Challenge: Solar Needs Liquidity

Transcription

1 Challenge: Solar Needs Liquidity (Solution: Solar Tax Equity Financing) Steven Center Vice President Environmental Development American Honda Motor Co., Inc. April 10, 2013 CNSE, State University of New York at Albany SunShot Conference

2 Blue Skies EBDO Major Themes GHG Accounting Mobility 2 Green Dealer Program Energy Efficiency Investigation Charging Fit EV Solar Honda Smart Home Renewable Electricity V2G Investigation Distributed Generation Natural Gas FCX Clarity Accord PHEV Home Hydrogen EVSE Future: Generator Civic GE CNG Station In a Box EBDO: Energy, Mobility, and and Policy

3 Blue Skies EBDO Major Themes GHG Accounting Mobility 3 Green Dealer Program Solar Honda Smart Home Energy Efficiency Renewable Electricity Distributed Generation Natural Gas Investigation Charging Fit EV FCX Clarity Accord PHEV Home Hydrogen EVSE Future: Generator Civic GE CNG Station In a Box EBDO: Energy, Mobility, and and Policy

4 Blue Skies EBDO Major Themes GHG Accounting Mobility 4 Green Dealer Program Solar Energy Efficiency Renewable Electricity Honda Smart Home V2G Investigation Distributed Generation Investigation Charging Fit EV FCX Clarity Accord PHEV EVSE Home Hydrogen Future: Generator Civic GE CNG Station In a Box EBDO: Energy, Mobility, and and Policy

5 Blue Skies EBDO Major Themes GHG Accounting Mobility 5 Green Dealer Program Energy Efficiency Investigation Charging Fit EV Solar Honda Smart Home Renewable Electricity V2G Investigation Distributed Generation Natural Gas FCX Clarity Home Hydrogen EVSE Accord PHEV Future: Generator Civic GE CNG Station In a Box EBDO: Energy, Mobility, and and Policy

6 Annual GHG Emissions of Lifestyle Activity () GHG Reduction for Customer Lifestyle Mobility HEV: 1.3 Ton/Year BEV: 2.3 Ton/Year Civic HEV BEV Solar Home: 3.1Ton/Year Mobility + Solar Solar Home + HEV: 4.4 Ton/Year Solar Home + BEV: 5.4 Ton/Year Solar Home + Solar BEV: 6.9 Ton/Year 2.9 Net Zero Energy Home: 6.0 Ton/Year Mobility + Solar + Eco Smart Home Net Zero Energy Home: + HEV 7.3 Ton/Year 2.5 Heat Electricity Vehicle Fuel Net Zero Energy Home: + BEV 8.3 Ton/Year 1.5 Net Zero Energy Home: + Transport 9.8 Ton/Year 400Therms/Year 7000 kwh/year miles/year California Example 0 6 To Achieve GHG Reduction: EBDO Focus on Entire Customer Energy and Transport Needs

7 FY 14 / 12Environmental th Midterm Technology Leasing Solar A00 Show Honda Brand environmental leadership Use solar electricity to reduce Honda s CO2 footprint, including distribution channels, where it is profitable business for Honda. A01 Install and lease up to 3500kW of solar systems at up to 10 dealers. Support Fit EV sales launch with a option to charge their vehicles with solar electricity. Example: $1M Invested in Solar System at Dealer $1M $0.3M $0.271M Fed Depreciation / 6 Years $0.089M State Depreciation / 12 Years IRR = 5.4% to 7.0% Depending on Month of Initial Payment and Realization of Tax Benefit $0.635M Lease Payments / 15 Years $0.295M Profit +158tons/yr CO2 Saved >60% Returned by Tax Incentives Lend the tax benefit to the dealer in year 1 to reduce the capital that is financed in the lease and create a consistent lease payment. Solar at Dealership FIT EV Customer Up To 3.5kW each Invest / 1Yr Fed Tax Credit / 1Yr Tax Incentives enable profitable businesses for solar. FY13 Targets: Develop partner and business model for installation and maintenance at dealers Achievement Timing Q2 CY 2012 Install up to 3500kW of solar at dealers Q1 CY 2013 Develop partner and business model for installation and maintenance at Fit EV customer s home Q2 CY 2012 Install up to 50 installations at customer s home Q1 CY 2013 Up To 350kW each Timeline Win for customer Win for AHM Win for Society Nissan s experience with the Leaf suggests up to 40% of Leaf customers install solar at home. 2 Evaluate, Select Partners FIT EV Launch 3 Sign Up Dealers Investment Recovery on straight leases are lengthy Install at Dealers Ongoing install at Customer site (through partner)

