Connecticut Self Storage Association Presentation

ENERGY SUMMITfor Self Storage Owners and Managers

CTSSA ProgramMarch 12, 2013

Overview

Discuss economic benefits of investing in energy efficiency measures from both an investment and a tax perspective.

Discuss low interest financing options. Review a case study – i.e. take you

through an actual proposal and financial analysis for a CT storage facility.

IntroductionsPanelists • Stephanie Grubb, Cohn Reznick - Investment Considerations and

Tax Benefits

• Jessica Bailey, CEFIA Commercial & Industrial Property Assessed Clean Energy - C-PACE Financing

• Elena Cahill, Globele Energy - Audit Requirements and Benefits

• Nicholas Malagisi, Sperry Van Ness Advisors; Real Estate Benefits

• Scott Hainey, Storage Insurance Brokers - Insurance Requirements

• Tim McGrew, Connecticut Light & Power – CL&P Assistance to Improve Energy Efficiency

• Christy Bradway, Connecticut Light & Power – Discussion of ZRECs

• Ted Lawrence, Renewable Resources Inc. – Solar Process and Case Study

• Tom Loredo, Renewable Resources Inc. - Panel Moderator

Energy Outlook

“Fuel for Thought”UN Population Growth Estimate

to 9 Billion by 2040

What will the effect be on:

The Use of Energy?

The Cost of Energy?

The Environment, if we continue to use fossil fuel based energy?

World Energy Outlook by 2035

World primary energy demand will increase 36%

China’s demand for energy is rising by 75%

The US is now the second largest energy consumer behind China

The use of renewable energy will triple

Renewables account for 7% of all energy and will rise to 14%

Electricity Rates

On average, CT electric rates have increased 5% per year, over the last 10 years. (Source: US Energy Information Administration)

Currently, the average commercial cost is between $0.16 - $0.17/kWh in CT

Straight line projection of 5%/year = $0.27/kWh in 2023

Globelé Energy

Energy Conservation, Generation and

Alternative SupplyOn overview

CONSERVATION

How can you conserve energy in a building:1. Look at your process and learn if you can lean

out the process;2. Make process equipment more energy efficient;3. Look at the building systems and determine if

you can replace any systems with energy efficient technology;

4. Manage you process and building systems with technology.

5. An audit or benchmarking will help you determine the present situation and provide options for you

Next make sure you understand the economics of conservation.

As you will learn today there are many programs available to assist with funding for conservation projects.

Understand some monies are incentive monies to do the project, other programs can help you finance the project, and yet other benefits are federal tax credits or deductions.

The benefits are cumulative: you may be qualify for incentive dollars which requires less funding for the projects and then take the federal tax credit or deduction on your tax return.

CONSERVATION

Federal programs apply to every state.Every state and within the sate the utility

company may have their own programs for conservation or generation.

CT has the energy efficiency fund and CEFIA and now CPACE

MA has Massachusetts Energy and Utility Assistance,

National Grid has efficiency programs, etcNY has NYSERDA, Con ED has efficiency

programs, etcDSIRE website for the benefits in your state

CONSERVATION

Alternative electric and natural gas supply.Deregulation intended to save money and it

can but be knowledgeableCT utility companies can change their rates

January 1 and July 1 – this year UI will change their rate next in January 1, 2014 and CLP in July 2013.

Present 24 hr rates- UI -.076 CLP - .078Make sure the rate can not go up. Natural Gas utility companies change their

rates monthly on the 1st.

ELECTRICITY AND NAT GAS

You can generate energy through renewable technologies such as solar, wind, etc

You can generate energy with cleaner technologies such as fuel cell, co-gen etc

Federal tax credits available for projects through 2016

In CT - CPACE program can potentially fund the projects, you will learn more later-CPACE is in 27 other states

Cumulative benefits again- CPACE- Fed tax credits, etc

DSIRE will list renewable programs as well

GENERATING ENERGY

Why Solar Power

Why Solar Power?

Solar is a clean and renewable energy source

Every hour, enough sunlight shines on the earth to meet global energy needs for an entire year

It’s Natural – Just like the Sun

Silicon Ingot

Wafer

Solar Cell

Modul

es

Array

Virgin Silicon

PV System on Building

Calculating Solar Efficiency

Azimuth

Pitch

Shading

Solar Economics

The Economics of Solar

Avoided Cost of Electricity equals Lower Operating Expenses

Federal Tax Benefits – ITC and Depreciation

State/Utility Incentives - ZREC

Life of Solar System (25 Year Warranties)

30% Federal Tax Credit through 2016

5-year accelerated depreciation (MACRS)

