new technology. Guarantees can also be structured to decline with each successive installation (e.g., 90% for first installation, 75% for next, then 60%...).

Advantages Leverages traditional capital. Challenges If a guaranteed project fails, it can be a very public (and political) black eye (e.g.,

Solyndra). Examples & Links

The US DOE Section 1703 program provides a loan guarantee for up to 80% of the debt on clean energy projects that use innovative technology.

The Asian Development Bank has committed up to $150 million for loan guarantees of up to 50% of bank loans for solar installation projects in India.

Repayment Collection Mechanisms

23. On-‐bill financing (OBF)

Description Financing that uses a utility bill, typically an energy provider, to collect payments; can also be the water or sewer utility. Repayment of the financing is added to the regular bill sent to the meter holder. This obligation to repay can be assigned to the customer (i.e., a conventional loan with repayments collected by the utility) or assigned to the meter, typically called “tariff-‐based systems.”

Source of capital

Loan capital can come from banks, credit unions, CDFIs, or other third parties; the utility (typically ratepayer funds, may be public benefit funds); or government. Most typically, government funds are used to seed a pilot program or provide loan loss reserves.

Target Market Commercial and residential meter holders. Potential Use Financing the purchase of electric vehicles and home charging stations, purchase and

installation of distributed energy systems or energy retrofit packages. Advantages Tariff-‐based systems are particularly useful for multi-‐family housing and rental

properties where the tenant pays for energy. Meter holders typically pay their utility


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bill; perceived threat of disconnection helps to ensure repayment.45 Challenges Utility may not be willing to provide financing for investments that do not have a

direct ratepayer benefit. Tariff-‐based systems will require regulatory approval. Examples & Links

The American Council for an Energy-‐Efficient Economy (ACEEE) reports that at least 20 states are home to utilities that have or are about to adopt OBF.46 ACEEE provides details of existing programs in the report. Greater info about the applicability in Vermont can be found in a report published by the High Meadows Fund.47

New York’s Power NY Act of 2011 includes a mandatory requirement that all of the state’s gas and electric utilities with annual sales in excess of $200 million establish an “on-‐bill recovery loan” mechanism for energy efficiency improvements. The regulatory order authorizing on-‐bill recovery tariffs was issued December 15, 2011.48 The capital will come from the New York State Energy Research and Development Authority’s (NYSERDA) Green Jobs-‐Green New York revolving loan fund. NYSERDA is administering the program for owners of 1-‐ to 4-‐unit residential properties.49

Clean Energy Works Portland is an on-‐bill financing program that provides loans to homeowners. It relies on loan capital from a community development financial institution (CDFI); a city-‐funded loan loss reserve fund (from ARRA $s); repayment on the utility bill; and enrollment through the Energy Trust, the State’s EVT equivalent.50

24. Expanded Property-‐Assessed Clean Energy (PACE) districts

Description PACE districts are clean energy districts established by municipalities, which rely on a special assessment typically billed with the property tax to repay financing. Funds are obtained by the municipality (or a consortium of municipalities) through a bond or other funds. These funds are used by property owners to invest in efficiency retrofits or renewables. Vermont’s PACE enabling statute limits the use of PACE financing to: the owners of 1-‐4 family homes, the lesser of 15% of the value of the home or $30,000, and renewable measures that meet the definition in 30 VSA §8002(2) (i.e., does not include geothermal). An expanded PACE would allow it to be used in commercial and multi-‐family properties with appropriate valuation limits.

45 It is highly unlikely the Vermont Public Service Board will allow disconnection for non-‐payment of an on-‐bill financing commitment. 46 Bell, Catherine, Nadel, S. & Hayes, S., “On-‐bill Financing for Energy Efficiency Improvements: A Review of Current Program Challenges, Opportunities and Best Practices”, December, 2011, ACEEE Report # E118, see http://www.aceee.org/node/3078?id=4491. 47 See http://www.highmeadowsfund.org/storage/research-‐and-‐learning-‐documents/energy-‐related-‐documents/01-‐15-‐12%20OBF%20FINAL%20report.pdf. 48 Matter 11-‐01764, Cases 11-‐E-‐0450 et al. For filings record, see http://documents.dps.state.ny.us/public/MatterManagement/CaseMaster.aspx?Mattercaseno=11-‐01764; for final order, see http://documents.dps.state.ny.us/public/Common/ViewDoc.aspx?DocRefId={4ADBF061-‐8823-‐4D9A-‐AA35-‐4FCD973BE0BD}. 49 For details of the program, see http://www.nyserda.ny.gov/en/About/Statewide-‐Initiatives/On-‐Bill-‐Recovery-‐Loan-‐Program/FAQ.aspx. 50 ACEEE Report, Report to the Oregon Public Utility Commission On Pilot Programs for the Energy Efficiency and Sustainable Technology Act of 2009, which is available at http://energytrust.org/library/reports/101001_EEAST_OPUC.pdf and ACEEE Case Study, which is available at http://www.aceee.org/files/pdf/case-‐studies/Portland_Clean_Energy_Works.pdf.


