Embed Size (px)
DESCRIPTION
U.S. Solar Market Overview. New Mexico Energy Investment Initiatives July 2008. MMA Renewable Ventures Overview. MMA Renewable Ventures is the leading owner and financing source for renewable energy and energy efficiency assets in the U.S. 27 MW of solar PV projects in operation; - PowerPoint PPT Presentation
Citation preview
U.S. Solar Market OverviewNew Mexico Energy Investment Initiatives
July 2008
2
MMA Renewable Ventures Overview
MMA Renewable Ventures is the leading owner and financing source for renewable energy and energy efficiency assets in the U.S.
— 27 MW of solar PV projects in operation; — 13 MW of projects currently under construction— 30+ customers, 10 integrators/installers
Recently entered into wind, biomass, and large-scale energy efficiency deals
Pipeline of $1 billion of identified opportunities for 2008-09
Delivering reliable and affordable clean energy with proven
— Project finance— Due diligence— Physical asset management
3
U.S. market will develop around strong financial partners that can U.S. market will develop around strong financial partners that can manage risks for developers, customers, investors, and manufacturers. manage risks for developers, customers, investors, and manufacturers.
DEVELOPER Financing Risk
Implementation Risk EPC Risk
Real Estate Risk Regulatory/Rebate
DEVELOPER Financing Risk
Implementation Risk EPC Risk
Real Estate Risk Regulatory/Rebate
INVESTOR Maintenance Risks Operating Expense
Credit Risk Regulatory Risk Production Risk
INVESTOR Maintenance Risks Operating Expense
Credit Risk Regulatory Risk Production Risk
CUSTOMER Implementation Risk
Relationship Risk Regulatory/Rebate Risk
CUSTOMER Implementation Risk
Relationship Risk Regulatory/Rebate Risk
Financial Sponsorship
MANUFACTURINGTechnology Risk
Brand Protection RiskRegulatory Risk
MANUFACTURINGTechnology Risk
Brand Protection RiskRegulatory Risk
4
High Potential U.S. Market
Germany United States
Source: Solar Energy Industries Association (SEIA)
5
Growing Market Potential for PV
• Rising electricity prices– Global demand for coal and
natural gas– Popular opposition to coal plants– Cap-and-trade system may
increase electricity prices by 20% (assuming $40/ton carbon)
• Falling tech and project costs
• Favorable trend in policy, e.g.,
– Renewable Portfolio Standards – Net metering and interconnection– Federal cap-and-trade system’s
distribution of allowances / auction proceeds to renewable energy
2Avg. Retail Electricity Prices
6
7
8
9
10
11
12
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
U.S
. ($
.00)
1012141618202224
Haw
aii
($ .
00)
U.S. Hawaii
6
U.S. PV Installation Growth
MW installed
2000: 17 MW
2006: 141 MW (+31%)
2007: 259 MW (+83%)
2008: 491 MW (+90%)
2009: 913 MW (+86%)
2010: 1590 MW (+74%)
• More than 60% large commercial Sources: US PV grid-tied module use 2006
IREC and Larry Sherwood, PV News, July 2007Greentech Media and Prometheus Institute, 2008
7
U.S. Non-Residential PV Installations
• California remains over half the U.S. market
• Power Purchase Agreements (PPA) growing quickly
By State
0
10
20
30
40
50
60
70
2003
2004
2005
2006
2007
Meg
awat
ts (
AC
)
California New Jersey Rest of States
Source: Greentech Media
By Financing Model
0
20
40
60
80
100
120
140
2003
2004
2005
2006
2007
2008
*
2009
*
Meg
awat
ts (
AC
)
PPA Non-PPA *ForecastSource: Greentech Media
8
U.S. PV Industry Market Trends
• Utilities entering owner – operator space
• Policy uncertainties are becoming a barrier to sustained development
• Rapid expansion (or everyone’s got the “solar bug”)
• Emerging dominance of Power Purchase Agreements (PPAs)
• Utility-scale projects becoming commonplace – hundreds of MWs
0%
100%
9
Power Purchase Agreement: Opening Markets for Solar
• Complicated financial incentives than Europe require PPA + third party ownership
– Capital conservation: no up-front capital expenditure
– Limited operational risk for customer – key differentiator from lease buyback model
– System purchase options for the energy end-user
10
The Power Purchase Agreement: A Long Marriage
The PPA is a long term contract in which the customer buys the electricity from the system owner on a set price schedule
SYSTEM OWNER RESPONSIBILITIESCUSTOMER RESPONSIBILITIES
Buys System Electricity10—25 year span
Provides System Site (for retail systems)
Site lease agreement
Develop & FinancePermittingDesignProcurement Installation
Own & OperateOperationsMaintenance Insurance
11
PV Projects with Third Party Ownership: Competing Interests on the Path to Standardization
Use new technology Commitments before $ Make customers happy Sell high
Secure tax benefits Minimize risk
— Credits, Technology, Operations
Buy low
INVESTORDEVELOPER
“Just this once and then we can replicate.”