50% bonus depreciation in 2013

Depreciable base is reduced by 50% of ITC credit value

Federal Solar Programs

Project Finance

Direct Purchase – Conventional financing

Capital Lease – 10 year term with $1 Buyout

C-PACE – Property Assessed Lending

Solar Project Development Timeline

Month 1 2 3 4

Week 1 2 3 4 5 6 7 8 9 10 11 12 13

Stage I II III

A. Agreements Completed

B. Physical Plan/Site Review

D. State Authorization

Municipal Permits

Assumes no zoning or variances

required

E. System Installation (Assumes good

weather conditions)

F. Municipal Inspection

G. Utility-Net Meter Install

C. Final Design

Utility Application/

Interconnection

H. State Inspection

Stage I - Design

Stage II - Applications

Stage III - Installation

Next Steps

Data Collection

12 Month History of Electric Use

Site plan

Blue Prints

Site review and structural analysis

Proposal

Financing Discussion

Preliminary Project Timing

Proposed Bill No. 203

AN ACT CONCERNING PROPERTY TAX EXEMPTIONS FOR RENEWABLE ENERGY SOURCES.Be it enacted by the Senate and House of Representatives in General Assembly convened:That section 12-81 of the general statutes be amended to exempt from property tax any Class I renewable energy source installed for the generation of electricity for commercial and industrial use, and to make such exemption applicable to assessment years commencing on or after October 1, 2012.

Statement of Purpose: To encourage the use of renewable energy sources, and to allow the commercial and industrial sectors to benefit from such sources by expanding current law that allows the property tax exemption for renewable energy sources only if the generation of electricity is for residential or farm use.

Storage Insurance Brokers

Commercial Business Case Study

Building OverviewBuilding Type: Pre-engineered, steelRoof Type: Metal, low pitchElectric Company: CL&PElectric Rate: $0.179/kWhElectric Consumption: Approx. 52,300 kWh/ yr.Anticipated Utility Rate Escalation: 3%

Metal Roof Installation

Commercial Business Case Study

Solar Installation• System Size— 46.08 kW• Panels— 192 @ 240 watts• System Production— 51,358 kWh (Year 1)• Percentage of Electricity Produced by Solar—

98%• System Degradation— 0.8%/year• System Mounting— S5 Metal Roof Clips• System Warranty— 25 year manufacturer’s

warranty

Solar Array Mock-up

Investment – Financial Evaluation

Investment analysis considers ‘at-risk’ rule, therefore the project is financed at 80% maximum. Balance of system cost is invested by owner. Also, a 35% corporate tax rate is assumed.

Considerations• Project Cost— $175,104• Cost/Watt— $3.80• Avoided Electric Costs Savings— $0.16/kWh (with 3% yearly

escalator)• 30% ITC Value— $52,531• MACRS Value— $148,838• Loan Value— $140,083• Loan Term— 10 years• Loan Rate— 6%• Annual Loan Payment— $19,033 (assumes 1 yearly payment)


Evaluation Without ZREC Income• Avoided Electric Cost Savings over 25 years –

$269,200 • $52,531 ITC—Year 1• $148,838 available MACRS• ROI— 77%• IRR— 9.21%


Evaluation With ZREC Income• Avoided Electric Cost Savings over 25 years – • $269,200 • ZREC Income— $119,665; ZREC Value =

$164.22• $52,531 ITC— Year 1• $148,838 available MACRS• ROI— 121%• IRR— 21.77%

CohnReznick LLP

R e n e w a b l e E n e r g y P r o j e c t F i n a n c e

March 2013

• What drives the Renewable Energy Market• What is the ITC• How to finance a renewable energy project• What are the benefits to you

A g e n d a

R e n e w a b l e E n e r g y M a r k e t D r i v e r s

• Renewable Portfolio Standards (RPS)• Financial incentives

- Renewable Energy Certificates (RECs), particularly for Solar (SRECs)- Feed-in Tariffs (FIT)- Rebate and grant programs- Federal tax incentives- State tax incentives

•Rising cost of electricity- Driven by fossil fuel prices and growth in demand- Electricity prices (average retail price) vary considerably across the

country• U.S average retail price for electricity is $0.0983/kWh• California costs are high, ~$0.13/kWh• New Jersey costs are higher, ~$0.147/kWh• Rates in Hawaii are among the highest, ~$0.25/kWh• Source (as of 1/30/2012): http://www.eia.gov/electricity/state/

http://www.eia.gov/electricity/state/

Key Renewable Energy and Solar Terms

PPA – Power Purchase Agreement = Contract for sale of electricity

MW – Mega Watt - Utility Scale Power generation. Powers neighborhoods

kWh – Kilowatt-hour – smaller unit of power output – e.g., a solar panel’s electrical output

REC or SREC – Renewable Energy Certificate or “credit.” NOT a tax credit. Represents the green/clean aspect of actual energy that is separately produced. S in “SREC” means a Solar REC.

