Confident DecisionsDefinitive Returns

AltaE Webinar Series:Assessing the Feasibility of Commercial Solar – Part I:

Incentives and Utility ConsiderationsOctober 2, 2013

Agenda

• Introductions• Webinar Objectives• The Regulatory Landscape• Distributed Generation Policies• Financial Incentives• Q & A

Today’s Presenters

• Cynthia Clark Manager of Utilities and Incentives, Alta Energy, Inc.

Alta Energy, Inc. is a company dedicated to enable volume adoption of renewable energy solutions in the commercial & industrial segment ‐ by streamlining deployment process to be effective & efficient, yielding an optimized solution every time.

• George AshtonVP and CFO, Sol Systems, LLC

Sol Systems is the largest Solar Renewable Energy Credit (SREC) aggregator and financier in the United States.  With thousands of customers and SRECs traded annually, they understand the intricacies of SREC monetization and the nuances of the SREC markets better than any other player in the solar industry. In addition to providing dynamic options for system owners to sell SRECs, Sol Systems also offers project financing and investor advisory services.

Webinar Objectives

Provide information to help solar‐interested property owners understand:

• The complex realm of electricity regulation

• Key policies that frame the solar potential in a given market

• A wide variety of available financial incentives for solar

Layers of Regulation

Wholesale Market:• Federal Energy Regulatory Commission 

(FERC)

• North American Electric Reliability Council (NERC)

• Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) 

Retail Market:• State Utility Regulatory Agencies and Energy 

Commissions

~2,000 Public Utilities

Composition of U.S.Electric Entities

Source: eia.gov, 2007

~1,000 Electric Cooperatives (Coops)

~250 Investor‐Owned Utilities (IOUs) 

~10 Federal Electric Utilities

~60%

Non‐Utility Power Producers

Retail Rates for IOUs governed by state PUCs

Retail Rate Authority & U.S. Electric Sales 

Public Utilities are self‐governing • Include Municipals (Munis),• Public Utility Districts (PUDs),• Irrigation Districts (IDs), etc.

Coops are also self‐governing

Source: eia.gov, 2007

~65%

Retail Market Restructuring

Restructuring means that a monopoly system of electric utilities has been replaced with competing sellers

Depending on the state and utility, a customer may pay one entity to generate electricity and another entity to deliver it, with some choice on the generation side.

Key Solar Policies

What are key policies that enable commercial solar distributed generation?

1. Renewable Portfolio Standards2. Interconnection Guidelines3. Net Energy Metering4. 3rd Party Power Purchase Agreements5. Local Permit Requirements

Solar policies are generally set by state government and implemented by the PUC.  Typically apply to IOUs and can vary for munis and coops.

1. Renewable Portfolio Standards 

A Renewable Portfolio Standard (RPS) requires a certain percentage electricity to be generated from renewable sources:

• 29 States + Washington DC have mandatory Renewable Portfolio Standards

• 8 States have voluntary renewable energy goals

• Primary driver for renewable energy policies and incentives

State Goal

Hawaii 40% by 2030

California 33% by 2020

Colorado  30% by 2020

New York 29% by 2015

Nevada

25% by 2025Oregon

Illinois

Minnesota

Delaware 25% by 2026

New Hampshire 24.8% by 2025

2. Interconnection Guidelines 

Interconnection Guidelines describe the conditions under which solar DG can be connected to the grid:

• Designed to protect the safety and reliability of utility infrastructure

• May require customer to pay for any necessary equipment upgrades

• Levels of review and fees typically based on system size and complexity

3a. Net Energy Metering

Net Energy Metering (NEM) is the dominant paradigm from promoting distributed generation in the U.S.

• 43 States + Washington DC have a net metering policy• Solar generation is “behind the meter” and the meter can run in either 

direction – credits carry forward• Vary by total program capacity, allowable system size & numerous other 

factors

3b. Net Energy Metering

A Billing Convention that allows customers to be compensated for electricity produced at full retail value:

Source:  Crossborder Energy for The Vote Solar Initiative

• Solar Energy Production can be intermittent and does not always match onsite demand 

• NEM policies allow solar customers to send excess energy to the grid and consume supplemental energy from the grid when needed

• Solar energy tends to be produced at times of peak system‐wide demand when time‐of‐use rates are highest

Solar Value is tied to Retail Rates

4. 3rd Party Power Purchase AgreementsThese policies determine whether a non‐utility 3rd party may own a customer‐sited solar system and sell power to the customer:

• Enables customers to “go solar” with minimal or no capital investment

• Is a good option for those who cannot use the tax benefits, e.g. gov/non‐profits, REITs, etc.

• Fairly new ownership model; legal status is still unknown or unclear in many states

• Lease arrangements may still bepermitted, depending on the terms

5. Local Permit Requirements

Each project may require multiple permits and approvals, subject to local jurisdictional authority (typically City or County):

Planning/ZoningLand use requirementsEasements & Rights of WayGen & Load on Separate ParcelsMaximum height restrictionsAesthetic considerations

Electrical/FireRequired Aisles and Set‐backsFees based on equipment, capacity and/or costFire Department Review

Building/StructuralSeismic Load RequirementsWind Load RequirementsStructural Load RequirementsRoof Penetrations

OtherArchitectural Review BoardHOA policies/restrictionsLabor Laws and RegulationsConditional Use PermitSite‐line Considerations

Local requirements can materially impact project cost and/or schedule

Financial Incentives are Available for Solar

Types of Incentive

• Tax‐based Incentives– Grant/Credit– Depreciation– Property or Sales Exemptions

• Solar Renewable Energy Credits • Capacity‐based Incentives

– Rebates, usually paid up front• Performance‐based Incentives

– Production‐based, usually paid over time• Financing Programs• Feed‐in Tariff/Value of Solar Tariff

