Transcript Document

Utilizing ESPC to Develop
Renewable Energy Projects
Peter Y. Flynn, September 16, 2014
FIFTH ANNUAL FEDERAL ENERGY WORKSHOP & DEFENSE ENERGY PARTNERSHIP FORUM | PAGE 2
About Bostonia
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Founded in 1998, Bostonia Partners is a full-service investment bank with primary market focus in energy and
real estate, and additional services in structured finance and advisory
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Bostonia Global Securities, the broker/dealer affiliate, provides direct access to investors and daily participation
in the capital markets
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Bostonia ranked seventh among all banks for domestic private placements in 2009 – 2011
Domestic Private Placement Summary 2011 - 2013
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Agenda
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Renewable Energy Contracting Options – focus on ESPC
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ESPC Financing Structures for Renewable Projects
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OMB Memoranda – Challenges
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Case Studies
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Conclusions
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Financing and Contracting Options
Utilization:
Term:
Key
Considerations:
PPA
ESPC
UESC
ENABLE
• Power Purchase with
secure fixed, long
term pricing
• Achieve energy savings
and ancillary benefits
through installation of
ECMs - may Include
renewable energy
• Utilities provide
energy improvement
projects and demand
reduction services
• Facilities under
200,000 Sqft
• 10 years (EAB Part
41), DOD up to 30
years (10 USC 2922a)
• Up to 25 Years
• 10 years for Army
• Up to 25 Years for
Non-DOD
• Target 10 – 15 Years
• PPA pricing may need
to be higher than
‘brown’ power
• ESCO provides savings
and performance
guarantees
• UESC, utility may
provide projects on a
streamlined basis.
• Taxable entity
required to own the
project in order to
utilize tax incentives
• M&V is required
• Partner with local
servicing utility or gas
company
• Provides standardized
and streamlined
process for quick
award
• Easement, site
license, lease or EUL
• Experience with ESA
structure
• Allows for 3d party
ownership
• Savings and
performance
guarantees not
required
• Limited ECMs
• Five standard ECMs
• Simplified M&V
• Renewable energy
component may be
‘subsidized ’ by
energy
efficiency
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ENERGY
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ESPC Financing Structure
FINANCIER
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ESPC Renewable Energy Structure
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CEQ/OMB Memorandum 8/16/11
• ESPCs can incorporate purchase of on-site renewable energy –
if lower energy consumption and costs to the Government
• Complexity of PPAs require special consideration and agencies
must submit PPAs entered into under ESPC for OMB review
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OMB Memorandum 10/3/12
• For an “onsite energy source” to qualify as an ECM, the arrangement
must:
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be “applied to a Federal building”;
“improve energy efficiency”;
be “life cycle cost effective”; and
involve energy conservation, cogen, renewable energy sources, improvements in O&M
efficiencies, or retrofit activities.
• Conditions for annual scoring
– ESPCs including onsite energy generation – “the Federal government must retain title to
the installed capital goods at the conclusion of the contract.”
– ESPCs and UESCs may not be used for the purchase of “off-site new renewable
generation or to build merchant scale power generating facilities on federal land.”
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White Sand Missile Range, NM
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Project Overview
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$18 million ESPC for US Army in White Sands, New Mexico – largest
military installation in the US
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ESPC includes 4.5 MW Solar PV array (ground mount and carport)
and an Energy Management Control System
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Solar array will produce 10.4 million kWh and contribute
approximately 10% of total energy consumption at the installation
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Project will create total cost savings of approximately $44 million
over the 25-year contract term based on escalation of electricity
rates
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Siemens Government Technologies selected to construct and operate
the system
Financing Overview
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Unlike a traditional ESPC, private ownership of the energy assets
allowed the project to monetize federal tax credits
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Long-term Energy Services Agreement (ESA) allows Government to
acquire solar power without upfront capital or a buy down of project
capital cost
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Title to non-solar ECMs will vest with the Government at acceptance
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Government will pay same utility rate it currently pays and will own
the RECs
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Hill Air Force Base, UT
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Project Overview
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$5 million ESPC financing at Hill AFB - 1st DOE Biomass Super Project
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Main parties include DOE, Ameresco, Bostonia, Hill Air Force base,
Davis County Landfill, Utah Power utility
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Large electrical demand and steam load at Hill AFB; large waste
disposal in place and daily disposal rate at Davis County Landfill
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Biomass and Alternative Methane Project included : 1.2 MW IC
engines, 20 year contract, 2 mile pipeline, conventional ECM’s in other
buildings
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Reduction of 5,000 tons of greenhouse gases, 5.5 tons of Nitrogen
Oxide, 4.8 tons of Carbon Monoxide, 19 tons of Sulfur Dioxide
Financing Overview
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Structured as securitization for ECMs, including biomass and
alternative methane fuel energy savings project that
generates electricity for the Government to sell to utility for
credit
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Total cost savings of $16+ million over the 20-year contract
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Overall simple payback under 10 years
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No Capital investment required by Hill AFB
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Monthly credit received by Hill AFB for Green Power
generation
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Conclusions
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ESPC is an important tool for meeting Federal energy goals and achieving
energy security
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RE projects are complex with steep learning curves
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Long-term contracting authority up to 25 years
Established program with proven contracting partners
Traditional ECMs can subsidize renewable energy projects
Government or a private entity can own assets
ESCO operates and maintains the project
Important to assemble the team early
Projects need a “champion” at the installation
Work with a public/private mentality and remain adaptive and flexible
Markets, incentives, and technologies drive projects
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Important to understand federal and state incentives, standards, and energy prices in
order to determine complete revenue picture
Important to determine what technologies are best suited to specific geographic
conditions
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Contact Information
Peter Y. Flynn
Executive Vice President
617-226-8103 Direct
617-437-0150 Main
[email protected]
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