EPC – Engineering Procurement and Construction contractor

Off-taker – purchaser or user of the electricity

Host – person or place where a project is physically located (could be the buyer in a PPA)

COD – Commence Operations Date (aka “Placed in Service”)

Sponsor – Energy Project developer or project manager

PV – Solar Photovoltaic (PV) technology. Makes electricity directly from sunlight Light

SPE – a Special Purpose Entity (often an LLC) that plays a specific role in the renewable energy project such as owning and/or operating it.

ITC – Investment Tax Credit (more on this later)

PTC – Production Tax Credit (more on this later)

Net Metering – Excess electricity is fed into the electrical grid. Project owner is given a credit on their utility bill to use when the system generates less electricity than needed.


Avoided Cost- is the cost the utility would have incurred had it supplied the power itself or obtained it from another source. It is the price at which an electric utility purchases the output of a Qualified Facility (QF)


Federal Tax Incentives

Ta x D e d u c t i o n v s . Ta x C r e d i t

Tax deductions are a reduction of a taxpayer’s total income that decreases the taxable income used in calculating the actual tax to be paid.

What is a deduction worth?- $1 Deduction = $1 x tax rate

- Assume 35% tax rate

- $1 x 0.35 = 0.35¢ of after tax value

Tax credits reduce dollar for dollar the amount of tax actually owed and payable to IRS.

What is a tax credit worth?- $1 tax credit = $1 of after tax value

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Renewable Technology: Solar Electricity

Use of solar equipment (e.g. photo-voltaic (“PV”) or concentrated solar power) to generate electricity.

Eligible for 30% ITC (or 1603) through December 31, 2016, 10% thereafter.

IRC § 48 – Energy Investment Tax Credit (ITC)

• ITC is based on the percent of eligible equipment , not on how much electricity is produced and not on total project cost. Most ITCs are 30% with some 10% credits depending on technology.

• Unlike production tax credits (PTCs), there is no requirement that electricity be sold, only that the facility generates electricity, heating, cooling or lighting or meets other standards per the tax code.

• One year credit – generally claimed in year placed-in-service (PIS)

- End-user of tax credit must be an owner/partner in the deal before COD/PIS date

- 5 year compliance/holding period (like § 47 Historic Rehab Tax Credits)

- Credit vests and recapture period burns off 20% per year for 5 years from date of COD/PIS

• 5 year MACRS depreciation on most technologies (Bonus Depreciation applies when law allows)

• Basis reduction – Must reduce depreciable tax basis by 50% of the credit amount

• No governmental or tax exempt use allowed (“use” means ownership or lease)

• Credits are Allocated by profit/loss ratio (like Historic Rehab Tax Credit)

• May offset Alternative Minimum Tax liability (for tax years starting after 2008)

• Note, the ATRA of 2012 extended the election to claim the section 48 investment tax credit (ITC) rather than the PTC for eligible wind and other PTC facilities. Not all PTC eligible facilities are allowed this option. For those that are, the election now applies for projects where construction begins prior to January 1, 2014. This is a new rule.

IRC § 48 – Energy Investment Tax Credit (ITC)

Ta x E q u i t y C a l c u l a t i o n

$1,000,000 Eligible Cost of Energy Property

x 30% Applicable ITC Rate (sometimes 10%)

$ 300,000 ITC to standalone project

Solar Tax Credits: Eligible Property Defined

Equipment that uses solar energy to generate electricity

· Constructed/Purchased by the taxpayer

· Must be Depreciable or Amortizable (i.e., used in a trade or business)

· Acquired by the taxpayer and first used by the taxpayer

– Exception for sale-leasebacks - 90 day rule (Old IRC Section 48(b)(2))

Eligible Energy Tax Credit Basis – Solar ITC

Which costs are eligible for the credit?

• Solar panels, mounts, racks, wiring, inverters etc.• Hard construction costs in general• Direct and indirect costs of installation

· System integration/design/testing· Permits, fees etc.· Interest expense prior to PIS – Subject to Section 266 Election· Developer fee if Reasonable· Other soft costs properly capitalized

Practical Issue: The extent to which a support system (i.e., “racking”) for solar qualifies for the credit. Note– roof surfaces do not qualify, unless the solar panel is also the actual roof; See, PLR 201121005.

• Base for ground-mounted units that have no other uses do qualify

• Parking garage structures which support panels but provide shade?

- Portion of roofing repair?

- Parking garage/carport cost? What portion?

For Solar Walls – See, PLR 201043023

Eligible Energy Tax Credit Basis

Test Your Knowledge: What is Eligible for ITC Basis?