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Sources of Capital

Bond proceeds and traditional sources.

Target Market Commercial, large residential, and industrial properties. Potential Use. Could support energy retrofits and renewable energy in multi-‐family and non-‐

residential properties. Advantages Investments stay with the property not the owner. Provides a high priority lien for

security. Vermont established a loan loss reserve fund and additional enhancements to entice investments.

Challenges Lien may be viewed unfavorably by first mortgagors. Examples & Links

Boulder County’s Climate Smart Loan Program finances energy improvements in both residential and commercial buildings.

Local ownership

25. Community-‐based energy development

Description Renewable projects that are owned and operated by local members of the community in which the project is sited. Frequently used in combination with the availability of group net metering, a feed-‐in tariff, or other means of assuring the purchase of energy generation at retail or more favorable prices.

Sources of Capital

Local community members and traditional sources.

Target Market Local individuals and businesses. Potential Use Distributed generation, district energy, biofuels production, vehicle to grid

infrastructure, any other infrastructure that has revenues. Advantages Shared local ownership can be a source of community pride. Community ownership

typically results in less community opposition. It also brings the environmental, social, and financial benefits of renewable energy to the local community.

Challenges Requires coordination and cooperation. Cost of project may exceed local capacity. Examples & Links

Canada has a number of community-‐owned wind, hydro, district energy, and renewable fuel projects including one in Toronto that owns and manages North America’s first urban-‐sited wind turbine.

High Country Energy (http://www.highcountryenergy.us/) is a Minnesota based LLC that develops and operates sustainable wind projects. It is committed to sharing economic benefits with the community.

Ontario’s feed-‐in tariff provides a price adder for projects that are community or cooperatively owned. Projects with community equity supplying >50% of the equity receive an additional cent/kWh; those with 15-‐50% community equity get ½ cent/kWh.

Colorado’s Clean Energy Collective (http://www.easycleanenergy.com/default.aspx) works with a variety of community groups to build, operate, and maintain community-‐based clean energy facilities.

26. Cooperative ownership

Description Cooperatives are jointly and equally owned, democratically controlled corporations designed to provide benefits to their members. The benefits can be financial, tied to


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use or related to the sale of products or services (e.g., worker-‐owned and marketing cooperatives).

Sources of Capital

Members, Cooperative Development Bank, and traditional sources.

Target Market Individuals. Potential Use Distributed generation, district energy, biofuels production, vehicle-‐to-‐grid

infrastructure, electric vehicle sharing, and any other infrastructure that has revenues. Advantages Shared local ownership can be a source of community pride. Consumer and marketing

co-‐operatives exist across Vermont – the structure is well understood. Cooperative ownership may allow access to unique financing sources such as the Rural Electric Cooperative Service; various USDA programs; the Washington, DC-‐based Cooperative Bank; the New England Cooperative Loan Fund; and other community loans funds and family foundations.

Challenges Requires coordination and cooperation. Cost of project may exceed local capacity. Vermont’s cooperative law can be cumbersome. It currently does not allow for new generation cooperatives, which permit some investment by non-‐members. Cooperatives are often reflective of their most active members, which can change dramatically over time.

Examples & Links

Denmark’s Middlegrunden 20-‐turbine wind farm is owned 50/50 by the 10,000 members of the Middlegrunden Wind Turbine Cooperative and the local municipal electric company.

Piedmont Biofuels (http://www.biofuels.coop/about) is a cooperative in North Carolina that produces biodiesel from cooking oil and sells it to its members.

Western Massachusetts’ Co-‐op Power (http://www.cooppower.coop/index.php/about-‐co-‐op-‐power) is a consumer-‐owned renewable energy cooperative that developed Northeast Biodiesels, an energy efficiency retrofit company, and a number of distributed renewable projects.

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Conclusions and Next Steps

In support of Vermont’s bold goal to have 90% of its energy needs met by renewables and efficiency, EAN established a related goal that 80% of the state’s 2030 energy needs be met through efficiency and renewables. It will be an extremely ambitious undertaking to meet this goal. It will require: (1) making significant changes in how we live, work, and play; (2) adopting immediate, comprehensive, bold, and coordinated statewide transportation and energy strategies; (3) amassing significant amounts of capital, in excess of $28.7 billion; and (4) instituting an economic and infrastructure approach similar to strategies outlined by the Vermont-‐based Clean Energy Group.51 To open discussion about meeting Vermont’s energy capital needs, we offer these suggestions:

1. Broaden the financial resources used for funding transportation and energy projects. 2. Augment the knowledge of Vermont’s financial community regarding energy financing

needs and mechanisms. 3. Coordinate and expand policy directives.

