Financing Renewable Energy with CLEAN Programs

December 6, 2011

Casey JohnstonRenewable Energy Program Director

ICLEI USA

Today’s Webinar

Agenda:

• Welcome and Introductions

• Introduction to CLEAN Programs

• CLEAN Programs for US Cities

• Gainesville Feed in Tariff Program

• Introduction to Local Clean Program Guide

• Q&A - Webinar Participants  

• Closing

Goal: Ensure participants have a foundational understanding of what a CLEAN program is and what the Local Clean Program Guide offers local governments.

ICLEI’s Mission

Our mission is to build, serve, and drive a movement of local governments to advance

deep reductions in greenhouse gas emissions and achieve tangible

improvements in local sustainability.

In 2010, the International City/County Management Association (ICMA) and ICLEI-Local Governments for Sustainability were competitively selected by DOE to conduct outreach to local governments across the United States, enabling them to replicate

successful solar practices and quickly expand local adoption of solar energy.

For more information visit www.solaramericacommunities.energy.gov.

Solar Outreach Partnership

Solar Powering Your Community: A Guide for Local Governments (2011)http://solaramericacommunities.energy.gov/resources/guide_for_local_governments/

Relevant Tools and Resources

Local CLEAN Program Guide http://www.clean-coalition.org/local-action

Dsire Solar Policy Guide: A Resource for State Policy Makers http://www.dsireusa.org/solar/solarpolicyguide/

The Local CLEAN Program GuideFree download: http://www.Clean-Coalition.org/local-action

Structure of the Guide:

Module 1: Overview & Key Considerations

Module 2: Establishing CLEAN Contract Prices

Module 3: Evaluating Avoided Costs

Module 4: Determining Program Size & Cost Impact

Module 5: Estimating CLEAN Economic Benefits

Module 6: Designing CLEAN Policies & Procedures

Module 7: Gaining Support for a CLEAN Program

Introductions

Today’s Speakers

• Wilson Rickerson - Meister Consulting Group, CEO

• Pegeen Hanrahan - Community and Conservation

Solutions, Principal

• Craig Lewis - Clean Coalition, Executive Director

• Bill Shepherd – Gainesville Regional Utility,

Energy & Business Services Manager

What is a feed-in tariff?

Four parts “feed”

• Utility must interconnect you (and yougo to the front of the line)

• Utility must buy 100% of your power

• Utility must transmit or “dispatch” yourpower before fossil fuels

• You get a standard contract

One part “tariff”

• A $/kWh price available to all comers

CLEAN!

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Countries with FITs in 2011

Source: REN21, Renewables 2010 Global Status Report

Countries with regional FITs

Countries with national FITs

GLOBAL INSTALLED CAPACITY BY INCENTIVE TYPE (%)

Source: Bloomberg New Energy Finance

Wind Solar

Feed-in tariff64%

Tax incentive

23%

Trade & quota

9%

Market based

3%

Tendering1%

194GW

Feed-in tariff87%

Tax incentive

6%

Market based/off

-grid7%

43GW

10

Electricity Generation (GWh) in Germany 2000 - 2020

0

50,000

100,000

150,000

200,000

250,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020

Year

PV

Biomass

Wind

Hydro

•5.4% renewables in 1999 to 16.1% by 2009

•30% by 2020 target

•38.6% actual projection (18.5% wind, 7% PV)

•50% by 2030

•65% by 2040

•80% by 2050

The argument is between 80% renewable electricity and 100% renewable electricity

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Market Growth in Germany

US Has Far Better Solar Resource than Germany

Source: NREL

What does this have to do with cities?

• They started it…

• 1992: Aachen introduced 20-year PV FIT at $1.34/kWh (!)

• PV will grow: “if the operators of solar facilities were paid for the electricity they fed into the grid at a price that would cover their costs just as at any other power plant.”

Source: Rickerson, based on Solarenergie-Förderverein (1994)

The First Steps in the US?

• Gainesville, FL (32 MW)

• Sacramento, CA (100 MW)

• San Antonio, TX (5 MW)

• Marin County, CA (2 MW)

• NIPSCO, IN (30 MW)

• Consumers Energy, MI (5 MW)

TOTAL: 166 MW

Are FITs right for your city?

