Identifying Suitable Solar Finance Options For Your Community

Transcription

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

2 Examples of Client Solar Projects

3 Solar Finance Options

4 Solar Finance Options Third Party Power Purchase Agreement (PPA) Solar Leases (Operating vs. Capital Leases) Property Accessed Clean Energy (PACE) Finance Community Solar Crowdfunding Low Interest Loans & Group Purchasing (addressed by other panelists)

5 Getting Solar Projects Built 101 (Criteria for Go vs. No Go ) 1. Is it Legal? Project structure must clearly be legally available in local community 2. Is it Affordable? Owner must possess or have others loan, invest or give enough money for up front capital costs. 3. Is it Bankable? If Owner borrows money or takes on investors, Project must throw off enough cash flow to pay rate of return that lenders or investors find attractive. 4. Is it Manageable? Project structural complexity and transactions costs must not be too high relative to transaction size and expected benefits.

6 Third Party Power Purchase Agreement (PPA) Host/Customer Leases Solar site to Third Party Third Party owns Solar Energy System and takes all incentives, tax credits, RECs and depreciation. Third Party sells power to Host/Customer. Status: Doubt exists over availability in Wisconsin and not available in Iowa, on basis of authority that says this activity is public utility service. See IUB Declaratory Ruling-Order: Docket DRU (2012); Section (5)(a), interpreted in February 8, 2012 Letter from Robert Norcross, Administrator of Gas & Energy Division of Public Service Commission of Wisconsin to Representative Gary Tauchen.

7 Current 3 rd Party PV PPA Legal Status

8 Solar Lease ( Operating Lease ) Lessor (System Owner) leases Solar Energy System to Lessee, who has use of Solar Energy System, typically to self serve and/or sell the power to the local utility. System Owner gets tax credits, depreciation and SRECs At end of term, Lessee can return System or purchase for FMV Different than Capital Lease Not a true lease, but an installment sales contract. Lessee owns System at end of term or can buy for bargain price. Status: Doubt exists over availability in Wisconsin. No formal determination but appears that PSCW legal staff will analyze it similarly to Third Party PPA. Advice: Only try in Wisconsin if you are prepared to be a test case.

9 Property Accessed Clean Energy (PACE) Finance City or county finances the up-front costs of the solar energy investment, directly or as an intermediary for private investors, at favorable interest rate. Property owner repays the loan over an extended period through a special property tax assessment with loan secured by a property tax lien. Requires State enabling legislation. Wisconsin adopted residential PACE authorizing legislation in 2009, then expanded it to include commercial and industrial properties.

10 Status of PACE Programs Residential PACE Programs: Most have been suspended because the Federal Housing Finance Agency has expressed concern that any first priority state PACE liens present a significant risk to lenders. See Commercial PACE: Programs in California (CaliforniaFIRST Program) & Connecticut

11 Community Solar

12 Community Solar Loosely-defined concept, but generally understood as bringing together a community of participants in a PV development project. Typically: Individual community members lack ability to develop solar on their own. Community members either claim proportional ownership in the System or subscribe to representational shares. Can be structured as a solar sponsorship program through a utility or municipality, or set up as an investment vehicle. Status: Available. The challenge is to make it Affordable, Bankable and Manageable.

13 Challenges with Community Solar Selecting a group of investors with similar profiles for the Community Solar project. Appetite for Risk Need for Return Ability to use tax credits and depreciation Complying with securities laws requirements Potentially high Transaction Costs and Complexity

14 Crowdfunding Solar Funding Achieved by Collecting Small Amounts from a Large Group

15 Crowdfunding Donor Crowdfunding: Collective donations to fund projects. Kickstarter.com New Generation Energy Investor Crowdfunding: Investors provide funds in expectation of a return. Securities Laws Issues See Jumpstart our Business Startups (JOBS) Act, April Solar Mosaic

16 New Generation Energy s Donor Crowdfunding Model New Generation is a Boston-Based Non-Profit whose Mission is to Make Non-Profits Sustainable. Provides an online forum for donations Offers matching donations for some projects Funded Projects Include: Falmouth Service Center (Falmouth, MA) Project Costs: $19,829 Aruna s Place (Massachusetts) Project Costs: $21,000.

17 Solar Mosaic s Investor Crowdfunding Business Model Investors purchase a Tile of equity in a community solar project in return for share of rebates and lease payments from system owner. To comply with securities laws, the projects funded to date have either: (a) returned no profit, only amount invested; or (b) been limited to friends & accredited investors. Future Plan is to issue Solar Power Notes that will provide an investment return (filed with SEC April, 2012).

18 Solar Mosaic Completed Projects Asian Resource Center (Oakland, CA) 134 Investors/$98,000 People s Grocery (Oakland, CA) 70 Investors/$38,800 Murdoch Community Center (Flagstaff, AZ) 87 Investors/$20,100 St. Vincent DePaul (Oakland, CA) 86 Investors/$88,500

19 Crowdfunding Project Northcreek Church (Walnut Creek, CA)

20 Northcreek Church Crowdfunding Structure A single purpose, for profit LLC is created. Memberships are sold to Parishioners and others at about $300 each. Proceeds then used to fund installation on Churches, etc. Northcreek Church has 10 year lease to purchase agreement with Sun Light & Power for a 305 kw PV System. See

21 Questions? Michael Allen (608)