These suggestions are meant to catalyze many future discussions, ideas, and applied strategies. 1. Broaden the financial resources/mechanisms used for funding energy projects.

Bonds/Tax-‐Exempt Leases: Recent changes at the Vermont Student Assistance Corporation have resulted in substantial excess capacity in the state’s allocation of “private activity” bonds. These government-‐issued, tax-‐exempt bonds could be selectively used to finance a variety of private-‐sector investments in renewables and efficiency. Additionally, state general obligation and revenue bonds, tax-‐exempt leases, and green bonds can be used to support district heating, energy efficiency, and the installation of renewables in public buildings. Finally the state should use its existing, low-‐cost (up to 70% of the interest is subsidized by the federal government) $6.4 million allocation of Qualified Energy Conservation Bonds (QECBs). Aggregation: When considered in their entirety, Vermont municipalities, universities, schools, and hospitals (MUSH) offer a substantial market for performance contracts and power purchase agreements (PPAs). When considered individually, however, many of these entities are too small to be attractive to national Energy Service Companies (ESCOs) or entities providing PPAs, Energy Service Agreements (ESAs), and Managed Energy Service Agreements (MESAs). In addition, these entities may not have sufficient personnel or expertise to assess and procure these services. The state, therefore, should consider: (1) how to provide technical assistance and aggregation services for public-‐purpose entities and (2) whether it is economically feasible for an existing or new public-‐purpose entity to provide ESCO, PPA, and ESA services to public-‐purpose entities.

51 Milford, L, R. Tyler and J. Morey, Strategies to Finance Large-‐Scale Deployment of Renewable Energy Projects: An Economic Development and Infrastructure Approach Commissioned by IEA-‐RETD, December 2011 -‐ http://www.cleanegroup.org/assets/Uploads/111205-‐FINANCE-‐RE-‐Final-‐Report.pdf.


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Morris Model: Vermont should investigate how to replicate the “Morris Model” hybrid bond-‐PPA finance model. The model can substantially drive down the rate paid under a PPA. To drive down the costs even further, the state should also consider using QECBs to fund Morris Model applications. Treasury support: To attract specialty energy efficiency lenders to Vermont, the state should consider providing the project capital needed to attract organizations like AFC First Financial — a one-‐stop-‐shop, specialty-‐lender, service-‐delivery mechanism. The state can do this by replicating or expanding on the Pennsylvania’s Treasury Department’s initiative to invest in energy efficiency. Similarly to what Pennsylvania did, Vermont should work with its treasurer to initiate an investment policy that supports renewables and energy efficiency investments while creating jobs, economic development, and a low-‐risk, fixed-‐income return for state investment funds. Crowdfunding: The potential for using crowdfunding to finance distributed renewables and efficiency in small-‐ to medium-‐sized businesses and community-‐based projects should be explored after the Securities and Exchange Commission (SEC) issues final guidance on how crowdfunding can be used. 2. Augment the knowledge of Vermont’s financial community regarding energy financing needs and mechanisms. Vermont has numerous entities that are skilled at providing financing, including banks, credit unions, CDFIs, revolving loan funds, and leasing companies. Many of the state’s anticipated finance needs can and will be served by these institutions. Most lenders will likely need to champion lending policy changes within their organizations to accommodate expanded and new financial product offerings. Furthermore, to meet Vermont’s future energy funding many Vermont financial institutions will need to enhance their finance expertise regarding:

• Energy Performance Contracts (EPCs), Energy Services Agreements (ESAs), Power Purchase Agreement (PPAs), and Managed Energy Services Agreements (MESAs).

• Energy efficient and energy improvement mortgages for housing purchases and renovations.

• Project financing (limited or non-‐recourse financing), as opposed to corporate and balance sheet financing.

• Community-‐owned or controlled net-‐metered renewable energy financing. • Renewable energy revenue projections and efficiency savings projections. • SPEED and net-‐metering program parameters as well as various incentive programs.


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3. Coordinate and expand policy directives.