8 Cumulative Cash Flow of First Year of Solar Lease Example: 10 Dealerships installed in FY2013 with 15 Year Solar Lease from AHM $10,000,000 Cumulative Cash Flow $5,000,000 $- $(5,000,000) $(10,000,000) $(15,000,000) $17,500,000 Invested over 1 year $(20,000,000) $8Million Tax Benefit Realized ~April 2014 Install Install 2 Install 3 Install 4 Install 5 Install 6 Install 7 Install 8 Install 9 Install 10 AHM will carry FY 2013 tax credits and depreciation forward to FY 2014 Months from April 2012 All investment paid back in year 9 30% Tax Credit 50% Bonus Depreciation for 2012 $5Million net return to AHM by lease end. IRR = 6.6% Plus: 35,500 of CO2 Avoided over 15 years Value at $21 to $81/ton = $0.75 to $2.9 Million Plus: 75,000 SRECs Generated over 15 years Value at $20/ea = $1.5Million (Honda Retires Them) Plus: Image of Solar at Dealerships Plus: Each dealer saves $120k (plus local incentives) in energy cost over 15 years Win for AHM, Win for Dealer, Win for Society Investment Recovery on straight leases are lengthy

9 Tax Equity Partnerships with SolarCity Financial companies who have an appetite for tax credits and depreciation are investing in Tax Equity Partnerships, and Solar City is one of the most successful at attracting investment. Honda is in a unique position where we have a relationship with the customer the other companies generally do not. SolarCity wrote the book on Tax Equity Financing of Solar

10 Installer Models with Honda Potential Partner Panel OEM Dealer / Installer O&M / Service Warranty / Guarantee Financier Judge AAAAA Sharp Honda Kyocera Stellar Installer A, B, C, Stellar Installer A, B, C, Relies on outside contractors to do the work. (Equipment Maker) Installer A, B, C, Relies on equipment maker s warranty. AHFC Purchase Financing Lease X SolarCity Honda Kyocera LG Trina (Any Maker) Solar City Simple, consistent customer experience SolarCity chooses the best combination of top quality, reliability, and lowest cost. SolarCity s own employees do the work. Solar City / AH Fund Purchase Financing Lease, PPA AHFC O a) Good potential for future Honda panel business b) One point of contact c) Simple customer experience. BBBBBB SunPower Honda SunPower SunPower SunPower Installer A, B, C, Installer A, B, C, Installer A, B, C, Relies on contractor network to do the work. SunPower / AH Fund Purchase Financing Lease, PPA. AHFC SolarCity s business covers all aspects of the customer experience.

11 Tax Equity Partnership Value is distributed to the party who wants it most: -Electricity to customer -Long Term Cash to Partner -Tax Benefits to Investor -Exit strategy for Investor Solar Partner O&M Insurance Investment Solar System Payment Distribution Customer Solar Energy Lease Payment AH / Solar Partnership Investment Tax Credit Depreciation Distribution Buyout Lease Payments Cash to Partnership Local Incentive Cash to Partnership Tax Benefit of Depreciation To AH Tax Credit To AH Investment Distribution Distribution of Cash Buyout Partner purchases AH s Share of in 6 th Year. AH Because the partner purchases AH s share of the business, they take care of the future warranty claims, including roof leakage, panel power output, inverter trouble, etc. This means the installer has to guarantee a high level of initial quality, which is good for our customer. Incentive Utility IRS Tax Credit Depreciation Tax Equity Partnership Efficient method of dividing and separately allocating Value Streams.

12 Tax Equity Partnership Structure SAMPLE

13 Financing Schedule SAMPLE You negotiate this Big Challenge: Little History, IRS (interp) Risks, Tax Code Changes, Be Careful!!!

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