• Are you served by a municipal utility? Create your own policy!

• Does your state have a FIT law? Position your municipality to go after it!

• Is your investor-owned utility looking to innovate? Partner up and create a new FIT!

• None of the above? There are other options…

CLEAN PROGRAMS FOR US CITIES AND GAINESVILLE’S

FEED IN TARIFFDECEMBER, 2011

Pegeen Hanrahan, P.E.

Local Government Actions

Local Governments manage: Transportation Infrastructure Land use and zoning Building codes Landscaping Waste management Land conservation Power generation

Gainesville

Home to the University of Florida (Gators)

Fifth largest university in the United States, 50,000+

Also home to Santa Fe College, 17,000+

Low tax base - rely heavily on municipal utility GRU

Transfer $36.4 million per year from GRU to General Government

Gainesville

City population of 130,000

More than 60 square miles

14th largest city in Florida

County population of almost 250,000 and 930 square miles

Our Focus on Saving Energy, Increasing Renewables, Creating Jobs,

Reducing Carbon

Requires ambitious action, particularly given our population growth since 1990.

Four key strategies:

Energy conservationEnergy supply TransportationLand use planning

US Mayors Climate Protection Agreement Signed by 78 Cities in Florida, 1054

Nationwide

23

Meeting Kyoto by 2013

A Three Pronged Approach

1. Maximize energy efficiency. Gainesville has been investing approx. $5.6 million per year in rebates and incentives for insulation, HVAC, lighting, roofing, water heating, and many other options. GRU matches business investment on a 1-for-1 basis, up to $100,000 per site.

2. Dramatically increase solar deployment, up to 32 MW by 2016.

3. Shift from a power purchase contract with Progress, replace with 100 MW biomass plant using waste from forestry, urban tree trimming.

Comparison of Annual Carbon Reduction Impacts by 2013

Biomass Power Plant 334, 219

Energy Conservation Programs 177,650

Traffic Light Synchronization 82,701

Acquiring Land and Development Rights 31,824

Repowering Natural Gas Plant 31,801

Combined Heat and Power Plant 22,557

Landfill Gas to Energy Plant 19,678

Solar Photovoltaic Electricity 7,682

LED Traffic Signals 2,967

Total 711,079

In Metric Tons CO2

Public Utility, Public-Private Partnerships Key

Gainesville’s Renewables Revolution

•In 2009 Gainesville became the first city in the United States to adopt a feed-in-tariff (also called CLEAN) policy to encourage development of renewable energy•Since then there have been hundreds of new solar installations, with a total installed capacity now approaching 9 MW, an increase of over 2600%.•We have become a model for other municipal utilities and some states.

Gainesville Adopted the First True Feed-in-Tariff (CLEAN Program) in U.S.

Feed-in Tariffs Best to Deal with Climate Change Say IPCC Working Group •FITs Least Costly--Most Competitive Mechanism Says Climate Researchers•November 8, 2011•The 135-page report by the Intergovernmental Panel on Climate Change, makes it clear that the overwhelming weight of academic studies conclude that feed-in tariffs--or fixed-price mechanisms--perform better at delivering renewable energy quickly and equitably than quota systems, such as Renewable Portfolio Standards in the US or the Renewable Obligation in Britain. This is not the unsurprising conclusion from a surprising source: the IPCC's Working Group III on Renewables.

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Solar investors finance, fund and build projects,

feed energy into grid

GRU adds solar costs to all retail customers’ fuel

adjustmentsGRU pays solar investors fixed rate for energy produced for

20 years

GRU provides 20 year fixed price

contracts to solar investors

Why Solar?

Customer survey of 400 residential customersWould you support or oppose GRU’s efforts to encourage

solar energy investments in your community if it would add one dollar or less per month to all customers’ utility bills?

Support: 75 percent

Strong community environmental ethic

Largest single source of energy on planet

Great faith in continued advances in cost-effectiveness

How does our FIT work?