B o n u s D e p r e c i a t i o n

ATRA Extended Bonus Depreciation

50% - Additional 1st year depreciation of 50% for qualified propertyacquired and placed in service before Jan. 1, 2014 (before Jan. 1, 2015 for certain longer-lived and transportation property). (Code Sec. 168(k)(2), as amended by Act Sec. 331(a)).

A conforming change is made to Code Sec. 460(c)(6)(B) (relating to 50% bonus depreciation not being taken into account as a cost in applying the percentage of completion method for certain long-term contracts).

Bonus depreciation may be allocated as of the placed in service date, so planning of Investor entry is important.

M A C R S D e p r e c i a t i o n

• Wind, solar and geothermal are generally classified as five-year property

• Biomass is typically classified as seven-year property• Ancillary components such as transmission lines are depreciated over

a longer period, generally not include in tax credit basis.• MACRS Permanent part of the tax code

Wind/Solar

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

MACRS 20.00% 32.00% 19.20% 11.52% 11.52% 5.76%

MACRS + 50% bonus depreciation

60.00% 16.00% 9.60% 5.76% 5.76% 2.88%

58

Financing Renewable Energy Projects

Why and How.

W h y F i n a n c e R e n e w a b l e E n e r g y ?

For investors – · Tax incentives:

– Solar - 30% Investment Tax Credit (ITC), and for certain other technologies, owners can elect Production Tax Credits (PTC) or a 30% immediate Investment Tax Credit depending on technology.

– Five year tax depreciation (with some exceptions) on the equipment.· Yields can be considerably higher with shorter holding periods than

LIHTC and other tax credit investments.For owner-operators – · Cash flow from the sale of energy to tenants or utilities under long

term agreements and renewable energy certificates (REC’s)For energy user or “off-takers” –· Lock in their energy costs for 10-20 years• Bloomberg Energy estimates the US energy tax credit equity market is

at $7B (source http://www.cohnreznick.com/sites/default/files/The%20Return%20%E2%80%93%20and%20Returns%20%E2%80%93%20of%20Tax%20Equity%20for%20US%20Renewable%20Projects.pdf)

H o w t o F i n a n c e R e n e w a b l e E n e r g y P r o p e r t y

•Educate Lenders

•Be aware of “At Risk Rules”

61

What Does This Mean To You?

More Tax Rules!

W h o C a n U s e E n e r g y Ta x C r e d i t s ?

Corporate investors (widely-held corporations)

· An estimated 15-20 active investors; expiration of the Sec.1603 grant will create demand for much more tax equity from investors

Individuals (and closely-held corporations)

· There are several rules that may come into play here.

Tax-exempt and government entities

· Qualified allocations

– Not eligible for tax credits, but won’t affect other partners if there are “qualified allocations.” A technical rule.

– Section 168(h) election required for wholly-owned subsidiaries of tax-exempts

· PPA needs to be respected as sales/service contract… or lose / defer incentives

W h e r e c a n I f i n d m o r e i n f o r m a t i o n ?

CohnReznick – Renewable Energy· http://www.cohnreznick.com/industries/renewable-energy

Energy Tax Credits – DSIRE· http://www.dsireusa.org/

– Information on federal tax credits and incentives– Provides links to relevant state websites

Solar Energy Industries Association · http://www.seia.org/

American Wind Energy Association · http://www.awea.org/

http://www.reznickgroup.com/

http://www.dsireusa.org/

http://www.seia.org/

http://www.awea.org/

C o h n R e z n i c k C a n H e l p Yo u

Stephanie Grubb, CPAManager

CohnReznick LLP525 N. Tryon Street

Suite 1000Charlotte, NC 28202

Main (704) 332-9100Direct (704) 837-7252

[email protected]

www.cohnreznick.comwww.cohnreznick.com/industries/renewable-energy

mailto:[email protected]

http://www.cohnreznick.com/

The LREC/ZREC PROGRAM

An Opportunity to Develop Behind-The-Meter Renewable Generation in Connecticut

Christie BradwayManager, Renewable Power ContractsNortheast Utilities

Why are People Interested in Renewable Generation?

Drivers: • To “Go-Green”• To reduce, or better predict, spending on energy

Barriers:• Cost of Systems• No clear long-term revenue streams to support capital

investments

• Public Act 11-80 created a billion dollar opportunity for developers and installers of small renewable systems

• CL&P and UI will enter into 15 year contracts to purchase “RECs” from new small renewable projects

What is a REC? = Renewable Energy Certificate• How is a REC Created?

