Challenges, Successes and Current Barriers to Scaling Solar in Affordable Housing

Transcription

1 Building Bridges to Net Zero Challenges, Successes and Current Barriers to Scaling Solar in Affordable Housing Offsetting Tenant Electric Loads in Multifamily Buildings 1

2 Wayne Waite, Moderator Moderator/Panelists Chris Neidl, Here Comes Solar Benjamin Healey, Connec=cut Green Bank Tom Osdoba, Enterprise Communi=es

3 II. Financial Outlook for Scaling Solar Financing, Underwriting, Securitization and Risk Assessment Who is the CT Green Bank? Help ensure Connecticut s energy security and community prosperity by realizing its environmental and economic opportunities through clean energy finance and investments. Support the Governor s and legislature s energy strategy to achieve cleaner, cheaper and more reliable sources of energy while creating jobs and supporting local economic development

4 Energy Challenges in CT High Cost CT has THE highest cost for electricity in the "lower 48" Old, Energy Inefficient Building Stock CT has some of the oldest and most energy inefficient building stock Energy Challenge in Connecticut Need for "Cleaner / Cheaper" Energy Sources Programs that will diversify our energy mix into renewable/ clean power "More Reliable" Grid 5 major storms in 2 years with widespread outages

5 We Get to This Newington Housing Authority Housing Authority of the Town of Wethersfield Middlefield Housing Authority

6 Using this Structure CGB Debt Syndicate Equity + Credit enhancement as required + Developer services Debt CT SL2, LLC Tax Equity System, Insurance, Lease CT Solar Lease provides an important financing tool, by which customers benefit from an affordable, no-money-down installanon and peace of mind CEFIA Holdings, LLC System $ $ EPC Contractor Assurant Insurance, maintenance, One Call Resolu=on PPA Payments Install Mul=family Property

7 Help Us Get Smarter! Ben Healey Director, Clean Energy Finance Connec=cut Green Bank (860)

8 III. Big-picture - Capacity Building and Capitalization Enterprise CEO Terri Ludwig Solar Commitment, May 2014: Enterprise will work with local partners to install 16 megawafs of solar energy capacity on affordable rental developments and in low-income communi=es by Enterprise working to deliver project financing Lots of interest from development partners in bringing solar to their porholios Substan=al needs for project development capacity among housing and community development organiza=ons Large degree of market varia=on on economics of solar project development Decision-making on business model - lease or own

9 Big-picture Context: Concerns Mee=ng goal and launching products requires PIPELINE of financeable projects Investment tax credit equity requires robust pipeline and deals of sufficient SCALE Affordable housing/community development pipeline today is modest in size and number of projects Many development partners have begun to think about this Market risks exist, but are manageable ITC set to decrease to 10% amer 2016 State energy policies and regulatory approaches are dynamic

10 Key Parameters Target Projects: PV and Thermal that serve and target low-and moderate-income (LMI) households, neighborhoods, redevelopment Target Markets: States with a combina=on of the right energy prices, local solar incen=ves, energy policies, and investor priori=es Scale: Seeking aggregated proper=es or groups of proper=es to create a solar project of at least 1 megawaf of installed capacity Investor and Lender Consent: Early stage consent from host sites financing sources, to install and operate solar equipment on targeted proper=es

11 Strategic Approach to Solar Project Development Commitment to 16 MW by 2020 as part of Obama Administra=on goals for renewable energy deployment (HUD goal is 100 MW) Target markets for proac=ve project development work (AL, CA, CO, FL, GA, IL, IN, KY, MA, MD, MI,MN, NJ, NY, NC, OH, PA, SC, VA, WI) Crea=ng a consistent process for building pipeline, and moving projects through process effec=vely Iden=fy a set of partners focused on pipeline, project development and implementa=on Capacity-Building Technical Assistance Project Scoping Support Business Model Development Assist in Structuring Assist in Regulatory AcNviNes Project Analysis Connect to Design & Install Vendors Energy Market Assessments IniNal Financial Modeling Equity ITC Debt 11

12 One Potential Deal Structure

13 Roles Enterprise provides technical assistance, debt, outreach, and coordina=on among the various par=es. Local partners will be hosts (roomops, sites). The tax equity source will provide equity financing. An EPC contractor (installer) will install and commission the systems. A developer will help to bring projects together, and operate and maintain them long-term. Local partner and developer in some cases will be the same.

