Future Energy Legislation Impact on Renewable Goals for Metropolitan Mayors Caucus
The update covers the status of the FEJA, PACE financing, and 100% renewable goals for the Metropolitan Mayors Caucus. The FEJA in Illinois includes components like Zero Emissions Credits, Energy Efficiency, and changes to the Renewable Portfolio Standard. It prioritizes long-term contracts for RPS compliance, redirects funds for low-income solar, and increases the solar carve-out. The legislation also establishes separate goals for various solar projects and provides special funding for income-qualified communities and consumers.
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Energy Market Update UPDATE ON STATUS OF FEJA, PACE FINANCING AND 100% RENEWABLE GOALS FOR THE METROPOLITAN MAYORS CAUCUS
Overview Future Energy Jobs Act Property Assessed Clean Energy (PACE) Financing 100% Renewable Goals Conclusions 2 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Future Energy Jobs Act STATUS, OPPORTUNITIES, OPTIONS 3 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Future Energy Jobs Act (FEJA) New energy legislation in Illinois New energy legislation in Illinois Negotiated by Exelon and a range of environmental & consumer advocates Passed by legislature on December 1, 2016 Signed by Governor on December 9, 2016 Enacted June 1, 2017 Primary components Primary components Zero Emissions Credits Purchased from Exelon s Quad Cities an Clinton plants ($2.35 billion/10 years) Energy Efficiency Lifts cost cap and places efficiency expenses into utility ratebase ($350 million/year) Renewable Energy Fundamental changes to Illinois Renewable Portfolio Standard Prioritizes RPS compliance towards long term contracts (15 year REC purchases with utilities) Positions most RPS transactions between utilities and renewable resource owners Redirects Renewable Energy Resources Fund towards low income ( Illinois Solar for All ) Increases the solar carve out from 6% to 50% of RPS goal 4 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Future Energy Jobs Act (FEJA) New energy legislation in Illinois New energy legislation in Illinois Negotiated by Exelon and a range of environmental & consumer advocates Passed by legislature on December 1, 2016 Signed by Governor on December 9, 2016 Enacted June 1, 2017 Primary components Primary components Zero Emissions Credits Purchased from Exelon s Quad Cities an Clinton plants ($2.35 billion/10 years) Energy Efficiency Lifts cost cap and places efficiency expenses into utility ratebase ($350 million/year) Renewable Energy Fundamental changes to Illinois Renewable Portfolio Standard Requires utilities to purchase wind and solar through 15 Requires utilities to purchase wind and solar through 15- -year contracts Increases the carve out for solar purchases from 6% to 50% Increases the carve out for solar purchases from 6% to 50% Establishes separate goals for utility, community, brownfield and residential solar projects Establishes separate goals for utility, community, brownfield and residential solar projects Establishes special funding for income qualified communities & consumers Establishes special funding for income qualified communities & consumers year contracts 5 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
FEJA: Solar Opportunities Utility Scale Solar (> 2,000 kW nameplate capacity) Generally requires more than 10 acres Owner can sell electricity outputs to wholesale offtakers Community Solar (<2,000 kW nameplate capacity) Generally requires less than 10 acres Retail consumers can subscribe to receive billing credits Distributed Solar (<2,000 kW nameplate capacity) Rooftop or land-mounted Electricity largely consumed where it is generated Brownfields / Illinois Solar for All Special carve outs for projects on USEPA/IEPA brownfields ~$200 million in funding for Income Qualified communities 6 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: What is it? Alternative to Rooftop Solar Alternative to Rooftop Solar Consumers purchase a portion of the generation from a remote solar resource Utilities credit the consumer s portion of monthly solar generation on monthly electricity bills Potential Benefits Potential Benefits Access to solar for consumers that don t own their homes, have a suitable roof, or have good credit Reduces the cost of solar by capturing economies of scale Funds development of new clean generation in Illinois Now allowed in Illinois Now allowed in Illinois Future Energy Jobs Act 156 MW in ComEd region by 2020 7 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: How does it Work? 1 Community Solar asset delivers energy to the Local Utility. Local Utility delivers blended energy to consumers 2 Local Utility applies on-bill credits to Community Solar Subscribers. 