• Cap of 4 MW a year to manage rate impact , hit first year’s capacity limit two days prior to implementation date of March 1

• Capacity queue filled through 2016 for 32 MW

• Backed by excellent credit of our public utility: “AA” rated by Moody’s, Fitch and S&P

Making Clean Local Energy Accessible Now

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CLEAN-Gainesville Seeds a US Solar Revolution

Solar Benefits Not Just Environmental

•Job creation•Energy independence•Fuel diversity, reliability and security•Democratizing the grid•Civic pride and publicity•Contributing toward a green industry economic development cluster•Building our innovation reputation

Indirect Benefits

• New solar companies and business models came to Gainesville

• Capital infusion into community• New solar-friendly zoning rules• Solar print and radio advertising• Dramatic improvement in $/watt

o 2008 ~$8.00/watto 2010 ~$6.50/watto 2011 ~$5.30/watto 2012 Less than $5/watt

• New market in leasing rooftops

Indirect Benefits

• Invited by the White House Office of Intergovernmental Relations to be on a Panel at the U.S. Center in the Bella Center in Copenhagen

• Named a Green Global Capital Challenge City by Carbon War Room

• Gainesville Chamber of Commerce has embraced green tech

Commission “Signing Day”

Feed in Tariffs Deliver Results

Over 50% of Wind Worldwide

Over 75% of Solar PV

Worldwide

Over 90% of Farm Biogas

Worldwide

Paul Gipe, Windworks.org

With No RPS, No Carbon Laws (YET….)

We will meet Kyoto Standard by 2013

Fuel Mix 2013 (Reduced Overall Demand): 62.6% Coal (same production capacity)

10.4% Natural Gas (cut in half)

5.2% Nuclear (same)

0% Oil (eliminated)

22% Renewable Energy

0% Purchased Power (eliminated)

Our costs are comparable to other like utilities….

Thank You!

Contact:

Pegeen Hanrahan, P.E.

PegeenHanrahan@aol.com

352-665-5939 mobile

www.communityconservationsolutions.com

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Craig LewisExecutive Director

Clean Coalitioncraig@clean-coalition.org

Local CLEAN ProgramsDriving Renewables and Economic Benefits

at the Local Level

Clean Coalition – Mission and Advisors

Clean Coalition – Mission and Advisors

MissionMissionTo implement policies and programs that transition the world to cost-

effective clean energy now while delivering unparalleled economic benefits

MissionMissionTo implement policies and programs that transition the world to cost-

effective clean energy now while delivering unparalleled economic benefits

Board of AdvisorsBoard of AdvisorsJeff Anderson

ED, Clean Economy Network

Josh BeckerGeneral Partner, New Cycle Capital

Jeff BrothersCEO, Sol Orchard

Jeffrey ByronFormer Commissioner, California

Energy Commission

Rick DeGoliaExecutive Chairman, InVisM, Inc.

Mark FultonManaging Director, Global Head of

Climate Change Investment Research, DB Climate Change Advisors, a

member of the Deutsche Bank Group

John GeesmanFormer Commissioner, California

Energy Commission

Patricia GlazaPrincipal, Arsenal Venture Partners

L. Hunter LovinsPresident, Natural Capitalism Solutions

Dan KammenChief Technical Specialist for

Renewable Energy and Energy Efficiency, World Bank

Fred KeeleyTreasurer, Santa Cruz County, and Former Speaker pro Tempore of the

California State Assembly

Felix KramerFounder, California Cars Initiative

Governor Bill RitterDirector, Colorado State University’s Center for the New Energy Economy,

and Former Colorado Governor

Terry TamminenFormer Secretary of the California EPA

and Special Advisor to CA Governor Arnold Schwarzenegger

Jim WeldonCEO, Solar Junction

R. James WoolseyChairman, Woolsey Partners, and

Former Director of the CIA

Kurt YeagerED, Galvin Electricity Initiative

Ultimate Clean Coalition Vision

What is Holding Renewables in U.S. Back?