14 TPO Financing and Ownership Structures TPO financing and ownership structures are prevalent in solar installa=on markets 70% in California 90% in Arizona Over 60% in Maryland, Massachusefs What is role of TPO approaches in affordable housing? How do they work? What are the benefits? When is purchasing advantageous?

15 Solar Agreements NREL - Solar Access to Public Capital Resources to build market Standardized agreements Lack of understanding about of affordable housing financing ownership, regulatory structures hzps://financere.nrel.gov/finance/content/solarsecurinzanon-and-solar-access-public-capital-sapcworking-group What can be done to be?er educate housing industry about solar agreements? How can we educate solar providers on affordable housing speak?

16 Building Bridges to Net Zero IV. Community Solar... Shared Solar... or Community Shared Solar? 16

17 Group Purchasing Mul=ple property owners, or proper=es gain compe==ve pricing and other benefits for individual solar installa=ons from one or more installers through pooled purchasing power RFP process driven by homeowners, civic organiza=ons, non-profits or public sector actors Omen (though not always) =me-bound, =er-based and geographically focused Examples: Solarize CB 6, Here Comes Solar

18 Shared Solar ( Community Net-Metering ) Mul=ple ratepayers derive monetary credits on share basis from centralized solar assets that distribute power to the local grid. Virtual net metering Sponsor: project ini=ated by private developer, u=lity, local government, non-profits and civic associa=ons Membership: Share ownership vs. Subscrip=on U=lity: tracks and distributes credit to shareholders Diverse and evolving models: Scale, geography, ownership, financing

19 Multi-Family Shared Solar Shared solar for individually metered ratepayers living in co-ops, condos, rental properties! Shared solar asset located at multifamily site!! Sponsor: property owners, shareholders, private third-party!

20 Community Net Metering in NYS PSC Case 15 E 0082 (July 2015). Product of Reforming the Energy Vision (REV) Mul=ple DG technologies eligible Facility must be located in same NYISO Zone as membership Behind the meter of commercial host account Credits awarded at full retail rate 2 MW Capacity Maximum

21 Community Net Metering in New York Sponsors: ESCO, municipal en=ty, business, non-profit, civic associa=on. Membership: Minimum of 10 members; members with demand > 25 KW limited to 40% of system output (except master-metered mul=-family buildings.) U=lity: tracks credits from shared renewables projects, assigns credit to members according to sponsor instruc=ons

22 Community Net Metering in New York Sponsors: ESCO, municipal en=ty, business, non-profit, civic associa=on. Membership: Minimum of 10 members; members with demand > 25 KW limited to 40% of system output (except master-metered mul=-family buildings.) U=lity: tracks credits from shared renewables projects, assigns credit to members according to sponsor instruc=ons

23 Community Net Metering in New York 2-Phase ImplementaNon: Phase I (October 2015 April 2016): DG Opportunity Zones and Low-Income Par=cipa=on Phase 2 (May ): En=re u=lity service territory Low Income Customer CollaboraNve: Collabora=ve between DPS, NYSERDA and Low-income community organizers Tasked to create mechanisms to overcome obstacles to LMI par=cipa=on

24 Community Building Solar Bridges Opportunities to Net Zero and Affordable Housing? Group Purchasing" Shared Solar" Multi-Family Shared Solar" 24

25 Community Solar NY Outlook Economics of Community Solar Other than PV system costs, what other projects costs must be considered for community solar? What are the chief cost advantages? Process/Pro Forma/ Due Diligence How will off-takers subscribe to service? How will the systems be financed? What do you see as project feasibility and underwrigng challenges?

26 Building Bridges to Net Zero QUESTIONS General Discussion Topics: Solar Costs, Metering, Utility Allowances and Sub-metering, and Promising Solar Program 26

27 Solar Costs - ITC ITC Sunset: ITC reduced to 10% on January 1, 2017 Expect: Rapid increase in ITC transac=ons in 2016 Projec=on: 8GW reduc=on in solar capacity in 2017 Do we have capacity to scale solar in affordable housing markets by 2017? Will affordable housing be crowded out?

28 IRS Private Letter Ruling IRS: Individual tax payer can claim solar tax credits for inves=ng in community solar hfps:// pdf Is the IRS Private Le?er an opportunity to facilitate community solar programs in LMI communiges?