3 Subscribers pay a portion of their on-bill credits to the Community Solar developer 4 8 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Wheres the Value? Low Range Low Range ( /kWh) High Range High Range ( /kWh) Community Solar Cost & Revenue Elements Community Solar Cost & Revenue Elements A. Costs (Levelized A. Costs (Levelized - - 20 Years) Materials & Construction ( /kWh) Site Acquisition & Preparation ( /kWh) Operations & Management ( /kWh) Total Solar Project Costs ( /kWh) 20 Years) 9.6 10.7 1.7 2.7 1.7 1.9 Cost to Generate Cost to Generate 13.0 15.3 B. Incentives (Levelized B. Incentives (Levelized - - 20 Years) Investment Tax Credit - Federal ( /kWh) Accelerated Depreciation Federal ( /kWh) Renewable Energy Credits State ( /kWh) Smart Inverter Grant Utility ( /kWh) Total Solar Project Incentives ( /kWh) 20 Years) 2.1 2.3 1.5 1.6 5.8 5.8 0.9 0.9 10.3 10.6 Value of Incentives Value of Incentives C. Energy Sales Requirement (Levelized C. Energy Sales Requirement (Levelized - - 20 Years) 20 Years) 2.7 /kWh 4.7 /kWh Net Revenue Requirement Net Revenue Requirement Payments from Subscribers 9 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Wheres the Value? Subscription Subscription Cost Cost Energy Energy Supplier Supplier Contract Contract Type Type Pricing Pricing Structure Structure Subscription Subscription Value Basis Value Basis Subscription Subscription Value Value ~3.0 /kWh Fixed Price Energy Only Retail Supply Paid ~2.8 /kWh Hourly Price Energy Only Subscription Cost 2.7-4.7 /kWh Capacity + Energy 6.1 /kWh Fixed Price Paid ~2.8 /kWh Hourly Energy Only Default Supply Capacity + Energy 6.1 /kWh Fixed Price Franchise ~2.8 /kWh Hourly Energy Only 10 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Whats it Worth? Unit Price ( /kWh) Unit Price ( /kWh) $/10,000 kWh $/10,000 kWh Pricing Variables for One Small Account Pricing Variables for One Small Account Default Default Supply Supply Default Default Supply Supply A. Energy Supply Cost Energy Commodity ( /kWh) Capacity ( /kWh) Transmission ( /kWh) Energy Supply Cost ( /kWh) 3.6 2.5 1.5 7.6 3 $360 $250 $150 $760 $300 $250 $150 $700 2.5 1.5 7 B. Subscription Credit Energy Commodity ( /kWh) Capacity ( /kWh) Gross Subscription Value ( /kWh) C. Net Price to Consumer Energy Supply Cost ( /kWh) Subscription Credit ( /kWh) Subscription Cost ( /kWh) Net Cost to Consumer ( /kWh) -3.6 -2.5 -6.1 -3 0 -3 ($360) ($250) ($610) ($300) - ($300) 7.6 -6.1 4.5 6 7 -3 4.5 8.5 $760 ($610) $450 $600 $700 ($300) $450 $850 11 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Whats it Worth? Unit Price ( /kWh) Unit Price ( /kWh) $/10,000 kWh $/10,000 kWh Pricing Variables for One Small Account Pricing Variables for One Small Account Default Default Supply Supply Default Default Supply Supply A. Energy Supply Cost Energy Commodity ( /kWh) Capacity ( /kWh) Transmission ( /kWh) Energy Supply Cost ( /kWh) 3.6 2.5 1.5 7.6 3 $360 $250 $150 $760 $300 $250 $150 $700 2.5 1.5 7 Default + Subscription Default + Subscription $100 less than Retail only $160 less than Default only B. Subscription Credit Energy Commodity ( /kWh) Capacity ( /kWh) Gross Subscription Value ( /kWh) C. Net Price to Consumer Energy Supply Cost ( /kWh) Subscription Credit ( /kWh) Subscription Cost ( /kWh) Net Cost to Consumer ( /kWh) -3.6 -2.5 -6.1 -3 0 -3 ($360) ($250) ($610) ($300) - ($300) 7.6 -6.1 4.5 6 7 -3 4.5 8.5 $760 ($610) $450 $600 $700 ($300) $450 $850 12 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Whats it Worth? Unit Price ( /kWh) Unit Price ( /kWh) $/2,000,000 kWh $/2,000,000 kWh Pricing Variables for Many Small Pricing Variables for Many Small Accounts Accounts Default Default Supply Supply Default Default Supply Supply A. Energy Supply Cost Energy Commodity ( /kWh) Capacity ( /kWh) Transmission ( /kWh) Energy Supply Cost ( /kWh) 3.6 2.5 1.5 7.6 3 $72,000 $50,000 $30,000 $152,000 $60,000 $50,000 $30,000 $140,000 2.5 1.5 7 Default + Subscription Default + Subscription $20,000 less than Retail only $32,000 less than Default only B. Subscription Credit Energy Commodity ( /kWh) Capacity ( /kWh) Gross Subscription Value ( /kWh) C. Net Price to Consumer Energy Supply Cost ( /kWh) Subscription Credit ( /kWh) Subscription Cost ( /kWh) Net Cost to Consumer ( /kWh) -3.6 -2.5 -6.1 -3 0 -3 ($72,000) ($50,000) ($122,000) ($60,000) - ($60,000) 7.6 -6.1 4.5 6 7 -3 4.5 8.5 $152,000 ($122,000) $90,000 $120,000 $140,000 ($60,000) 90,000 $170,000 13 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Challenges