Technology solutions are ready

Capital is swarming

POLICY IS MISSING

It is hopefully coming though, via:

SB32 – statewide CLEAN Program in California

DSIS / Rule 21 Interconnection Reform in California + FERC

Local CLEAN Program Guide for local jurisdictions

Policy needs to solve the top three barriers to project development:

Procurement – getting contracts to sell energy to utilities

Interconnection – getting projects interconnected to the distribution grid

Financing – getting projects financed

U.S. Policy Gap for Clean Local Energy

National policies focus on removing barriers for large-scale renewable power facilities and infrastructure.

State and local net-metering policies promote small-scale renewables:

Net-metering is designed to reduce a utility customer’s electric bills

Net metering is not designed for owners of commercial and multi-tenant properties (where tenants pay the utility bills)

Annual on-site energy often caps net-metering project sizes

Investors and lenders find “revenue” from a utility customer’s energy savings from net-metering far less attractive than a true revenue stream from a utility

What Does Policy Need to Do?

Focus on Wholesale Distributed Generation

aka Wholesale DG or WDG

Implement CLEAN Programs to overcome top three barriers to renewable energy project development

Let private capital transform the energy industry

Energy industry is like telecom industry 30 years ago

Policy innovation needed to drive technology innovation and capital flows

Superior Value of Wholesale DG Solar

Solar Markets: Germany vs California (RPS + CSI + other)

0

5000

10000

15000

20000

2002 2006 2007 2008 2009 2010

California

Germany

Germany added 28 times more solar than California in 2010.Even though California’s solar resource is 70% better!!!

Sources: CPUC, CEC, SEIA and German

equivalents.

CLEAN Programs Defined (FITs + Interconnection)

CLEAN Features:

Standard and guaranteed contract between the utility and a renewable energy facility owner

Predictable and streamlined distribution grid interconnection

Predefined and financeable fixed rates for long durations

CLEAN Benefits:

Removes the top three barriers to renewable energy

The vast majority of renewable energy deployed in the world has been driven by CLEAN Programs

Allows any party to become a clean energy entrepreneur

Attracts private capital, including vital new sources of equity

Drives local employment and generates tax revenue at no cost to government

Making CLEAN Programs Easy

Targeting communities and individual utilities with Local CLEAN Program Guide

Targeting states with to-be-developed State CLEAN Program Guide

Accessible to all via free download at Clean Coalition website

CLEAN Programs are Simple and Transparent

CLEAN Programs remove barriers and reduce costs

Typical German paperwork for one projectTypical California paperwork for one project

Could be a 1kW-sized project, but maximum 1MW (via CSI program). Even more paperwork for California projects larger than 1MW (via RPS

program).

Could be a 1kW or 20MW-sized project, or bigger.

Source: Gary Gerber, President of CalSEIA and Sun Light & Power, Jun09

CLEAN can easily reduce costs by 20% by preempting bureaucracy alone

CLEAN Gainesville Seeds a U.S. Solar Revolution

Source: Gainesville Regional Utilities, April 2011

CLEAN California Campaign Partners – Join Us

www.EnergyJobsNow.org

Free download: www.Clean-Coalition.org/local-action

Contact us: LocalGuide@Clean-Coalition.org

Structure of the Guide:

Module 1: Overview & Key Considerations

Module 2: Establishing CLEAN Contract Prices

Module 3: Evaluating Avoided Costs

Module 4: Determining Program Size & Cost Impact

Module 5: Estimating CLEAN Economic Benefits

Module 6: Designing CLEAN Program Policies & Procedures

Module 7: Gaining Support for a CLEAN Program

Download the Local CLEAN Program Guide

For communities with no formal control over the distribution grid:

•CLEAN Retail Contracts Program: Have control of retail electricity purchases only like in cities served by Investor-Owned Utilities:

• City offers standard retail Power Purchase Agreement (PPA)

• Predefined rates for energy delivered for a long duration

• Predefined sites for projects

• Developer installs and interconnects renewable facilities “behind the meter” to serve on-site load to predefined sites

•CLEAN Contracts Program: Have control over wholesale electricity purchases, but no control of local electricity grid, like in Community Choice Aggregation (CCA) jurisdictions:

• Same as a CLEAN Program, minus grid access procedures, which are still controlled by the underlying utility