Competitive Policy Directives: To entice more out-‐of-‐state and international private-‐sector investment in renewable energy, the state should consider ways to make its incentives, permitting, and processes as competitive as other states.52 Examples include:

SPEED: The state should increase the SPEED: (1) standard offer rates, (2) cumulative megawatt capacity, (3) maximum MW project size, and (4) current schedule for annual capacity increases (e.g., double or triple). State tax credits Vermont should readopt more robust state tax credits for corporate and residential renewable energy systems.53 While Vermont currently provides a tax credit piggybacked on the federal investment tax credit (which amounts to a 7.2% state-‐level credit for solar, small wind, and fuel cells) other states offer as much as 50%.54 Vermont’s renewable energy tax credits are set to sunset at the end of 2016, which is the same time federal solar energy tax credits expire. Vermont should provide leadership by removing uncertainty through an extension of its sunset dates to a time commensurate with Vermont’s 2050 energy goals. Streamline permitting: The state should consider streamlining its regulatory processes for renewable energy projects under 5 MWs. This will enhance the prospects for completing these projects and will, therefore, attract more investors. Model docs: The state should consider endorsing and promoting standardized documents for performance contracting through Efficiency Vermont (EVT) and standardized power purchase agreements through Renewable Energy Vermont (REV).55 To foster more project financing in Vermont – by driving down legal costs and reducing closing time –the state should consider endorsing model project financing documents. Net metering: To foster the development of larger community-‐based renewable energy projects, Vermont should increase group net metering limits from 500 kW to 2.2 MW (the amount allowed for military systems). Similarly, excess credits generated under group net metering should not revert to the utility after twelve months.

Fuel Gross Receipts Tax: To help reduce vehicle miles traveled and increase the funds available to electrify the transportation sector, the state should expand the Fuel Gross Receipts Tax so that it also applies to motor fuels.

52 For example, depending on project size, the current (version 2) feed-‐in-‐tariff for roof-‐top solar in Ontario varied from $0.48 to $0.55 per kW/hour, and $0.34 to $0.44 kW for ground-‐mounted solar PV. In comparison, Vermont customers currently receive approximately $0.21 per kW/hour for all solar PV installations. See www.dsireusa.org/incentives. 53 These include, among others, Arizona, Florida, Hawaii, Louisiana, Montana, New Mexico, and North Carolina. 54 For example, Louisiana offers 50% of the first $25,000 for any renewable energy system for both commercial and residential applications. Hawaii offers up to 35% of the actual cost of a PV system or $500,000 for the commercial sector. See www.DSIREUSA.org for more examples of state incentives. 55 Note: the state of Pennsylvania and the Energy Services Coalition have already created model documents for performance contracting, which can be a good starting point for this endeavor. See, e.g., http://www.energyservicescoalition.org/resources/model/index.html.


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Green Leases and On-‐bill Financing: The inherent disincentive to make energy investments in rental properties when the tenant pays energy costs should be addressed by incentivizing the adoption of green leases. These leases help align tenant and owner interests in favor of energy improvements. On-‐bill tariffed mechanisms also help overcome this split incentive issue. The state, therefore, should consider the potential for a utility on-‐bill tariff mechanism to finance and collect repayments for investments in energy efficiency. This could also be used to finance electric vehicles. Lead by example: Vermont should continue to set an example as a lead adopter of the technologies and behavioral changes outlined in this guide. Specific areas where the state can continue to set an example include: the installation of new renewable technologies wherever appropriate, continued investment in renewable energy (either directly or through third-‐party ownership), continued investments in energy efficiency (either directly or through performance contracts, MESA, or ESAs), development and use of district heating, the purchase and use of electric vehicles, incentives for state employees to not use single-‐occupancy vehicles to get to work, and the use of green leases in all state rental contracts. User fees: The state should consider the implementation of user fees to induce more desirable behavior. Areas that warrant consideration include higher energy use taxes, road tolls, increased vehicle registration fees to cover the costs of alternative transportation infrastructure, and charging all state employees and visitors for parking on state-‐owned or state-‐leased property. Technical Assistance: Borrowers may require technical assistance and access to streamlined service-‐delivery systems that are just beginning to emerge in Vermont. As a result, there may be additional value in supporting a public-‐purpose entity that is charged with helping public-‐ and private-‐sector commercial properties use these mechanisms. Comprehensive one-‐stop service models — such as those offered by Sun Common, Solar Tracker, home comfort energy providers and the NeighborWorks of Western Vermont H.E.A.T. Squad program — should be strongly supported through the state’s economic development channels. Other: Enhanced state policies that should be considered include the use of additional incentives for community or co-‐op owned resources, the expansion of PACE to commercial and industrial property owners, and continued and increased funding for the Weatherization Trust Fund as emphasized in RAP’s 2011 Affordable Heat report.56

56 See www.leg.state.vt.us/reports/2008ExternalReports/228544.PDF.


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Additional Resources

The following were the most informative of the many resources we reviewed:

Financing the Clean Economy, Chapter 6 of The West Coast Clean Economy; Opportunities for Investment and Accelerated Job Creation, Commissioned by the Pacific Coast Collaborative, March 2012 -‐ http://www.globeadvisors.ca/media/3350/financing%20the%20clean%20economy.pdf

Innovative Infrastructure Financing Mechanisms for Smart Growth by Ray Tomalty, PhD, Co-‐Operative Research and Policy Services for SmartGrowth BC, December 2007 -‐ http://www.smartgrowth.bc.ca/Portals/0/Downloads/sgbc-‐infrastructure-‐report-‐web.pdf