CUSTOMERS WANT TAILORED SOLUTIONS
“Just keep it simple and cover all the bases”
12
Differing Views: Return Expectations
DEVELOPER INVESTOR
“Lower risk than wind” “Where’s the money?” Return Expectations IRR vs. money Valuing the PPA Provider Residual Value
“If I deliver, you fund” “Sure…just make sure
you deliver”
Financing Risk State regulatory timing issues Who bridges delays? Credit market meltdown
“No moving parts, …..solar lasts forever”
“Get me out in six” Operating Risk Less than perfect installations Taxes and changing incentives Erosion and peeling on modules
13
A Typical U.S. Solar Fund Syndication
• Diverse Financial Products– Aggregation of PV projects – diversification of risk– Leveraged structure with senior debt at the project level– Majority of returns come from federal tax benefits– Partnership structure – not a lease– Proven technology
• Exit for Investor– Clear exit path, terms, and overall deal
• Yields– Matching risk & return. Consider fund-level risk, leverage, and credit
protection from each party
14
Uncertainty in Federal Policy
• No long-term Federal policy is established.
• Delay in extending the 30% Solar Investment Tax Credit (ITC) undercuts installation. Industry believes another one year extension is likely, though timing is uncertain. Current ITC restrictions include:– Not available to utilities– Residential credit capped at $2000– Not available to Alternative Minimum Tax (AMT) payers
• Several carbon emissions schemes are currently under debate in the Senate. Discussion of national Renewable Portfolio Standard too.
• The leading Presidential candidates all favor a federal cap-and-trade system for carbon emissions.
15
Solar Investment Tax Credit
• Extension is held up due to lack of compromise between Senate Republicans and House Democrats over funding
• Fundamentally, ITC caught up in larger political issues and election
• Industry impact from delay
– Temporary demand spike to qualify for 2008 driving up prices
– Orphaned projects
– Layoffs at project firms
– Domestic firms (and jobs!) going offshore
– Accelerate industry consolidation?
I T C
16
The Solar Alliance
• An Alliance of– PV Manufacturers– Systems Integrators– Financiers
• Working at the state level to adopt cost-effective solar policies and programs
17
State Rebate Programs
DSIRE: www.dsireusa.org March 2008
D.C.
Both state & utility/other programs available
State programs available
Utility/other programs available
18
Solar Policy Puzzle
Insolation
Tilt & Orientation
Fixed/Tracker
Total System Cost =
Modules + BOS
InterconnectionNet Metering
Property & Sales Tax Exemptions
RPS
Utility Rates
TOU
DemandDecoupling
ITC MACRS
State Incentive
19
20
Track Record at Scale vs PriceT
RA
CK
RE
CO
RD
PRICE
Solar Photovoltaic Crystalline
Solar – Concentrating PV
Solar – Stirling Dish
Solar Thin Film
Wind
Biomass
Solar – Parabolic Trough
Geothermal
2010—2012
21
• The two biggest PV projects in U.S. are located in Nevada (Nellis) and Colorado. Both states have:
– Good solar insulation – not nearly as good as New Mexico – Stable, long-term policy regimes – state Renewable Portfolio
Standard with a solar carve-out – enabling long-term contracts with utilities
• Building similar projects in New Mexico will depend on:
– Certainty on federal ITC extension through 2010-2011– Motivated communities and stakeholders to help bring all the required
pieces into place (expedited permitting, additional financial support, etc)
Creating the Next Nellis
22
Nellis Air Force Base – 14.2 MWs Ground mounted tracking system that covers 140 acres
Using over 70,000 solar modules with tilted trackers
Largest PV system in Americas
Nellis Air Force Base
23
MMA RV: Financed, Owned & Operated
• ~$100MM project on Nellis Air Force Base (AFB) property, eight miles northeast of Las Vegas, Nevada
• All electricity sold to U.S. Air Force under 20 year Power Purchase Agreement contract
• All Renewable Energy Certificates (RECs) sold to Nevada Power under contract under State Renewable Portfolio Standard w/solar carve out
• Saves Nellis ~$1 Million annually
Nellis Air Force Base
24
Total Third Party Construction Cost ~ $100 million
Nellis Construction Funding Schedule
* A typical solar project construction takes approx. 8 – 9 months.
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
Construction Debt Outstanding Letters of Credit from MMA
12/21/07 – Final Completion Date and Perm Debt Funded
25
Final Thoughts
• U.S. is the most promising solar market in the world today
• U.S. solar industry competing with European firms
– Third party ownership facilitates entry of European firms
– ITC risk pushing U.S. firms overseas
• But, U.S. solar industry still playing catch-up with Europe, due to weaker policy environment
• Project financier and third party capital necessary for U.S. market growth due to incentives structures
26
Seeking a Level Playing Field for Solar
• Congress considering permitting utilities to receive ITC (currently not permitted)
– Utilities starting to enter the North America PV generation market (SCE, Duke)
• Utilities can bring scale to industry
• But utilities are already receiving federal subsidies and regulatory advantages
• Incentives should encourage all market participants to make the solar marketplace
