Transcript Expand Scope, Accelerate Compliance with State Clean

Washington, D.C.
202.777.7700
Coalition for Green Capital
September, 2013
Contact Reed Hundt or the Coalition for Green Capital at
[email protected]
202-777-7700
www.coalitionforgreencapital.com
1
Washington, D.C.
Energy investors profit from consumer payments
Upfront
Investment
202.777.7700
Lower Required Profit
Means Lower Payment
• Investors recover capital and
make profit from customer
payments for electricity
• Investors seeking lower profits
charge lower interest rates
Consumer
Payment Provides
Profit to Investors
• Lower interest rates mean
Lower customer payments
• If payments are below retail
price of electricity , consumer
will demand clean energy
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Washington, D.C.
Green Bank can make consumer payments lower202.777.7700
than
retail electricity rates, which are rising steadily
Average Retail Residential Electricity Price in U.S.
14
12
Cents/kWh
10
8
6
4
2
0
Residential Electricity Price
3
Source: EIA Electricity Data Browser, Average Retail Price of Electricity, Monthly. Trendline is linear.
Washington, D.C.
Because Green Bank expects low profits, consumers
202.777.7700
make lower payments
Typical Capital Structure of Clean
Energy Investment
Capital Structure of Clean Energy
Investment With Green Bank
Source of
Capital
Source of
Capital
Share of
Capital
Structure
Required
Return on
Capital
Commercial
Debt
40%
6%
Tax Equity
48%
12%
Developer
Equity
12%
15%
Share of
Capital
Structure
Required
Return on
Capital
Green Bank
Debt
20%
2%
Commercial
Debt
20%
6%
Tax Equity
48%
12%
Developer
Equity
12%
15%
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Washington, D.C.
A 20% investment by Green Bank is enough to lower
202.777.7700
clean energy price by nearly a quarter
Source of Electricity Cost
Costs of Typical
Capital Structure
(cents/kWh)
Costs with Green
Bank Investment
(cents/kWh)1
Capital Costs
28.6
23.9
Operating Costs
2.5
2.5
Gross Costs
31.1
26.5
Less State Incentives
8.2
8.2
Less RECs
2.0
2.0
Net Clean Energy Cost
21.0
16.3
1) Assuming Green Bank debt offered at 2% for 15 years.
Example figures represent solar project in Connecticut with Connecticut REC price and state incentives.
Rooftop Solar PV “Green Bank” Financing Model, Sponsored by The Connecticut Clean Energy Finance and Investment Authority and the Coalition
for Green Capital, Developed by the Brattle Group. Available for download from: http://www.coalitionforgreencapital.com/the-model.html
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Washington, D.C.
If Green bank provides enough investment, clean202.777.7700
energy
projects require lower electricity prices than now charged
Retail Electricity Price ($/kWh) as a Function of Green
Bank Debt1 and Installed Cost
Key Assumptions
• Developer Equity Return 15%
Solar Install Cost
($/Watt)
% of GB Capital in Structure
• Tax Equity Return
12%
• Total Leverage
40%
NA
• Commercial Debt Rate
6%
0.085
NA
• 15-Yr REC Price
$0.030/kWh
0.057
NA
• 6-Yr State Incentives
$0.225/kWh
0%
10%
20%
30%
40%
4.5
0.210
0.187
0.163
0.140
0.117
4.0
0.174
0.154
0.133
0.112
3.5
0.139
0.121
0.103
3.0
0.103
0.088
0.072
Highlighted prices are below current retail
electricity price in Connecticut
If solar installation costs drop to $3.5/watt, and 30% of investment comes from Green Bank,
the consumer needs only to pay 8.5 cents per kWh to pay back investors with adequate
profit…If solar costs are higher, add more green bank capital to keep electricity rates down.
1) Assuming Green Bank debt offered at 2% for 15 years.
Rooftop Solar PV “Green Bank” Financing Model, Sponsored by The Connecticut Clean Energy Finance and Investment Authority and the Coalition
for Green Capital, Developed by the Brattle Group. Available for download from: http://www.coalitionforgreencapital.com/the-model.html
6
Washington, D.C.