State Clean Energy Financing Guidebook, NGA Center for Best Practices, January 2011 -‐ http://www.nga.org/cms/home/nga-‐center-‐for-‐best-‐practices/center-‐publications/page-‐eet-‐publications/col2-‐content/main-‐content-‐list/state-‐clean-‐energy-‐financing-‐gui.html#

Strategies to Finance Large-‐Scale Deployment of Renewable Energy Projects: An Economic Development and Infrastructure Approach, Clean Energy Group, Commissioned by IEA-‐RETD, December 2011 -‐ http://www.cleanegroup.org/assets/Uploads/111205-‐FINANCE-‐RE-‐Final-‐Report.pdf

United States Building Energy Efficiency Retrofits: Market Sizing and Financing Models, Deutsche Bank Climate Change Advisors & The Rockefeller Foundation , March 2012, http://www.rockefellerfoundation.org/uploads/files/791d15ac-‐90e1-‐4998-‐8932-‐5379bcd654c9-‐building.pdf.

42

Appendix A – Fitting Programs to Meet Market Segment

Source: National Governors Association – State Clean Energy Financing Guidebook 57

57 http://www.nga.org/files/live/sites/NGA/files/pdf/1101CLEANENERGYFINANCING.PDF

43

Appendix B – Existing Sources of Financing by Projected Need

Energy Sector

What is needed to achieve 2030 scenario Type of Capital Needs

Existing Sources-‐ in addition to owners Numbers refer to ID # in Appendix C Funding (Grants & Incentives)

Financing Other Incentives

Electric

Utility-‐owned renewable electric generation/contracts

RE Systems -‐ Pre-‐development $; Project-‐based financing; long-‐term contracts (feed-‐in tariff)

20, 24, 25 36 32

Non-‐utility owned distributed electric generation -‐ all forms

RE systems -‐ Pre-‐development $ and TA; Project-‐based financing; long-‐term contracts (feed-‐in tariff); incentives for optimum sites

All forms – 19, 20, 24, 25, 26

All forms -‐ 3, 11, 15, 20, 27, 28, 36, 40

14 (details tbd), 32, net metering

Solar Solar -‐ 2, 13, 22

1-‐stop -‐ All Earth

Renewables, Sun

Common

Wind Wind -‐ 2, 22

Biomass Biomass – 12

Smart grid infrastructure – T&D

Infrastructure at T&D level

Smart Grid Investment Grant

40

Smart grid infrastructure – end users

Funding for end user interfaces

40

Thermal

New zero-‐emission commercial construction

New commercial space – incentives for added cost for exceeding building codes

9, 31 36

New zero-‐emission residential construction

New Homes – incentives for added cost for exceeding building codes

8, 32 36

Retrofit existing residential buildings

Incentives and financing -‐ Need to retrofit 200,000 homes; grants for lowest-‐income; first $$ for moderate income; financing and TA for all

4, 14, 17, 18, 22, 30

11, 14, 16, 17, 21, 28, 36, 39

4, 18

Appendix B

44

Energy Sector




Retrofit existing commercial buildings and processes – all sectors

Incentives and financing -‐ Need to retrofit 50,000 buildings

5, 7, 8, 14, 26, 31

3, 15, 21, 26, 27, 28, 36, 38, 39

Retrofit existing buildings – efficient products

Incentives for more efficient HVAC, lighting, appliances, processes

10

District energy infrastructure

Development of district energy systems and conversion

State Capital bill

3, 36, 37, 40 US Dept of Energy (DOE) grants

District energy infrastructure – end user connections

Incentives to encourage connection; financing for costs

11(?), 16, 21, 39, 40

Solar thermal Incentives, TA & financing 21 3, 15, 36, 40 vendors

Geothermal Incentives, TA & financing 15, 36, vendors


Financing for pellet manufacturing facilities

36, 38 Equity? 33, 34, 35


Financing for pellet delivery infrastructure

36, 38



6 36, vendors

Transport

Biofuels production In-‐state biofuel (on-‐farm) production facilities – farms

37, VSJF Bioenergy Initiative

3, VSJF Bioenergy Initiative

Biofuels production In-‐state biofuel (algae) production facilities

36, 38 Equity? 33, 34, 35

Biofuels infrastructure Incentives and financing to convert infrastructure to handle cold-‐weather issues – aviation, transport & heating fuel

36 Equity (if business)? 33, 34, 35

Appendix B

45

Energy Sector




VMT reduced by 20% -‐ improved Public transit

Funding for equipment and operating expenses

Federal Transpor-‐tation $$, 36

40 VTrans Public Transit Policy

Plan

VMT reduced by 20% -‐ education re: telecommuting, carpools, etc.