SREC Lottery 40% Volume Cap - Funding for 156 MW Incentives - 800 MW of projects - A Subscriber may take more than 40% of a single project s output - Lottery trigger @200% of funding limit Term Term - Economics are best for small accounts, marginal for large accounts - Developer cannot guarantee availability - Developer cannot guarantee availability - Projects require long- term guaranteed cash flows Developers need Developers need 15 15- -20 year 20 year commitments commitments Need access to Need access to multiple projects multiple projects to meet needs to meet needs Pre Pre- -Lottery Lottery commitment is commitment is challenging challenging Need to carefully Need to carefully structure the structure the account portfolio account portfolio 14 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Municipal Role in Solar Project Development Inventory. Create an inventory of available land and rooftop space in the community. Enrollment Zoning/Permitting. Adopt appropriate zoning for utility, community, and distributed solar. Subscription Financing. Utilize industrial development bonds and enterprise zones to support solar project development. V a l u e Zoning / Permitting Hosting Subscription. Purchase subscriptions to local or regional community solar projects for municipal facilities. Short-listing Financing Hosting. Lease municipal land for use as a solar project site. Inventory Short-listing. Create a preferred developer list for residents and business to use at their option. Municipal Involvement Enrollment. Facilitate subscription of local accounts into local solar projects. 15 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Community Solar: Municipal Opportunities Update Zoning / Update Zoning / Permitting Permitting Subscribe Municipal Subscribe Municipal Accounts Accounts Combine Solar & Combine Solar & Aggregation Aggregation Subscribe municipal accounts to one or more Community Solar resources to achieve lower net costs R RECOMMENDATION ECOMMENDATION: : Create a purchasing group Create a purchasing group to leverage lower prices, to leverage lower prices, manage the 40% rule, manage the 40% rule, optimize small accounts, optimize small accounts, and protect against IPA and protect against IPA lottery. lottery. Structure supply agreements with prices that match monthly ComEd rate and require a % of Community Solar content R RECOMMENDATION ECOMMENDATION: : Select a supplier now that is Select a supplier now that is negotiating Community negotiating Community Solar supply agreements, Solar supply agreements, and negotiate short and negotiate short- -term (1 5 year) agreement ahead of 5 year) agreement ahead of 2019. 2019. Adopt unified rooftop solar permitting processes Prepare zoning for brownfield and community solar development R RECOMMENDATIONS ECOMMENDATIONS: : Investigate SolSmart Investigate SolSmart program expansion for program expansion for more municipalities more municipalities match the and term (1- - 16 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Property Assessed Clean Energy (PACE) Financing STATUS, OPPORTUNITIES, OPTIONS 17 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: What is It? Alternative Low Alternative Low- -Cost Energy Project Financing Cost Energy Project Financing Property Assessed Clean Energy ( PACE ) is a project financing vehicle for owners of commercial, industrial, and other non-residential properties to obtain low-cost, long-term financing for energy efficiency, renewable energy and other types of projects. Potential Benefits Potential Benefits 100% project financing with no up-front costs for up to 30 years Loan repayment appears as special assessment on property tax bill Loan obligation automatically transfers to the new owner upon sale No bonding requirement or reduction in property tax collections for municipality Now allowed in Illinois Now allowed in Illinois Public act 100-0077 DuPage County and other counties are reviewing 18 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: What is it? Building Envelope Building Envelope (100% Financing) (100% Financing) Major Systems Major Systems (100% Financing) (100% Financing) Power Generation Power Generation (100% Financing) (100% Financing) Insulation Air Sealing Duct Sealing Windows Doors Roofs Heating Air Conditioning Ventilation Water Heating Lighting Building Management Systems Pool Equipment Solar PV Solar Thermal Wind Geothermal Water Catchment Cogeneration 19 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Wheres the Value? 20 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Wheres the Value? 