UTILITY FINANCING OF SOLAR PV

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1 UTILITY FINANCING OF SOLAR PV NEW BUSINESS MODELS PANEL 2015 Finance Forum ALEX HILL DUNSKY ENERGY CONSULTING (514)

INTRODUCTION Res: OBF DUNSKY FINANCING EXPERIENCE All sectors: ALL OPTIONS Res/SB: ALL OPTIONSLow-Income: OBF SF/MF: PACE MF/C&I: ESA Res: PACE Res: LEASING

.. All Sectors Res: PACE All sectors: ALL OPTIONS Evaluation All sectors EXPERTISE Energy Efficiency and Demand-Side Management Renewable Energy and

2 INTRODUCTION Res: OBF DUNSKY FINANCING EXPERIENCE All sectors: ALL OPTIONS Res/SB: ALL OPTIONSLow-Income: OBF SF/MF: PACE MF/C&I: ESA Res: PACE Res: LEASING Res: PACE All sectors (23 programs): OBR, OBF, PACE, ESA... All Sectors Res: PACE All sectors: ALL OPTIONS Evaluation All sectors EXPERTISE Energy Efficiency and Demand-Side Management Renewable Energy and Emerging Technologies Greenhouse Gas Reductions SERVICES Design and evaluation of programs, plans and policies Strategic, regulatory and analytical support New opportunities assessments CLIENTELE Utilities Governments Solution Providers Large consumers Non-profits

3 Net present value of systems installed in the given year NPV of lost sales to solar PV in each year UTILITY SOLAR FINANCING MODELS Key advantages for utilities to enter the solar financing market Existing billing relationship with customer sales channel and logistics May control interconnection/permitting Access to capital Challenges Revenue losses (shifts) DG load management $2,000,000 $0 -$2,000,000 -$4,000,000 -$6,000,000 -$8,000,000 -$10,000,000 -$12,000,000 -$14,000,000 -$16,000,000 Our Goal: Find a financing model with a positive NPV for utility and customers Year Self financed baseline

4 Net present value of systems installed in the given year NPV of lost sales to solar PV in each year UTILITY SOLAR FINANCING MODELS Key advantages for utilities to enter the solar financing market Existing billing relationship with customer sales channel and logistics May control interconnection/permitting Access to capital Challenges Revenue losses (shifts) DG load management $2,000,000 $0 -$2,000,000 -$4,000,000 -$6,000,000 -$8,000,000 -$10,000,000 -$12,000,000 -$14,000,000 -$16,000,000 Our Goal: Find a financing model with a positive NPV for utility and customers Year Self financed baseline 3rd party lease baseline

5 ASSESSING THE BUSINESS CASE Predictive Model Homeowner/Business Utility Cash Flow

6 ESTIMATING MARKET UPTAKE Step 1 Market: Portion of properties with solar potential Step 2 Cash flow analysis for utility and homeowner (or business), covering various financing options Step 3 Annual uptake estimated from Payback, NPV and adoption rates

7 NPV of lost sales to solar PV in each year BUSINESS CASE SOLAR PPA

8 NPV of lost sales to solar PV in each year BUSINESS CASE SOLAR PPA NET RETURNS

9 THREE UTILITIES: THREE CHALLENGES MUNICIPAL INVESTOR OWNED GOV T OWNED Distribution only (unregulated) Challenge: Rising bulk rates and demand from citizens Explored financing models and implementation (i.e. streamlined permitting) Solution: Streamlined, long term (30yr) lease/ppa using tax/utility bill repayment Advantages: market outside of service area, low cost of capital, tax/utility bill Multiple states, integrated gas and electricity Challenge: Lost revenues to 3rd party solar PV Defined NPV of various scenarios to develop business case. Solution: PPA offered to all customer. Test PPA pricing, and delivery Advantages: Access to gas customers, voluntary RE target, first to market 400,000 Customers (regulated) Challenge: High DG and RPS Targets (40% by MW of new DG) Solution: Drive and transform market with community solar Next Steps: Develop cost benefit model to test the planned programs: Solar garden, leases, PPA, HELOC Advantage: High summer peak bulk rates, RPS commitment

10 CONCLUSIONS Full cost and revenue loss recovery difficult in early years for utilities However the baseline is not zero Even low cost electricity markets will likely become attractive for solar leases in the next 5-10 years Utilities can be first to market in areas where there is not significant 3 rd party PPA and solar lease availability Finding ways to sell outside of the existing customer base can help (if possible) Besides the Bottom Line, there are many other benefits Maintains customer relationship, offers a new options Geo-targeting DR and DG management Meet RPS target, transform utility generation base Q: What is the advantage/disadvantage to market place of utilities becoming active in solar financing?

Streamline permitting, interconnection rates and process etc. Marketing, partnerships etc.

11 NEXT STEPS: BUSINESS MODEL Secure capital and determine cost City utility has restrictions on use of financing Utility claims a high discount rate, but has a low cost of capital Implementation model Streamline permitting, interconnection rates and process etc. Marketing, partnerships etc. Business delivery models Contracted installers vs developing service internally Community solar attractive as the first step

12 QUESTIONS? ALEX J HILL DUNSKY ENERGY CONSULTING (514) x30 alex.hill@dunsky.ca

Identifying Suitable Solar Finance Options For Your Community

Identifying Suitable Solar Finance Options For Your Community Michael Allen Energy Law Wisconsin Solar Powering Your Community Conference Madison, Wisconsin(October 11 th, 2012) Examples of Client Solar