Each time a renewable generation unit produces, the energy is considered “renewable” LREC: Low – emission RECs = e.g Fuel Cells ZREC: Zero – emission RECs = e.g Solar, Wind, Small Hydro

Each megawatt hour of energy produced = 1 REC

• Why Should You Care About RECs?• RECs have a value (commodity) and are used by electric companies to

satisfy regulatory requirements (RPS)

How Many RECs & How Much Are These RECs Worth? RECs from Zero Emission units (solar, wind, hydro) may be worth up to $350 each* (cap) :

However, average price of selected medium zrec bids from 2012 = +/- $150 each

Example 1: Residential Home = 5 kW Solar System= 6 RECs/year Annual Payment = $900.

$150/REC x 6 RECs/year =+/- $900. per year Total Payment over 15 years = $13,500.

$900 x 15 years = $13,500

Example 2: Commercial Business = 100 kW Solar System = 114 RECs/year Annual Payment = $17,100. Total Payment over 15 years = $256,500.

RECs from Low Emission units (Fuel Cells) may be worth up to $200 each* (cap) However, average price of selected bids from 2012 = +/- $90 each

Example 3: Commercial Business = 400 kW Fuel Cell = 3,154 RECs/year Annual Payment = $283,860 Total Payment over 15 years = $4,257,900

REC Contract directly with customerCustomer

Utility

The REC purchase is a separate transaction

Utility purchases excess energy under existing tariff

Rec Contract with a developerDeveloper Customer

Utility

Electric Supply

LREC & ZREC EligibilityGeneral Project Eligibility Criteria

• Must be located behind contracting utility distribution meter • Must not have received funding/grants from Clean Energy Finance Investment

Authority, or its predecessor the CT Clean Energy Fund (other than low cost financing)• Projects must be in service on, or after, July 1, 2011

LRECs• No larger than 2,000 kW• Must have low emissions

• <0.07 lbs/MWh NOx; <0.10 lbs/MWh CO; 0.02 lb/MWh VOCs, 1 grain per 100 standard cubic feet

• May include fuel cells and other low emission Class I resources, as well as all zero emission Class I resources

ZRECs• No larger than 1,000 kW• Must have zero emissions• May include solar, hydro and wind

Procurement Processes1) Competitive Solicitation - (RFP)

2) Tariff

Project Type

Size Annual Budget

Renewable Energy Credit Price Cap*

RFP Timeframe and Frequency

Large ZRECs

≥250 kW to 1,000 kW

~$2.13 M Max. $350/REC Annual in April for 6 years2013 will be year 2

Medium ZRECs

>100 kW < 250 kW

Approximately $2.13 M

Max. $350/REC Annual in April for 6 years2013 will be year 2

LRECs Up to 2,000 kW

$4 M Max. $200/REC Annual in April for 5 years2013 will be year 2

Project Type

Size Annual Budget

Renewable Energy Credit Price Cap

Tariff Availability and Frequency

Small ZRECs

Up to 100 kW ~$2.13 M Weighted Average of the Medium ZREC price + 10% up to $350/REC- Year 1 Avg = $164.22/REC

Annually, after the approval of the RFP and the filing of the medium ZREC rate + 10%Expect to offer Yr. 2 Q4 2013 or Q1 2014

Budget & commitment schedule

Final Results of 1st RFP

• Final Selected Projects weighted average price/REC = $89

1. Average prices were about 1/3 of the cap • LREC Cap = $200 and Avg. Weighted Price/LREC = $65.94• ZREC Cap = $350 and Avg. Weighted Price/ZREC = $121.13

2. RFP contracts will result in approximately 27 MW of installed renewable capacity in CT• LRECs = 5.6 MW – fuel cells• ZRECs = 21 MW - solar

Category Size # Bids # Bids Selected

Average Weighted Price/REC

Committed Budget ($M)

Uncommitted Budget ($M)

% of Budget Uncommitted

15 Year Contract Value ($M)

LRECs Up to 2 MW 43 12 $65.94 $3.0 $162K 5% $45.6

Medium ZRECs

100 – 250 kW

113 47 $149.29 $2.0 $78K 4% $29.8

Large ZRECs

250 – 1,000 kW

140 21 $101.36 $2.1 $145K 7% $30.8

Total 296 80 $89.13 $7.0 $386 k 5% $106

Small ZREC Tariff• Instead of competitive bidding - projects less than or equal to 100

kW are eligible to enroll in a tariff

• Price takers = $164.22/REC • Program establishes the price as the average of the selected Medium ZREC

projects +10%

• Schedule - Small ZREC Tariff Program must open 30 days from approval of Medium ZREC Contracts• Medium ZREC Contracts approved 11/21/13 • Opened Small ZREC Program 1/8/13 (with PURA approval for extension due to

holidays)• Initial two-week window closed 1/22/13

Small ZREC Tariff

• At the close of the Small ZREC 2-week , CL&P received 479 completed Small ZREC Applications, which totaled over $5.6M in requested Small ZREC funding - more than 138% above CL&P’s available Small ZREC budget of $2.36M for this round of the Small ZREC Program.