21 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Wheres the Value? $100M Capital Stack Before PACE After PACE 6.25% 6.25% Senior Debt Senior Debt $49.5M 3.00% 3.00% Tax Credits Tax Credits $21.9M 15.00% 6.13% Mezzanine Loan PACE Finance $23.9M 10.00% 10.00% Equity Equity $22.4M Weighted Average Cost of Capital 9.29% 7.46% 22 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: How does it Work? Illinois Finance Authority (IFA) securitizes syndicated capital from investors 1 2 3 IFA makes capital available to Program Administrator 2 Program Administrator issues loan to Property Owner in exchange for PACE lien 3 1 5 4 County collects PACE Assessment on property tax bills and passes through to Trustee 4 Trustee distributes PACE Assessment to Administrator, IFA, and other service providers 5 23 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Whats it Worth? Oakbrook Hilton Planned renovation Energy Conservation Measures LED lighting Lighting controls & sensors Cooling & Refrigeration VSD & exhaust fans Building automation system Energy management system Kitchen hood controls Swimming pool covers Cogeneration system 24 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Whats it Worth? Original budget: $1.5 million Final budget: $4.7 million 20-year funding term 6.5% PACE financing Impact 100% financing Off-Balance sheet Captured all available utility rebates and other tax incentives $550,000 increase in Net Operating Income 25 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Municipal Role Policies Policies Structure Structure - Assessment Administration Administration - Commercial - Single or multiple finance providers - Control Capital Capital - Single or multiple programs within the municipality - Fees - Ordinance - Municipal debt - Amend over time - County notice - Illinois Finance Authority - Engage program administrator Recommendation: Recommendation: Use Illinois Finance Use Illinois Finance Authority Authority Recommendation: Recommendation: Select an Open Select an Open Structure Structure Recommendation: Recommendation: Start with a Single Start with a Single Administrator Administrator Recommendation: Recommendation: Create a Plan of Create a Plan of Governance Governance 26 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
PACE Financing: Potential Benefits Economic Economic Development Development Policy Fulfillment Policy Fulfillment Cost Neutrality Cost Neutrality Lower costs for new construction and renovation development Accelerate project development Aligns development with sustainability goals Foster compliance with new code requirements Costs borne by developers No requirement for municipal funding Payment obligation transfers with property sale 27 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
100% Renewable Energy Initiatives STATUS, OPPORTUNITIES, OPTIONS 28 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
100% Renewable What is it? Organizations are advocating for commitments to 100% renewable energy Ready for 100 (Sierra Club) RE100 (there100.org) Renewable Energy Challenge (City of Chicago) Very little detail RECs or renewable energy? Wind, solar, biomass, other? Measurement and verification? Include efficiency? Directional assessment for municipalities What can be accomplished by municipalities? How can progress be made? 29 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Municipal Role in 100% Renewable Plan / Benchmark. Community energy benchmarking reports, and inventory of available program options for the community. Facilitate. Adopt appropriate permitting and zoning to remove barriers to the development of native renewable energy assets. Sponsor I m p a c t Sponsor. Create programs that assist community members access renewable energy (i.e. aggregation). Participate Facilitate Plan Plan / Benchmark Participate. Purchase renewables for municipal utility accounts. Municipal Involvement 30 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
100% Renewable: Outlook & Options Likely a concept that advocates will continue to press It s conceptually simple Builds on recent successes (FEJA) Municipalities face limits that advocates may not appreciate No control over private sector energy transactions Resource availability Municipalities may benefit from crafting their own approach to 100% Renewable Define terms and compliance Set standards Share the cost of developing program options 31 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
Thank You Very Much Mark J. Pruitt The Power Bureau P. 219/921-3828 E. markjpruitt@thepowerbureau.com 32 THE POWER BUREAU, LLC | METROPOLITAN MAYORS CAUCUS