If Green Bank provides enough investment, private
sector
202.777.7700
investors will add money to share in consumer payments
Developer Return (%) as a Function of Green Bank Debt1
and Retail Price
Key Assumptions
• Installed Cost
$4.50/w
• Tax Equity Return
12%
Price of Clean Electricity
($/kWh)
% of GB Capital in Structure
0%
10%
20%
30%
40%
0.230
17.0%
20.2%
24.7%
30.8%
38.6%
• Total Leverage
40%
0.180
12.0%
14.2%
17.4%
22.4%
29.5%
• Commercial Debt Rate
6%
0.130
NA
8.1%
9.9%
12.9%
18.5%
• 15-Yr REC Price
$0.030/kWh
0.080
NA
NA
NA
NA
NA
• 6-Yr State Incentives
$0.225/kWh
Highlighted returns exceed target developer
return of 15%
Green Banks attract private investors who still achieve required returns, even with clean
electricity prices at or below retail rates
1) Assuming Green Bank debt offered at 2% for 15 years.
Rooftop Solar PV “Green Bank” Financing Model, Sponsored by The Connecticut Clean Energy Finance and Investment Authority and the Coalition
for Green Capital, Developed by the Brattle Group. Available for download from: http://www.coalitionforgreencapital.com/the-model.html
7
Washington, D.C.
Green Bank can tap large amount of private investment
202.777.7700
that is presently not used for clean energy
• Green Bank goal is to attract
more private investment to
clean energy sector
• More private investors want
low risk, low return than seek
high risk, high return
• Green Bank can lower risk for
private investors in clean
energy and assure adequate
return
Treasury rates from U.S. Treasury Department. Clean Energy Debt rate based on assumptions used in NREL paper, “The Impact of Financial
Structure on the Cost of Solar Energy. March 2012. Tax Equity rate based on NREL paper, Bloomberg New Energy Finance Paper, “The return –
and returns – of tax equity to US renewable projects,” November 2011, and USPREF paper, “Tax Credits, Tax Equity and Alternatives to Spur
Clean Energy Investing,” September 2011.
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Washington, D.C.
Green Bank investment + Private investment leads
to
202.777.7700
more clean energy projects
Technically Feasible Projects
Typical Capital
Structure
Green Bank Capital
Structure
Economical
Projects
High Capital Costs Push
Consumer Payments Above Retail
Electricity Price
Lower Capital Costs Reduce
Consumer Payments Below
Retail Rates
Green Bank investment attracts private investors and
increases size of clean energy market.
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Washington, D.C.
As Green Bank gets paid back, it re-uses its money
to
202.777.7700
expand clean energy investing
Illustrative Example of Green Bank Recycling
Original Investment
Year 0: Initial
investment
attracts
private capital
• Same Green Bank dollars
invested multiple times, releveraging private dollars
Year 10:
Investment
is fully
repaid
• Recycling multiplying total
clean energy investment
First Recycling
Year 10: Funds
are recycled into a
new investment,
attracting more
private capital
Year 20:
Investment is
fully repaid
Second Recycling
Public funds are lent
Public funds are repaid
Year 20: Funds
are recycled into a
new investment,
attracting more
private capital
Year 30:
Investment is
fully repaid
• Illustration is conservative, as
loan repayments occur
constantly and cash can be
redeployed throughout period
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Based on CGC research in New York for the New York Green Bank in conjunction with Booz & Co.
Washington, D.C.
Green Bank investing expands total clean energy202.777.7700
investing more than government cash hand-outs
Public Capital Deployed Under Subsidy Scheme
Public Capital
Deployed
This simplistic model of a subsidy
scheme is intended to illustrate the onetime deployment of capital, which in
reality might occur in stages
0
1
2
3
4
5
6
7
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In example, total clean energy
investment with Green Bank is
more than three times greater
than with subsidies
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20
Years
Public Capital
Deployed
Public Capital Deployed Under Green Bank Mechanism - Simplified
Initial Capital Deployment
0
1
2
3
4
This simplistic model of a Green Bank
scheme is intended to illustrate capital
preservation; several simplifying
assumptions are made, such as a nonstaged recycle time of 6 years
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15
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20
Years
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Based on CGC research in New York for the New York Green Bank in conjunction with Booz & Co.
Washington, D.C.
202.777.7700
Coalition for Green Capital
September, 2013
Contact Reed Hundt or the Coalition for Green Capital at
[email protected]
202-777-7700
www.coalitionforgreencapital.com
12