Funding for TA and education campaigns

37

Pedestrian/Bike way infrastructure

Funding and financing for construction and maintenance of pedestrian and bike paths

Federal, State & local Transpor-‐tation funds

40 VTrans Policy Plan

(with

impact on electric)


Incentives for incremental cost of electric vehicles & home-‐based charger; financing

23 21, 29, 36, vendors

Project Get Ready

(with

impact on electric)


Incentives, TA & financing for conversion of combustion vehicles

21, 29, 36

(with

impact on electric)



40

(with

impact on electric)



40

46

Appendix C – Existing Sources of Financing by Sponsor and Program 58

ID # Sponsor Program Org Type

Web site/Link for program-‐specific info

Type -‐ Fund or

Finance (& Mechanism if relevant)

Typical Amount Available (per year or as noted)

Eligible Applicants

Comments

Eligible EE & RE Uses

Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions

Electrical EE retrofit

Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

CAPITAL FOR THE EE OR RE PROJECT

1 Clean Energy Development Fund (CEDF)

Loan Program State Gov't List of loans -‐ http://publicservice.vermont.gov/energy/ee_files/cedf/All%20CEDF_including%20ARRA_Loans.pdf

Finance -‐ Loan

None as of 2012; Had been $650K/ yr for loans

√ √ √ √ √ √ √ closed indefinitely √ √ √ √ √ √

2 CEDF/Dept of Public Service (DPS)

Vermont Small Scale Renewable Energy Incentive Program

State Gov't http://www.rerc-‐vt.org/incentives/index.htm

Fund -‐ Incentive

$2.5 million in 2012; Range has been $1-‐2.5 million

√ √ √ √ √ √ √ √ √ must be installed by installed by Vermont Solar, Wind and Hydro Partners; efficiency adder in 2012; Cannot be combined with CEDF grant or loan

√ √

3 Catalyst Financial Group, Inc.

Other www.catalyst-‐financial.com

Fund – TA & Finance

Arrange funding for renewables $1MM+; Efficiency $500K +

√ √ √ √ √ √ √ Provide financial advisory and investment banking services; have access to billions of $$ for RE and EE financing, including performance contracts, PPA’s and project financing

√ √ √ √ √ √ √ √ √ √ √

58 Subject to input and correction!

Appendix C

47



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

4 Efficiency Vermont/BED

Home Performance with Energy Star (HPwES)

EEU -‐ EVT/BED

http://www.efficiencyvermont.com/for_my_home/ways-‐to-‐save-‐and-‐rebates/energy_improvements_for_your_home/home_performance_with_energy_star/general_info/overview.aspx

Fund -‐ incentive & TA re: finance

$1.6 million in incentives

√ √ Must be installed by HPwES-‐certified contractors.

√ √ √


Building Performance

EEU -‐ EVT/BED

http://www.efficiencyvermont.com/for_my_business/ways-‐to-‐save-‐and-‐rebates/insulation_air_sealing/building_performance/general_info/overview.aspx

Fund -‐ incentive & TA re: finance

$100 thousand in incentives/ year

√ For house-‐like premises occupied by businesses; Must be installed by HPwES-‐certified contractors.

√ √ √


Biomass Heating Incentive

EEU -‐ EVT/BED

http://www.efficiencyvermont.com/for_my_business/ways-‐to-‐save-‐and-‐rebates/hvac/rebates/all_rebates.aspx

Fund -‐ Incentive

$22,000 in incentives/ year

√ √ √ for replacement of heating system with commercial or residential biomass system

√


Large Commercial & Industrial

EEU -‐ EVT/BED

http://www.efficiencyvermont.com/for_my_business.aspx

Fund -‐ rebate & TA

√ √ √ √


Small Business EEU -‐ EVT/BED

http://www.efficiencyvermont.com/for_my_business/solutions_for_me/small_businesses/general_info/overview.aspx

Fund -‐ rebate & TA

√ √ √ √ √ √ √ √ √ √

Appendix C

48



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure


New Construction

EEU -‐ EVT/BED

Commercial -‐ http://www.efficiencyvermont.com/for_my_business/ways-‐to-‐save-‐and-‐rebates/commercial_new_construction/general_info/overview.aspx; Residential -‐ http://www.efficiencyvermont.com/for_my_home/solutions-‐for-‐me/building_a_new_home/general_info/overview.aspx

Fund -‐ incentive & TA re: design

Business -‐ $3.02 million/ year; Residential -‐ $2.08 million

√ √ √ √ √ √ √ √ √ √ √


Efficient Products

EEU -‐ EVT/BED

http://www.efficiencyvermont.com/for_my_home/ways-‐to-‐save-‐and-‐rebates.aspx

Fund -‐ Incentives to vendors

$6.12 million/ year

√ √ √ √ √ √ √ √ √ √ Funding typically to vendors for more efficient products -‐ HVAC, lighting, appliances, motors, etc.

