Agenda. 34 th Annual C.A.S.H. Conference. Overview of Chico USD Financing Options Legal Considerations Construction and Results

Transcription

1 34 th Annual C.A.S.H. Conference Navigating the solar process: From Pre-Construction and Financing through Project Construction and Results Agenda Overview of Chico USD Financing Options Legal Considerations Construction and Results 1

2 Financing Considerations Evaluation of Solar Project Feasibility What is the goal? Superior economics? Policy desire for green energy? Step 1: Compare project costs to business as usual (BAU) scenario Is net annual PV cost + O&M + Residual Energy Cost < = BAU? Future energy price escalation factor assumption in BAU can alter results Step 2: What is the best method to finance the project? Public ownership versus private ownership of solar facilities Application of available subsidies 5 year CSI payment dependent on actual production Who owns the Renewable Energy Credits (RECs)? 2

3 Private Ownership Power Purchase Agreement (PPA) Private entity owns solar facilities Enables public entities to share in ability to monetize tax subsidies District purchases power for 20+ years at a contractual rate Economic viability of PPA is highly dependent on rate of return investors in the PPA are seeking Power Purchase Agreement Structure School District 20 Year Cashflow Solar Power Private Company Company Receives: A Tax Benefits B C D PPA Payments CSI, if available RECs Public Ownership Cash on hand vs. Loan Source of repayment Property tax financed (General Obligation Bond) GF Financing (COP/lease purchase) Financing options Tax-exempt financing Tax credit bonds (QSCBs, CREBs, QECBs, QZABs) Borrowing methods Bond market vs. private placement with a bank 3

4 Bond Funded Solar Projects for Schools Lincoln USD $6.7M CREB Calistoga JUSD $1.52M CREB Twin Hills Union SD $1.21M CREB Jurupa USD $27.1M Tax-Exempt Lodi USD $9.9M QECB August MW Solar PV May kw Solar PV March kw Solar PV September MW Solar PV November MW Solar PV Mt. Diablo USD $110M Tax-Exempt/CREB Huntington Beach City SD $7.9M Tax-Exempt/BAB San Ramon Valley USD $25.0M QSCB Morgan Hill USD $13.6M Tax-Exempt/QSCB Santee SD $2.3M CREB September MW Solar PV July kw Solar PV/EE July MW Solar PV June MW Solar PV June kw Solar PV Tax-Exempt Borrowing Rates Tax-Exempt interest rates are near all-time lows Bond Buyer Revenue Bond Index (RBI) (%) 4.0 Average 4.53% Max = 6.48% Min = 4.06% Current = 4.22% Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan (%) Average 5.03% Source: The Bond Buyer. Tax-Exempt Bonds maturing in 30 years with average rating of A1/A+. As of 1/23/

5 State Subsidies California Clean Energy Jobs Act (Proposition 39) The Governor s January 2013 budget proposes to transfer $450 million of the revenues generated from Prop 39 in into a special fund for energy efficiency projects for K-12 schools and community colleges; followed by $550 million in each of the next four years The California Solar Initiative (CSI) Incentive program based on actual production Limited funding available today California Energy Commission (CEC) Provides low-cost loans Bright Schools Program provides technical assistance California Solar Initiative (CSI) - Step Schedule 5

6 Legal Considerations Legal Considerations Selection of Solar Vendor Competitive bidding not required School districts may select and award energy service contracts to a contractor on the basis of the experience, type of technology employed, cost to the school district, and other relevant considerations, and without competitive bidding if: Certain findings are made Public hearing is held with proper notice Notice and Public Hearing Notice provided 2 weeks in advance of regularly scheduled public hearing 6

7 Findings as required by Government Code section : It is in the best interest of the school district to enter into an energy service contract and any necessarily related facility ground lease. The anticipated cost to the school district for thermal or electrical energy or conservation services provided by the energy conservation facility under the contract will be less than the anticipated marginal cost to the school district of the thermal, electrical, or other energy that would have been consumed by the school district in the absence of those purchases. The difference, if any, between the fair rental value for the real property subject to the facility ground lease and the agreed rent, is anticipated to be offset by below-market energy purchases or other benefits provided under the energy service contract. Can use RFP process to select solar vendor Due diligence Review financials to make sure solar vendor is financially viable over the course of installation and operation of solar energy system Experience installing solar energy systems at public facilities Responsiveness if there are problems with the system Success with achieving production guarantees Check references District staff and others to select solar vendor 7

8 Legal Considerations - Consultants Solar Energy Consultant Engineer and/or Construction Manager Financial Advisor Environmental Consultant Legal Counsel Solar Energy Consultant Independent compensation not based on whether solar project is approved or production output or savings achieved Solar energy system experience Experience with energy audits and evaluation of solar energy systems that best suit District s needs and goals 8

9 Engineer and/or Construction Manager Solar energy system experience Public works experience District experience Financial Advisor Independent compensation not based on whether solar project is approved or production output or savings achieved Experience evaluating financial savings and cost escalation assumptions provided by solar vendor Experience with both PPA and public agency ownership models 9

10 Environmental Consultant Experience with CEQA compliance and other applicable laws and regulations in connection with solar projects Solar panels generate heat, light, glare Possible effects on wildlife and endangered species Legal Counsel Independent compensation not based on whether solar project is approved or production output or savings achieved Experience with both PPA and public agency ownership models, including drafting documentation 10

