Current and Potential Incentives for Public & Private Financing of District Energy & CHP

Transcription

1 Current and Potential Incentives for Public & Private Financing of District Energy & CHP International District Energy Association Annual Conference 2013 Mark Spurr President, FVB Energy USA June 4, 2013 Global Presence Local Solutions 40 Years of Experience in Sustainable District Energy Systems

2 Agenda Overview of technologies considered Current incentives Tax exempt bonds Investment tax credits Production tax credits Accelerated depreciation Potential incentives (pending legislation) Master Limited Partnerships Parity Act Local Energy Supply & Resiliency Act Biomass Thermal Utilization Act

3 Technologies Combined heat & power (CHP) Natural gas Biomass Renewable thermal production Renewable power production Thermal distribution & building connections

4 Current Federal Incentives For-profit Non-profit Exempt Facility Bonds Production Tax Credits Municipal Revenue Bonds Investment Tax Credits Accelerated Depreciation

5 Tax-Exempt Bonds Exempt Facility Bonds Issued by local governments on behalf of private entities for a range of purposes including district energy distribution systems Subject to state volume caps Municipal Revenue Bonds Issued by local governments for revenueproducing activities Backed by project revenues, not general obligation of local government

6 Investment Tax Credits (ITC) Technology Energy Output Credit % Maximum Expires Solar Heat, cool, power 30% None Drops to 10% at end of 2016 Geothermal heat pump Geothermal direct use Heat, cool, power 10% None No expiration date CHP Heat + power 10% No $ max, but only up to 15 MW Dec. 16, 2016 Section 48 of the U.S. Code

7 Production Tax Credits (PTC) Section 45 of the U.S. Code Credit only for power production Credit of 2.3 cents/kwh for wind, closed loop biomass and geothermal Credit of 1.1 cents/kwh for open loop biomass, landfill gas, municipal solid waste, hydroelectric Duration of credit is 10 years Projects must begin construction by 12/31/2013 Taxpayers eligible for the PTC can instead take a 30% ITC if construction begins by 12/31/2013

8 Accelerated Depreciation Modified Accelerated Cost-Recovery System (MACRS): Technologies classified as five-year property include solar-thermal technologies direct-use geothermal and geothermal heat pumps combined heat and power (CHP) Biomass is seven-year property

9 Bonus Depreciation 50% first year depreciation for certain properties including those eligible for ITC Extended to properties for which construction has begun by Dec. 31, 2013

10 Current State Incentives (See Supplemental Slides) For-profit Renewable Energy Credits Energy Efficiency Credits Personal & Corporate Tax Credits Sales Tax Exemptions Property Tax Credits Grants Loans Net Metering Utility Rebates Non-profit

11 Pending 2013 Legislation Master Limited Partnerships Parity Act of (MLPPA) Local Energy Supply & Resiliency Act (LESRA) Biomass Thermal Utilization (BTU) Act

12 Master Limited Partnerships Parity Act of 2013 Introduced April 24, 2013 MLPs have been used for decades but by law have only been available to investors in energy portfolios for oil, natural gas, coal extraction, and pipeline projects What is an MLP? Business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market Double taxation (corporate and individual) is avoided because income from an MLP is taxed only at the individual level, thereby significantly reducing the cost of capital Tax attributes and liquidity makes it very attractive to investors

13 Master Limited Partnerships Parity Act of 2013 MLPPA extends the definition of qualified sources to include clean energy resources and infrastructure, including: COMBINED HEAT AND POWER.--- generation, interconnection with the nearest electric grid, storage, or distribution of thermal energy from CHP RENEWABLE THERMAL ENERGY.---generation, storage or distribution of thermal energy from closed-loop biomass, open-loop biomass, geothermal energy and municipal solid waste, solar and geothermal resources

14 Local Energy Supply & Resiliency Act To be introduced by Sen. Al Franken (D-MN) Would provide cost-shared technical assistance funding and debt financing for Local Energy Infrastructure, defined as systems which: Recover or produce useful thermal energy from waste heat or renewable thermal energy sources, Generate electricity locally, Distribute electricity in microgrids, Distribute thermal energy, or Transfer thermal energy to building heating and cooling systems

15 Local Energy Supply & Resiliency Act Technical Assistance Program Grant program to provide technical assistance Open to for-profit and nonprofit entities Cost-shared funding for: Identifying opportunities Assessing feasibility Overcoming barriers to project implementation Conducting financial assessments and planning Engineering Authorized appropriations: $125 million over the period 2014 to 2018

16 Local Energy Supply & Resiliency Act Local Energy Infrastructure Loan Program Creates program within the Department of the Treasury to provide loans for Local Energy Infrastructure Treasury notes or bonds would be used to fund up to 70% of total project capital cost Limit of $30 million per project Authorized appropriations: $125 million over the period 2014 to 2018.

17 Local Energy Supply & Resiliency Act Recoverable Waste Energy Inventory Program Reauthorizes appropriations for the Recoverable Waste Energy Inventory Program which expired in 2012 Inventory is a survey of all major industrial and large commercial combustion sources to identify the quality and quantity of waste energy produced at each source Authorizes appropriations of $8 million a year from 2014 to 2016.

