Exploring Feasibility Finding a market, business structure, and incentives

Transcription

1 Exploring Feasibility Finding a market, business structure, and incentives Milton Geiger Energy Extension Coordinator Worland, WY March 8, 2011

2 Basic Feasibility Understand your Resource Available energy Head and flow Seasonality of production Will water be available year-round? Consider the seasonal hydrograph Access to transmission The larger the project, the greater the need Cost of development Equipment, engineering, etc. Do federal water fees need to be paid? For small hydro, a full feasibility study is vital!

3 Basic Feasibility Permitting Wyoming State Engineer s Office Non-consumptive use, but still requires permit Requires application for new use, as opposed to irrigation, municipal water, or domestic water Necessary for both micro-hydro and small hydro!

4 Basic Feasibility Exemptions/Licensing Federal Energy Regulatory Commission (FERC) Authority over any non-federal hydroelectric facility Mechanical hydropower (e.g. center pivots) is exempt FERC Preliminary Permits Provide exclusive 36-month right to develop hydroelectric project Only necessary if think their will be a competing claim FERC Exemption Quicker and issued into perpetuity Conduit 5-MW or less FERC License Longer process and must be renewed every years

5 Basic Feasibility Exemptions/Licensing Tips Name USDA Rural Development and/or NRCS as a cooperating agency with FERC application May speed up application for other funding resources Pursue exemption first Must have real property rights Easier on non-federal land Conduit exemption cannot be issued on federal lands Remember that transmission lines are part of the project! Apply as soon as possible Must have project design finalized, but lag time of up to 12 months for exemptions and 18 months for licenses is possible

6 Finding a Market Micro-hydro Less than 25 kw Reduce costs behind-the-meter Not designed to create a new revenue stream Effective net metering Allows you to bank electrons Annual true-up on January 1 st Can help mitigate seasonality of production E.g. produce more in summer than can use Important to match production with consumption Small hydro Greater than 25 kw Generate revenue Must be able to sell electricity to an electric utility

7 Finding a Market Small Hydro Power Purchase Agreements (PPAs) Contract to buy the electricity generated by a power plant Energy must be able to get to market Need willing buyer and adequate electric transmission Binding contract Promise to deliver energy at a promised price Generally years in length PPA needed to obtain financing! Integral part of feasibility!

8 Finding a Market Small Hydro PacifiCorp (Rocky Mountain Power) Avoided Cost Purchases from Qualifying Facilities: Schedule 37 Based on Public Utilities Policies Act of 1978 (PURPA) P.S.C. Wyoming No. 12 Provides defined payments for energy and capacity for firm resources, such as small hydro Limits to amount of energy provided under Schedule 37 Contact PaciCorp for Information Manager, QF Contracts 825 NE Multnomah Street, Suite 600 Portland, OR (503)

9 Finding a Market Small Hydro Selling to your Rural Electric Cooperatives Members of Tri-State Generation and Transmission Association Must buy their electricity from Tri-State, but Tri-State allows local cooperatives to but up to 5% of energy locally Policy No. 115 and 117 Local cooperatives are not required to buy locally Provide prescribed rates for purchases Energy credit and demand credit available for hydro Can sell Renewable Energy Credits (RECs) to Tri-State at a prescribed rate Also can be marketed independently Contact your local electric cooperative for more details!

10 Business Structure Micro-hydro Not as important for cost reducing systems Will it serve a residential or commercial electric meter? Important for incentives Small hydro Public ownership (nontaxable) Irrigation districts Municipalities Private ownership (nontaxable) Cooperative Private ownership (taxable) LLC or other

11 Business Structure Small Hydro Publicly owned (including irrigation districts) Advantages Limited tax liability, potential access to public loan funds (limited), and simple as no new structure required Disadvantages Unable to obtain chief federal incentives Cooperative (e.g. rural electric cooperative) Advantages Existing structure, access to USDA Rural Development grants and loans, limited tax liability Disadvantages Cannot use Production Tax Credit, generally do not control resources (must pay for lease), unknown desire to be system owner

12 Business Structure Small Hydro For-profit (LLC, Corporation, etc.) Advantages Access to all federal incentives, including USDA grants, guaranteed loans, and PTC, may protect against liability for individuals Disadvantages Require additional paperwork to organize, must pay taxes (offset with incentives) Structure will vary, but for-profit may deliver the lowest cost option via incentives for most small hydro installations.