• Based on the volume of applications received during the two-week window, CL&P conducted a random selection process of completed Applications submitted during the 2-week window, which process was observed by a representative of the State of Connecticut Office of Consumer Counsel (OCC). The random selection process resulted in a numerical rank of all completed Applications received during the two-week window.

• Based on the queue and available budget, we expect to enter into contracts with approximately 200 applications

• PURA approval of these individual contracts is not required

• PURA approved the Small ZREC Tariff and the price of tariff = $164.22/REC

• Small ZREC Tariff will be open until all available budget has been allocated, or at the time when a new Small ZREC price has been established for the next year Small ZREC applications.

• Expect this round of the Small ZREC Program will result in an approximately 9 MW additional installed solar in CT

Category Size # Applications Received

Approx. # of Contracts to be

awarded

Price/REC Available Budget

($M)

Total Annual Value of

Applications

15 Year Contract Commitment

Value ($M)

Small ZREC

0 – 100 kW 479 200 $164.22 $2.36 $5.6 $35.4

Timeline and Next StepsAction Date Comments

Small ZREC Tariff Service Attachment Execution

January – July 2013 Execution of ~200 Service Attachments

LREC and Medium/Large ZREC RFP – Year 2 Opening

April, 2013 Year 2 RFP to open in April 2013

For additional information visit:

Website: CL-P.com, and Click on Renewable Energy Credits under the “Going Green” tab

Email: [email protected]

UI: www.uinet.com/powerprocurement

Email: [email protected]

http://www.uinet.com/powerprocurement

Energy Efficiency Programs for Business

Customers

Conservation & Load Management Connecticut

Light & Power and Yankee Gas

Energize Connecticut: New name, same great programs

• Energize Connecticut is the state’s new branding initiative to help consumers save money and use clean, affordable energy.

• A partnership of the Energy Efficiency Fund, the Clean Energy Finance and Investment Authority, and local electric and gas utilities

• Energy efficiency is a valuable resource for Connecticut, it:– Reduces air pollutants and greenhouse gases– Saves customers money– Reduces need for more energy generation– Creates jobs

• Program funding:– Electric customers pay 3 mills per kilowatt-hour– Natural gas programs are funded through gas utility bills and approved by

the Public Utilities Regulatory Authority

2013 Program Incentive Budgets & Caps

Project caps• CL&P $1,000,000 per federal tax ID• YGS/CNG/SCG projects with an incentive amount greater

than $100,000 require PURA approval

BudgetsCL&P C&I $ 35.2 M

YGS $ 2.4 M

CNG $ 2.3 M

SCG $ 2.1 M

New Construction & Equipment• Captures electric and natural gas

savings where they are most cost-effective: during design

• Covers up to:– 95% of the incremental

cost of installing measures in new construction

– 75% of the incremental cost for equipment replacement projects

Energy Efficient Lighting

Lighting Controls

HVAC Equipment

Building Envelope

Refrigeration

Process Equipment

Gas Boilers VFDs

New Construction Major Renovation Equipment Replacement

Prescriptive Rebates

• HVAC Unitary Equipment

• Heat pumps• Infrared heaters• Water heaters• Food service

rebates

• Gas heating equipment– Condensing boilers– Non-condensing

boilers– Condensing

furnaces– Condensing unit

heaters

Existing Buildings

• Incentives to replace functioning equipment with more energy-efficient options

Covers up to:• 40% of installed

cost• 50% of installed

cost for comprehensive projects

Energy efficient lighting

Lighting controls

EMS/ Programmable Thermostats

Process Equipment VFDs HVAC

Refrigeration

Controls

Gas Measures

Small Business Energy Advantage (SBEA)

• Turnkey energy-saving program• Pay nothing upfront• Existing business, municipal, and government

customers • Average 12-month peak demand between 10

kW and 200 kW• All possible energy efficiency measures• On-bill, 0% financing to qualifying customers

BUSINESS & ENERGY SUSTAINABILITY (BES)

Retro Commissioning/PRIME/O&M Services/Training & Outreach

Business & Energy Sustainability (BES)

• The next level after all or most major capital improvements have been completed

• Maximize operational strategies with existing capital equipment & people

• Develop management practices

BES Programs

• Retro Commissioning: Optimizes operation of customer’s facility without installing capital equipment

• PRIME: Focuses on industrial manufacturing processes

• Operations & Maintenance: Improves efficiency through changes and repairs that can be classified as maintenance or operational procedures

• Training & Outreach

FinancingType Min Max Rate Term

MaxPymt Source

SBEA/ Muni

$500 $150,000 0% 4 yrs On-Bill Utility

C&I $2,000

$1 Million (1st $100,000 w/ subsidy)