√

11 Efficiency Vermont/BED & Municipalities that have approved PACE

PACE Other http://pacevermont.wikispaces.com/Welcome+to+PACE+Vermont

Finance -‐ Assessment District

Tbd -‐ ~ $20 million in initial pool

√ Not yet operational √ √ √ √

12 GMP Cow Power Utility http://www.greenmountainpower.com/renewable/cow/

Fund -‐ production incentive

4¢ per kWh √ Typically used to fund project coordinator and provide grants of ~100K/farm anaerobic digester

√

Appendix C

49



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

13 GMP Solar GMP (net metering program)

Utility http://www.greenmountainpower.com/renewable/solar/faqs/

Fund -‐ production incentive

6¢ per kWh √ √ √ √ √ √ √ √ √ √ must be net metered; now available in all utility jurisdictions

√

14 GMP Community Energy & Efficiency Fund (CEED)

Utility http://publicservice.vermont.gov/dockets/7770/Pet-‐DPSMOUAttII(2).pdf

Both $9 million in total; $10 million to weatherize-‐tion

$21 in total; $10M committed to weatherization; $2 to thermal efficiency; remaining subject to PSB review -‐ likely to be used for EE, RE, demand response

√ √ √ √ √ √ √ √

15 Municipal Leasing Consultants

Municipal Lease

Other http://www.powerofleasing.com/

Finance -‐ Lease

$10-‐50 million per year for VT energy projects

√ √ Must demonstrate that revenues can repay the lease

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √

17 NeighborWorks of W. VT (NWWVT)

H.E.A.T. Squad Alternative $$ -‐ CDFI, NGO, Fdtn

http://heatsquad.org/

Both 3-‐year program has $710 thousand for incentives; $5.3 million for loans

√ Combined with Efficiency Vermont HPwES Program, limited to Rutland County

√ √

18 Office of Economic Opportunity and CAPs

Weatherization program

State Gov't http://dcf.vermont.gov/oeo/weatherization

Fund -‐ Grant

$8-‐10 million per year

√ √ Must be income-‐eligible household; typically 80-‐85% from state Weatherization Trust Fund; remainder from federal funds

√ √ √

19 State of Vermont

Sales Tax exemption

State Gov't Exemption (46) http://www.leg.state.vt.us/statutes/fullsec

Fund -‐ sales tax

√ √ √ √ √ √ For RE systems up to 250 kW that generate electricity, CHP systems

√ √ √ √ √ √

Appendix C

50



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

tion.cfm?Title=32&Chapter=233&Section=09741

exemption up to 20 kW and solar HW systems

20 State of Vermont

Investment Tax Credit

State Gov't http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=VT37F&re=0&ee=0

Fund -‐ Tax Credit

24% of the federal credit – see #

√ √ √ Can also be used by a utility; Subject to placed in service deadlines

√ √ √ √ √ √

21 Union Bank GreenLend™ Energy Efficiency Loans

Bank or CU https://www.unionbankvt.com/personal-‐banking/greenlend.htm

Finance -‐ Loan

varies -‐ based on applicants

√ √ √ √ Must lower the costs of energy use

√ √ √ √ √ √ √ √ √

22 US -‐ DOE Residential RE Tax Credit

Fed Gov't http://www.energystar.gov/index.cfm?c=tax_credits.tx_index


30% of cost √ Solar thermal limited to hot water systems

√ √ √ √

23 US -‐ DOE Federal Tax credit for PHEV & EV

Fed Gov’t http://www.fueleconomy.gov/feg/taxphevb.shtml


√ Phases out after manufacturer makes 200K eligible cars; Credit starts at $7500

√

24 US -‐ Treasury Production Tax Credit

Fed Gov’t http://dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F


1.1 -‐ 2.2¢ per kWh, depending on resource

√ √ Subject to placed in service deadlines

√ √ √ √ √

25 US -‐ Treasury Business Energy Investment Tax Credit

Fed Gov’t http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US02F&re=1&ee=1


30% for solar, fuel cells and small wind; 10% for geothermal, micro-‐turbines, CHP & hydro

√ √ √ Can also be used by a utility; Subject to placed in service deadlines

√ √ √ √ √ √

Appendix C

51



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

26 USDA Rural Development

Rural Energy for America (REAP) Program

Fed Gov’t http://www.rurdev.usda.gov/BCP_Reap.html

Both $70 million allocated nationally for 2012

√ √ √ Can also be used for energy audit or feasibility study. Grant max is lesser of 500K (for RE), 250K (for EE) or 25% of project costs. Guarantee of 75% of project up to $25 million. Combined max is 75% of project costs.