Hybrid CLEAN Programs

CLEAN Avoids Hidden Transmission Costs

Source: CPUC IOU RPS Project Status, October 2011Source: Clean Coalition

CLEAN Locks In Reasonable Electricity Rates

CLEAN Programs result in cost savings as avoided costs increase:

• Avoided costs may include fossil fuel, new peaker plants, transmission costs

• Gainesville, FL increased solar by 2,000% with <1% ratepayer impact

• Sacramento, CA procured 100 MW renewables with no ratepayer impact

¢/kWh

For this single 10 kW solar rooftop project in

Colorado, avoided costs will rise

above the CLEAN contract price within a

few years

Economies-of-Scale Make Solar Cost-Effective

CLEAN Rates required for PV rooftop projects up to 30kW. Assumptions include $3.50/W instaIled cost (20% higher than in Germany) + use of US federal tax benefits

Source: John Farrell, ILSR, Jun2011: http://energyselfreliantstates.org/content/pricing-clean-contracts-feed-tariffs-solar-pv-us

• CLEAN projects are “shovel-ready” and create local jobs now – no delays for transmission and associated environmental reviews and community opposition

• Renewable energy creates far more jobs than fossil fuels or nuclear

CLEAN Maximizes Local Jobs Creation

• Local Job Creation

• Local Capital Investment

• CLEAN Programs level the playing field, giving local residents and businesses theopportunity to reinvest capital in the community

• Local ownership of renewable energy increases the economic benefits to the community by 200% to 300% (Source: U.S. Government Accountability Office)

• Local Tax Revenues

• Local job creation and capital investment inthe community creates new sources of localtax revenues

CLEAN Maximizes Local Economic Benefits

Map of CLEAN Programs in the U.S. and Canada

Q&A and Discussion

Comments and Questions

Please type in the right hand side of your screen

Direct questions to: “All Panelists”

The Conversation Continues…

http://icma.org/en/icma/knowledge_network/topics/kn/Topic/292/Solar_Energy

Thank You!

Casey Johnstoncasey.johnston@iclei.org

Back-up Slides

Back-up Slides

CLEAN Programs Ramping in the United States

Local CLEAN ProgramsGainesville (early 2009)

Sacramento (early 2010)

San Antonio (June 2010)

Los Angeles (expected 2011)

Fort Collins, CO (expected 2011)

Palo Alto, CA (expected 2011)

Local CLEAN Program Guide (2011)

www.Clean-Coalition.org/local-action

State CLEAN ProgramsVermont enacted the first statewide program in mid-2009

Hawaii and Oregon enacted programs in 2010

Rhode Island enacted a program in the fall of 2011

Connecticut moving Governor-sponsored CLEAN legislation

CLEAN California Campaign

www.EnergyJobsNow.org

State CLEAN Program Guide (2012)

CLEAN Programs Unleash Wholesale DG

CLEAN Programs provide Transparency, Longevity & Certainty (TLC)* to the Wholesale Distributed Generation market by removing the main barriers to the sale of clean local energy to utilities for local use.

Germany Has Cheapest Solar in World (US$0.12/kWh)

Most expensive German CLEAN rate is set for solar

Germany’s weighted average solar rate is about US$0.30/kWh

In Colorado, the equivalent rate would be less than $0.12/kWhTax credits in US reduce the German rate by 40%

Investment Tax Credit (ITC) and Accelerated Depreciation

Solar resource is at least 50% better in Colorado , which reduces German rate by more than an additional one-third

Effectively: 30 cents/kWh goes to 18 and then to less than 12

German PV rate of 30 cents is equivalent to less than 12 cents in Colorado

CLEAN California is about Economics

CLEAN California = 3x job creation

+ $50 billion added

private investment

UC Berkeley study

(Dan Kammen)

CLEAN Maximizes Local Economic Benefits

CLEAN keeps energy dollars in the community:

CLEAN Programs for California RPS vs. baseline approach:

3 times more jobs

$50 billion additional private investment

$1.7 billion additional state revenues

Low burden on the community and the utility:

Does not rely on subsidies or other government expenditures

Can be easily implemented and administered by utility staff