13 Incentives State Sales tax abatement Net metering for systems under 25 kw Federal Production Tax Credit (PTC) USDA Rural Development Rural Energy for America Program Value-added Producer Grant Rural Utility Service USDA Natural Resource Conservation Service Conservation Innovation Grant

14 Incentives State Sales Tax Abatement Applicable to both small projects (less than 25 kw) (saves 5-6% of project cost) Available to both public and private entities Net Metering and Interconnection Micro-hydro (25 kw or less) Allows producers to get full-retail rate Wyoming Water Development Commission Not currently funding feasibility studies

15 Incentives USDA Rural Development Feasibility Study Value Added Producer Grant Farmer/Rancher controlled corporations are eligible 50% grant w/ in-kind eligible as match Feasibility/Business Plan/ Marketing Plan No engineering costs REAP Feasibility 25% grant Available to non-ag producers Resource assessment/transmission access/business plan No engineering costs

16 Incentives USDA Rural Development Rural Energy for America Program REAP (Section 9007) Grants for renewable energy systems (including hydro) 25% of total cost Reimbursable for design, installation, equipment, etc. Available only to ag producers, rural small businesses, and electric cooperatives Cannot supply residences directly (micro-hydro) Irrigation districts, municipalities, etc. are ineligible Guaranteed Loans Security for private lenders May offer lower rate Comes with a fee of 1% and subsequent annual fees

17 Incentives USDA Rural Development Rural Utility Service (RUS) Loans Low rates Works best though existing borrower, such as local electric coop Private companies developing renewable energy are now eligible, but they are generally looking for larger projects (20MW+)

18 Incentives USDA Natural Resource Conservation Service USDA NRCS Conservation Innovation Grant Fund 50% of micro-hydro system University of Wyoming Cooperative Extension Service is considering an application to the program Considering landowner partners for a micro-hydropower irrigation system (mechanical) and micro-hydroelectric system for an agricultural operation Landowners would be required to provide ~50% cash match Application Deadline of April 15 th Need to act soon! (Talk to me after the meeting)

19 Incentives Federal Production Tax Credit Available only to corporations Non-profits and cooperatives cannot utilize Expires 12/31/2013 (in-service date) $0.011/kWh for first 10-years of production Increases with inflation Excess credits can be carried forward for up to 20-years

20 Incentives Renewable Energy Credits Compensation for the green attributes of a small hydro projects Range from 0.5 /kwh to 2.0 /kwh Tri-State will pay /kwh until 2015 followed by 0.85 /kwh Many require Low Impact Hydropower Institute certification Lower Valley Energy s 1.5 MW Strawberry Creek installation

21 Summary Micro-hydro FERC requirements Hydropower (mechanical) do not If electric, requires FERC exemption or license Part of expedited process, but process can take up to 12 months Ownership matters If the project serves non-residential meter, eligible for 25% USDA RD REAP grant Eligible for Wyoming/county sales tax exemption 25 kw or less

22 Summary Small Hydro FERC requirements Start your exemption/license process as soon as possible Make USDA Rural Development a cooperating agency, even if you are not sure if you will use USDA funds Must sign Power Purchas Agreement (PPA) Essential aspect of feasibility assessment Business structure matters LLC/cooperative for USDA RD grants LLC (or similar) with tax appetite to use PTC Non-profits/non-taxable are eligible for few incentives Full feasibility examination is vital Obtain financing and incentives

23 Contact Information Contact Milton Geiger (307)