√ √ √ √ √ √ √ √ √ √ √ √

27 Vermont Economic Development Authority (VEDA) & EVT

Business Energy Conservation Loan Program

Other http://www.veda.org/financing-‐options/vermont-‐commercial-‐financing/vermont-‐business-‐energy-‐conservation-‐loan-‐program/

Finance -‐ Loan

√ √ √ √ Loans from $5,000 up to a maximum of $150,000. 5-‐year term, can amortize over 10. VEDA also provides a range of financing programs for Vermont-‐based companies.

√ √ √ √ √

28 VSECU Green Loan Bank or CU https://www.vsecu.com/loans/other-‐loans/green-‐loan#/tab/overview

Finance -‐ Loan


√ √ √ √ √ √ √ √ √ √

29 VSECU Green Vehicle Loan

Bank or CU https://www.vsecu.com/loans/energy-‐saving-‐loans/green-‐vehicle-‐loan#/tab/overview

Finance -‐ Loan


√ Offer longer term and lower rates than conventional car loan

√

30 VT Gas Systems

Residential EE Program

Utility http://www.vermontgas.com/efficiency_programs/res_programs.html

Both $323,000 for retrofit

√ √ VGS is in the midst of an EEU process, which may alter prior approach.

√ √ √

31 VT Gas Systems

Commercial EE Program

Utility http://www.vermontgas.com/efficiency_programs/comm_programs.html

Both $153,500 for retrofit

√ √ √ √ √ VGS is in the midst of an EEU process, which may alter prior approach.

√ √ √

Appendix C

52



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

32 VT Public Service Board

Standard Offer -‐ Vermont SPEED Program

State Gov't http://vermontspeed.com/standard-‐offer-‐program

Fund -‐ Feed-‐in tariff

√ √ √ √ √ √ √ √ 2012 Legislature raised cap from 50 MW to 127.5. Annual increases to begin in April 2013

√ √ √ √

SOURCES INTERESTED IN FINANCING EE/RE MANUFACTURERS AND INSTALLERS

33 Fresh Tracks Capital

Venture Capital Funds 1 & 2

Venture Capital

http://www.freshtrackscap.com/

Finance -‐ equity

√ √ Current funds fully committed; In the process of raising a new fund. Have funded numerous EE & RE companies

√ √ √ √ √ √ √

34 VT Center for Emerging Technology

Vermont Seed Capital Fund

Private Equity

http://vermonttechnologies.com/capital/

Finance -‐ equity

$50,000-‐$250,000 per investment;

√ √ Seek early stage, high opportunity, technology-‐based companies in Vermont. Have funded EE & RE companies.

35 VT Sustainable Jobs Fund (VSJF)

VSJF Flexible Capital Fund

Alternative $$ -‐ CDFI, NGO, Fdtn

http://www.vsjf.org/what-‐we-‐do/flexible-‐capital-‐fund/about-‐flexible-‐capital

Finance – near-‐equity

$100,000-‐$300,000 per investment;

√ √ Target early and growth-‐stage companies; Provides near equity and royalty financing. RE companies are a target market

OTHER SOURCES FOR PROJECT & COMPANY FINANCE

36 Banks Varied Bank or CU Finance -‐ Loan

√ √ √ √ √ √ √ √ √ √

37 Foundations Varied Other Both √ √ √ √ √ Grants are limited to NGOs; Investments may be to others

38 Vermont Community Loan Fund

Varied Alternative $$ -‐ CDFI, NGO, Fdtn

http://www.investinvermont.org/

Finance -‐ Loan

√ √ √ √ √ √

Appendix C

53



Type -‐ Fund or



Eligible Applicants

Comments


Residential

Housing

Multi-‐fam

. 5+ units

Individuals

Farm

s

Small Business

Big Biz/Industry

NGO

s

Government

Schools

Other Institutions


Thermal EE retrofit

EE equipment

EE Technologies

Solar PV

Wind

Biom

ass electric

New

hydroelectric

Geotherm

al

Solar Thermal

Distributed

biotherm

al

CHP

District Energy

PHEV & EVs

Transit

Infrastructure

39 Regional revolving loan funds capitalized with CDBG, USDA and other $$

Varied Alternative $$ -‐ CDFI, NGO, Fdtn

See 2010 list at p. 45 -‐ http://www.leg.state.vt.us/reports/2010ExternalReports/254597.pdf

Finance -‐ Loan

√ √ √ √ √ Use of most of these funds must benefit low and moderate income Vermonters

40 Vermont Municipal Bond Bank

Tax-‐exempt and taxable bond issuance

State Agency

http://www.vmbb.org/

Finance -‐ Bonds

Varies by issuer

√ √ Bonds are sold once a year in July and may be issued more frequently if there is large enough demand

√ √ √ √ √ √ √ √ √ √ √ √ √ √

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