18 Biomass Utilization Act Adds open-loop biomass heating property as qualifying for the Section 48 ITC 10% credit if efficiencies are 65 to 80% 30% credit if over 80% efficient Note: the existing Section 48 investment tax credit expires at the end of 2016

19 Thanks for your attention! Mark Spurr Phone: Global Presence Local Solutions 40 Years of Experience in Sustainable District Energy Systems

20 Supplemental Slides State policy maps from DSIRE database

21 Renewable Portfolio Standard Policies.. / March states,+ Washington DC and 2 territories,have Renewable Portfolio Standards (8 states and 2 territories have renewable portfolio goals).

22 Renewable Portfolio Standard Policies with Solar / Distributed Generation Provisions. / March states,+ Washington DC have Renewable Portfolio Standards with Solar and/or Distributed Generation provisions

23 Energy Efficiency Resource Standards. / February states have Energy Efficiency Resource Standards. (7 states have goals). Note: See following slide for a brief summary of policy details. For more details on EERS policies, see and

24 EERS Policy Details Arizona: 22% cumulative electricity savings by 2020; 6% cumulative gas savings by Arkansas: 0.75% of 2010 electric sales reduction by 2013; 0.4% of 2010 gas sales reduction by California: Varies by utility. Colorado: Electricity sales and demand reduction of 5% of 2006 numbers by 2018 (statutory requirement); natural gas savings requirements vary by utility. Connecticut: 4% of retail load (includes CHP and waste heat recovery). Delaware: Electricity and peak demand savings equivalent to 15% of 2007 numbers by 2015; natural gas savings equivalent to 10% of 2007 natural gas consumption by Florida: 7,842 GWh cumulative reductions from (statewide goal); 3,024 MW cumulative summer peak demand reduction from , 1,937 MW, cumulative winter peak demand reduction from (statewide goal). Hawaii: 4,300 GWh reduction in electricity use by Illinois: 2.0% reduction of 2008 electricity sales by 2015; 1.1% reduction of 2008 peak load demand by 2018; 8.6% cumulative natural gas savings by Indiana: 2.0% electricity sales reduction by Iowa: Varies by utility. Maine: 30% reduction of electricity and natural gas sales by Maryland: 15% reduction in per capita energy consumption by 2015, compared to 2007; 15% reduction in per capital peak demand by 2015, compared to Massachusetts: Reduce 1,103 GWh electricity in 2012 (statewide); reduce 24.7 million therms by 2012 (statewide). Michigan: 1.0% annual reduction of previous year retail electricity sales by 2012; 0.75% annual reduction of previous year retail natural gas sales by Minnesota: 1.5% reduction of previous 3-year average retail electric sales by 2010; 1.5% reduction of previous 3-year average retail natural gas sales by Missouri : 9.9% cumulative electricity savings by2020; an additional 1.9% each year thereafter.9% cumulative peak reduction by 2020; an additional 1% each year thereafter. New Mexico: 10% of 2005 total retail kwh sales by New York: 15% reduction relative to projected electricity use in 2015; gas savings of 112 Bcf annually by Ohio: 22.0% reduction of previous 3-year average retail electricity sales by Pennsylvania: 3% of projected June May 2010 electricity consumption by May 31, 2013; 4.5% of measured June May 2008 peak demand by May 31, Rhode Island: Varies by utility. Texas: 25% reduction in annual growth in demand 2012; 30% reduction in annual growth in demand Vermont: 320,000 MWh electricity savings (3-year goal for 2012, 2013, 2014); summer peak kw savings: 60,800 (3-year goal for 2012, 2013, 2014). Virginia: 10% electricity savings by 2022 relative to 2006 base sales. Washington: Varies by utility. Note: For more details on EERS policies, see and Wisconsin: : Net annual electric energy savings of 1,816,320,000 kwh; net annual natural gas savings of 73,040,000 therms.

25 Tax Credits for Renewables / January 2013 DC Personal tax credit(s) only Corporate tax credit(s) only Personal + corporate tax credit(s) Notes: This map does not include corporate or personal tax deductions or exemptions; or tax incentives for geothermal heat pumps. Puerto Rico 24 states offer tax credits for renewables

26 Sales Tax Incentives for Renewables / January 2013 DC State exemption or deduction State exemption + local governments (option) authorized to offer exemption or deduction Notes: This map does not include sales tax incentives that apply only to geothermal heat pumps or other energy efficiency technologies. Puerto Rico 28 states + Puerto Rico offer sales tax incentives for renewables

27 Property Tax Incentives for Renewables.. / January 2013 DC 38 States, +Washington DC & Puerto Rico, offer property tax incentives for renewables.

28 Grant Programs for Renewables / January Puerto Rico, The Virgin Islands. Notes: This map only addresses grant programs for end-users. It does not address grants programs that support Research & Development, nor does it include grants for geothermal heat pumps or other efficiency technologies. 22 states, + 2 territories,offer grant programs for renewables.

29 Loan Programs for Renewables. / January Note: This map does not include loan programs for geothermal heat pumps or other energy efficiency technologies. 41 states, offer loan programs for renewables.

30 Net Metering. / March states, + Washington DC & 4 territories,have adopted a net metering policy. Note: Numbers indicate individual system capacity limit in kilowatts. Some limits vary by customer type, technology and/or application. Other limits might also apply. This map generally does not address statutory changes until administrative rules have been adopted to implement such changes.

31 Rebate Programs for Renewables. / January Notes: This map does not include rebates for geothermal heat pumps, daylighting or other energy efficiency technologies. 16 States, + Washington DC and 2 territories offer rebates for renewables.