29 Solar Costs - Reductions Source: NREL Costs Per Waf Can the cost of solar installanons be further reduced to offset ITC reducnon? NREL: Som costs account for a significant por=on of total installed PV system prices 64% Residen7al 57% Small commercial (up to 250kW) NREL: TPO transac=ons add costs $0.78/W Residen7al porfolio $0.67/W to a commercial porfolio But Provide: Other services; lower LCOE, volume discoun7ng NREL: Transac=on Costs: $0.21/waf to $0.24/waf

30 Metering Net Metering Changes: NEM is a billing arrangement that provides credit to solar customers at full-retail value for the electricity they are genera=ng 16 states have proposed or enacted legisla=ve and regulatory changes to net-energy metering policies New Fees/ Lower rates for solar credits How will net metering changes affect the value proposigon for on-site solar? Community Solar? What strategies for LMI should be pursued? (E.g. Neighborhood Virtual Net Metering) Ar=cle from RMI

31 Utility Allowances and SubMetering PHA completed detail consump7on analysis to set schedule 3,276 kwh/year per yr. 273 kwh/month per yr. Solar valua7on $0.091/kWh $25.00/month Documenta7on of PV installa7on and produc7on Scaling PV to serve tenants may requires a revenue stream to cover added investment costs Strategies Sub-metering U=lity Allowance adjustments Solar U=lity Allowances LIHTC policy op=ons HUD Guidance Changes Other What acnons are needed?

32 Promising MF Programs/Policies/Practices Commercial PACE (Connec=cut, California ) HUD-State Partnerships: California Pilot with 223(f) Scaled Affordable Mul=family Solar Program Connec=cut (Mul=family Solar: Non-Profits, Housing Authori=es, Private Owners) Hawaii GEMS (Green Energy Market Securi=za=on) California: AB 693 Mul7family Affordable Housing Solar Roofs Program Other Solar Renewable Energy Cer=ficates (New Jersey) Solar Financing Solar Investment Funds YieldCOs

33 Innovative Practices Credit Enhancement Public Benefit Charges General obliga=on/cash Collateral support Securi=za=on On-Bill Financing/Repayment Morris Model General Obliga=on Guarantee + Double Barreled Bond Financing + Tax Credits + Incen=ves + Project Cash Flow Structures as solar lease Metering Connec=cut metering legisla=on

34 Other Notes Mul=family Solar Guidance New York City Mul=family Solar Guide, March 2015 h\p:// Solar Plus Bafer Storage Clean Energy Group, Resilience for Free: How Solar + Storage Could Protect Mul7family Affordable Housing From Power Outages at Li\le of No Net Cost, October 2015 h\p://

35 Scaling Solar Porholio-wide Approaches What do por`olio approaches look like? Tenant Enrollment Opportuni=es How can PHA s leverage Community Solar to benefit Voucher Program parncipants? Program Integra=on Can solar improve the value proposinon of energy efficiency programs to support deeper retrofits? Housing Program Leveraging LIHTC RAD

36 Community Solar Capacity GTM: U.S. Community Solar Outlook developers ac=vely on community solar projects Clean Energy Collec=ve and SunShare account for 32% of community solar capacity Are there enough providers in community solar space to scale community solar in affordable housing? What are capacity building strategies needed for community solar to reach LMI markets?

37 Tenant Strategies To Bridge Green Divide Solar has by-passed lower income households/ communi=es Less than 5% of households with incomes under $40,000 have solar 40% of US households have incomes less than $40,000 Electricity costs make up a much larger share of a lowincome households budget RENEW300: Objec=ve: Increase access to solar energy for all Americans, What strategies/policy are needed to scale solar to provide tenant s with access to solar? ensure that households in affordable housing receive a direct economic benefit from solar?

38 Building Bridges to Net Zero Closing Remarks 38

39 Community Solar Models 12 states have policies/programs encouraging shared solar NREL Shared Models h\p:// Varia=ons: Capacity-based programs own, lease, or subscribe to por=on of the system and receive electricity or monetary credits in propor=on to their interest Energy-based programs offer par=cipants the opportunity to purchase the output of an array via kilowaf-hour blocks of genera=on. What community solar model is most useful for affordable housing? Residents?