2.99% or 4.99%

5 yrs 3rd Party 3rd Party

PURA Loan (>50 kW savings)

$1 Million

1% below rate/no more than prime

10 yrs 3rd Party 3rd Party

Residential ProgramsHome Energy Solutions

HES – Income Eligible

Residential New Construction

Retail Products

Heating & Cooling

CL&P Contacts• New Construction (ECB): Rich Asselin (860) 665-3292• Retrofit (EO): Glen Eigo (860) 665-5084• Business & Energy Sustainability: Dave McIntosh (860)

665-3531• Cool Choice: Dennis Beauregard (860) 665-4758 • Express Lighting Rebates: Dennis Beauregard (860) 665-

4758 • Small Business: Randy Vagnini (860) 665-4753• Financing: Gentiana Darragjati (860) 665-4757• Residential Programs: Lomont White (860) 665-3790• Natural Gas Programs: Matt Fox (860) 665-3749 • Your Account Executive

UI Contacts

• New Construction (ECB) : Peter Aufdemorte (203) 499-4715

• Retrofit (EO) : Peter Aufdemorte (203) 926-4715• Cool Choice ( CCH) : Will Riddle (203) 499 -2407• Express Lighting : Will Riddle (203) 499 -2407• Your account manager

QUESTIONS?Thank you!

1-877-WISE-USEEnergizeCT.com

C-PACE:A financing tool for multi-family

Clean Energy Finance and Investment Authority

Property Assessed Clean Energy

▪ An innovative financing structure that enables commercial, industrial, and multi-family property owners to access financing for qualified energy upgrades and repay through a benefit assessment on their property tax.

Private capital provides 100%

upfront, low-cost, long-term funding

Repayment through property taxes

A senior PACE lien is put on the property

and stays regardless of ownership

CRE Owners Face Barriers to Upgrades

REFERENCESEE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)

PACE Addresses Key Barriers

REFERENCESEE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)

Why C-PACE

▪ Zero up-front cash investment▪ Immediate positive cash flow▪ Long-term financing (up to 20 years) and low interest

rates▪ PACE assessment stays with the property upon sale▪ Ability to pass payments through to tenants▪ Higher rents and greater long-term property value

because of energy efficiency▪ Preservation of borrowing capacity through off-balance–

sheet financing

Connecticut Special Session Public Act 12-2 (June 2012)

▪ Commercial, industrial & multi-family property

▪ Requires the consent of the existing mortgage lender

▪ Requires SIR>1; permanently affixed

▪ Enables municipalities to opt-in

▪ Enables CEFIA to administer a statewide program

CEFIA’s Role in C-PACE

•Publish Guidelines November 2012•Onboard Municipalities•Website launched (www.c-pace.com)

Design Program

•Technical Underwriting•Marketing & Outreach•Work with Existing Mortgage Lenders

Administer Program

•Qualify Capital Providers•Offer Credit Enhancement tools (as needed)•Provide capital (as needed)•Develop warehouse / bonding authority (Q2 2013)

Attract Private Capital



Design Program


Administer Program



Municipalities Opted into C-PACE

Coming Soon: Cheshire, Clinton, East Granby, East Hartford, Fairfield, Hamden, Manchester, Meriden, New Haven, Plymouth, Torrington, Waterbury, Wethersfield

▪ Beacon Falls▪ Bridgeport▪ Durham▪ Hartford▪ Middletown▪ Norwalk▪ Old Saybrook▪ Putnam

HartfordWest Hartford

BridgeportNorwalk

SimsburyStamfordStratford

Southbury

▪ Simsbury▪ Southbury▪ Stamford▪ Stratford▪ West Hartford▪ Westport▪ Wilton▪ Windham

C-PACE Opportunities in Connecticut


BridgeportNorwalk


Southbury

Customers Apply Into C-PACE


BridgeportNorwalk


Southbury



Design Program


Administer Program



C-PACE Partners do Technical Underwriting


BridgeportNorwalk


Southbury

3rd Party Administr

ator: Buonicore Partners

Program Expertise: Buonicore Partners• Milford, CT• Modeled Energy Profile of CT• Nationwide PACE experience

Technical Expertise:

Celtic Energy• Glastonbury, CT• $1bn of energy-

related projects• Experience with large

commercial end-users, utilities, and government

Real Estate Expertise:

Sustainable Real Estate Solutions

• Trumbull, CT• Benchmarking

Database• Industry leader in

building energy performance assessment

Upgrades: What’s Eligible

Anything that saves energy from baseline

▪ High efficiency lighting▪ HVAC upgrades ▪ New automated building and HVAC

controls▪ Variable speed drives (VSDs) on motors

fans and pumps ▪ High efficiency chillers, boilers, and

furnaces▪ High efficiency hot water heating systems


BridgeportNorwalk


Southbury

… as long as it isn’t going anywhere

▪ Combustion and burner upgrades▪ Fuel switching▪ Water conservation▪ Heat recovery and steam traps▪ Building enclosure/envelope

improvements▪ BMS▪ Renewable energy systems

Upgrades: What’s Not

▪ Appliances, e.g., refrigerators, dishwashers, etc.