– See Alta Energy’s latest whitepaper, “Placing a Value on Distributed Solar Generation,” for more info on this topic:

• http://www.alta‐energy.com/whitepaperswebinars/

Tax‐based Incentives

• Business Investment Tax Credit (ITC): 30% through 2016 (10% thereafter)

• Federal Modified Accelerated Cost Recovery System (MACRS): 5 year schedule for qualified assets

• Business Tax Credit• Production Tax Credit• Sales & Use Tax Exemption• Property Tax Exemption

Federal

State/Local

Solar Renewable Energy Credits

(SRECs)

Renewable Energy Financial Services

George AshtonVP & CFO

Sol Systems

About Sol Systems

We are a solar financial services firm that:

• Offers investors direct access to renewable energy assets

• Provides developers with project financing solutions

• Helps system owners maximize the value of theirSRECs

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Solar Finance Services

10/2/2013 Renewable Energy Financial Services 21

Project Development & Finance

20+ MW and 17 projects funded/exec. term sheet through Sol Systems in past

six months

Corporate, energy supplier, private equity, and high wealth individual

clients

Over $15 million in tax equity investments in 2012, $40 million more

in 2013

$2.4 billion in capital seeking projects

Over $20 million committed capital from Sol Systems partners

SREC Aggregation & Finance

Market makers - largest and longest-standing SREC services firm

Over 300 developer partners with nearly 40 MW under management

Facilitated over $150 million in project financing through SRECs

Direct investment of millions in up-front SREC payments to developers

Trusted partner to thousands of homeowners and businesses

SRECs Defined

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1 SREC = 1000 kWh

Solar Credit

Monetization Strategies

10/2/2013 Renewable Energy Financial Services 23

STRATEGY RISK REWARDSPOT MARKET HIGH HIGH1-2yr Contract MED MEDRFPs LOW MED3-5yr Contract LOW LOWUPFRONT NONE LOWER STILL

Monetizing SRECs for a given project depend on:

• Appetite for risk• Financing needs

SREC & Solar States

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DC

Project Financing Market

Project Finance and SREC Market

Most Viable SREC States

10/2/2013 Renewable Energy Financial Services 25

• DC• Fixed rate contracts:

$300-400/SREC• Upfront: $1200/kW• Spot: $485

• MA (SREC I) Fixed rate contracts:

$165-$200/SREC Upfront: $1100/kW Spot: $245

• MD• Fixed rate contracts:

$60-$80/SREC• Upfront: $300/kW• Spot: $133

• NJ • Fixed rate contracts:

$75-$100/SREC• Upfront: $120/kW• Spot: $130

Oversupplied, less viable markets include DE, OH, & PA, where spot prices range $15-$50/SREC.

Summing It Up

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• SREC markets have been critical for driving solar development on the East Coast

• Hot SREC markets are DC and MA, and projects in NJ and MD can pencil with a viable SREC solution

• Work with a trusted counterparty to monetize your SRECs and create a strategy for your portfolio

10/2/2013 Renewable Energy Financial Services 27

George.Ashton@SolSystemsCompany.com | (202) 588-6452

General Information:

info@solsystemscompany.com 888-235-1538

Facebook.com/SolSystemsCompanyTwitter.com/Sol_Systemswww.solsystemscompany.com

Thank You.

Questions?

Capacity‐based Incentives

• Offered at the State or Utility level• One‐time up‐front payment ($/Watt)• Small window of opportunity/limited availability

LADWP Solar Incentive Program ‐ ~$30M annual budget since 2000, current rate $0.70/W (up to $700K for 1 MW)  FPL Solar Rebate Program ‐ $15.5M annually, current rate $1.50/W up to $50K per premiseLIPA PV Rebate Program ‐ $28.8M budget (2013), current rate $1.45/W up to $145K or 50% of project costs

Performance‐based Incentives

• Offered at the State or Utility level• Paid out over time, based on actual electricity produced 

(₵/kWh) – incremental to the value of the energy• Application queues and wait lists are common

Xcel Energy Solar Rewards Program – (current rate: 7₵/kWh) typical 500 kW system would earn ~$48K in annual revenue for 20 years SDG&E CSI Program – (current rate: 4.4₵/kWh) typical 1 MW system would earn ~$65K in annual revenue for 5 yearsEWEB Solar Electric Program – (current rate: 8.6₵/kWh) typical 200 kW system would earn ~$18K in annual revenue for 10 years

Additional Incentive Considerations

• Selection Methods Vary• Application Requirements• Available Program Funding• Declining incentive levels• Project incentives often capped by 

size or max $• May have separate capacity 

allocated by size or sector• Restrictions on combining 

incentives• REC ownership • Taxability

Incentives come & go; it’s important to be prepared!

Summary

1. Electricity markets are subject to layers of regulation2. Retail electric policies vary by state, utility type, and local 

jurisdiction:• Renewable Portfolio Standards• Interconnection Guidelines• Net Energy Metering• Third Party Power Purchase Agreements• Local Permit Requirements

3. Financial Incentives come in many shapes and sizes4. Solid financial returns are currently available in many markets, even 

without incentives5. Incentives can materially influence the economics of a project

Plan ahead to secure key solar incentives!

Questions & Answers

Any Questions?

Please use the WebEx Q&A feature on right of your screen to submit your 

questions

Contact Information

Still have questions?Contact Us:Email: info@alta‐energy.comTel: 650‐345‐2582 (ALTA)www.altaenergyinc.com

Upcoming Webinar:“Unlocking the Economic Potential of Solar – Part II: Property and Ownership Considerations”