11 Legal Considerations Contract Provisions Parties Compliance with Government Code findings Responsibilities Performance guarantees Assignment Warranties Insurance Indemnification Dispute resolution Attorneys fees Damages Termination System removal Parties Identify parties and status Compliance with Government Code findings Provision establishing that school district has made the findings required by Government Code section

12 Responsibilities Design Funding Construction Ownership Removal Performance guarantees Minimum production Threshold for what constitutes a shortfall Accuracy of meter Test meter on regular basis Adjustments if meter is not accurate Payment by or refund to District if not accurate 12

13 Assignment Often under PPA model, agreement is assigned to the investors Assignee should have same level of experience with solar energy systems and same financial viability as solar vendor District can request ability to consent to the assignment, but unlikely to be successful Warranties Manufacturer s warranty Existing or supplemental All equipment Services Negotiate provisions in contract for warranty Connect warranty provisions to performance guarantees 13

14 Insurance School district should consult with its risk manager to determine appropriate levels of insurance Commercial general liability Excess liability Workers compensation and employer s liability Automobile liability Self-insurance Indemnification Provide proper protection to District from those creating the risk Indemnification from manufacturer Indemnification from installer/operator Ongoing safeguards protecting District against operations and workers on site 14

15 Dispute resolution Arbitration or Mediation Non-binding Attorneys fees Relative benefits compared to harm Damages Solar vendor may try to avoid consequential, special, incidental and other types of damages Risk of consequential damages should be imposed on proper party Manufacturer Ongoing operator Liquidated damages In the event that solar vendor fails to timely install and commence operation of solar energy system 15

16 Termination Pre-construction Mutual consent Early determination Buy-back provisions Termination without cause Termination for cause Grounds Default Damages System removal At termination, solar energy vendor must remove entire system and components (i.e., concrete footings for ground-mounted systems) and return buildings and grounds to condition it was in prior to installation of the system Time limit to remove and restore the property 16

17 Construction and Results Site Selection Best Practices Solar is not a fit for every District. When initially looking at your District s sites it is important to consider the following factors: Available space Use of space pedestrian traffic, vehicular traffic, special events, etc. Shading Distance from array to interconnection point Rate tariffs Geotechnical considerations ADA triggers Community involvement 17

18 Structure Type Not all structures are the same. There are significant price fluctuations between structure types. T versus L shaped carport and shade structures Ground mounted structures Most cost effective Roof mounted structures DSA requirements and roof conditions can be prohibitive Chico USD Sites Pleasant Valley High School 18

19 Chico USD Sites Corporate Yard Chico USD Sites Marsh Junior High School 19

20 Chico USD Sites Pleasant Valley High School Pre-Construction Best Practices More upfront planning results in smoother construction and overall process. Thorough contract review Design phase is critical Set clear expectations with stakeholders early and often Community education meetings, renderings Solidify schedule of weekly construction meetings Construction/SOLAR POWER/index.html 20

21 What to Expect During Construction Phase one of project execution: Shade structure construction What to Expect During Construction Phase two of project execution: Module installation 21

22 What to Expect During Construction Phase three of project execution: Interconnection and completion Chico USD - Actual versus Expected Results Chico USD engaged Newcomb Anderson and McCormick, to perform a third party evaluation of system performance one year after the systems were installed. All systems are operating at or above expectations. Construction/SOLAR POWER/index.html 22

23 Lessons Learned and Future Steps Contact Information Michael Weissenborn Chico Unified School District (530) Anna Van Denga Stone & Youngberg (415) Addison Covert Kronick Moskovitz Tiedemann & Girard (916) Anastasia Beckett SolarCity (650)

24 Glossary of Select Terms Capacity Factor The amount of actual energy produced by the system versus the theoretical maximum calculated by multiplying the nameplate capacity by 8,760 hours in each year. CSI The California Solar Initiative (CSI) payments are production-based monthly cash payments paid to the solar system owner Investor Owned Utility A utility owned by investors, versus a municipal entity, who provides electricity for a geographic area. In California, refers to PG&E, SCE and SDG&E. Feed-in Tariff a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology. Load The amount of electricity usage, or demand, by the end user or host site MWh Megawatt hour is equivalent to 1,000 kilowatts, or 1,000,000 watts Net Metering The process of the local utility keeping track, and crediting, the excess energy created by the system versus the amount used by the host site. Residual Energy (Cost) The sum of the difference in the amount of energy used by the host site versus the energy generated by the solar facility. Glossary of Select Terms RPS Renewable Energy Standard. California law mandates that utilities in the State meet a minimum of 33% of their Load requirement from renewable energy sources. Anniversary Year - Each one-year period commencing on the Commercial Operation Date in which payments are made to the solar energy provider for the purchase of solar energy. Commercial Operation Date - The date that the facility(s) providing electric power (i) is mechanically complete and operating and (ii) energy is delivered to the site's electrical system. Early Buyout Option - On a date(s) and at a price(s) set forth in the PPA or other agreement to provide energy, the school district may exercise its option to terminate the PPA or other agreement, and to purchase the facility providing electric power. Excusable Delay - A delay in achieving the Commercial Operation Date not caused by the solar energy provider that may allow for the project schedule and Commercial Operation Date to be adjusted. Guaranteed Energy Output - The solar energy provider's guarantee to deliver to the school district a certain agreed upon energy output commencing on the Commercial Operation Date. 24