▪ Plug load devices▪ Vending machine controls▪ Any package of measures with a

weighted average effective useful life (EUL) that does not meet or exceed the life of the loan

▪ Any package of measures that does not achieve an energy savings (over the life of the loan) to [total project] investment ratio > 1


BridgeportNorwalk


Southbury

▪ Any measure that is easily removed/not permanently installed

▪ Any measure that does not result in improved energy efficiency

▪ Extending natural gas lines to the property line to enable a PACE-eligible gas conversion project.



Design Program


Administer Program



Capital Partners


BridgeportNorwalk


Southbury

Qualified Capital Providers

▪ CEFIA qualified 8 capital providers through a RFI.

▪ “Lending tree” model

Owner Arranged Financing

▪ Property owner is free to choose their capital provider from the private market. There is no government financing required.

Construction and Term Financing from CEFIA

▪ CEFIA authorized $20M short term facility for construction and term financing.

Requirements

▪ Building must be commercial, industrial, or multifamily▪ Non-profits eligible if municipality allows▪ Building must be located in a municipality which has

opted in▪ Feasibility study required for renewables▪ Mortgage lender must consent

Application Review: Two Paths▪ Full Assessment – Whole Building Analysis

– Begin with a Level I screening step (by CRE owners consultant), designed to cost effectively identify projects with compelling savings & ROI

– Proceed to Level II/III audit when significant savings potential exists. Determine the optimized bundle of ECMs, calculate project cost, projected energy savings & key financial metrics

▪ Fast Track – Designed for buildings where prior energy audits have been

completed including ECM recommendations, but failed to get implemented due to owner inability to self-fund the project

– Less technically complex projects (single ECM)– Pre-approved projects under utility EE incentive/rebate programs

▪ Developed in light of other PACE and leading CRE energy retrofit finance programs around the country

▪ Incorporates three established industry protocols– ASTM Building Energy Performance Assessment (BEPA) Standard

E2797-11 for baseline energy use data collection and analysis– ASHRAE Level 1, 2, 3 Energy Audit Guidelines to identify ECMs

and project energy savings– International Performance Measurement & Verification Protocol

(IPMVP) for energy savings measurement and verification

▪ Underwriting methodology is technically sound, standardized, reliable & fully-transparent

Application Review: Technical Standards

$$

$$$$$$C-Pace Capital Provider ContractorProperty Owner

$$

CEFIA Town Tax Collector

Town Land Records

Property/ECMs

Lien$$$

Mortgage Holder

Notification & Consent

Assessment & C-PACE Services Contract

Funding Agreement

Funding: Capital Flow Process

“M&V”

Financial Conduit

Agreement

Property Audit/ Energy Assessment

ContractorProperty Owner

$$

$$

$$$


$$$


$$

$$

$$$


$$$

Mortgage Holder



$$

$$

$$$


$$$

Mortgage Holder


CEFIA Program Administrator

Technical Review


$$

$$


$$$

Mortgage Holder

CEFIA

C-Pace Capital Provider

Funding Agreement



$$

$$


$$$

Mortgage Holder

CEFIA



Funding Agreement



$$

$$


$$$

Mortgage Holder

CEFIA


Financial Conduit Agreement

Funding Agreement



$$

$$


$$$

Mortgage Holder

CEFIA


Funding Agreement

Property/ECMs Financial Conduit Agreement




$$

$$


$$$

Mortgage Holder

CEFIA



Funding Agreement

Town Land Records

Property/ECMs

Caveat



$$$$$$

Equipment &Services


$$


$$$

Mortgage Holder

CEFIA



Funding Agreement

Town Land Records

Property/ECMs

Caveat



CEFIA

$$$$$$ ContractorProperty Owner

$$

$$


$$$

Mortgage Holder

CEFIA


Funding Agreement

Town Land Records

Property/ECMs

LIEN






$$

$$


$$$

Mortgage Holder

CEFIA



Town Land Records

Property/ECMs

LIEN


Funding Agreement




$$

$$


$$$

Mortgage Holder


CEFIA



Funding Agreement

Town Land Records

Property/ECMs

LIEN$$$


$$



$$

$$


$$$

Mortgage Holder


CEFIA



Funding Agreement

Town Land Records

Property/ECMs

LIEN$$$

Financial Conduit

Agreement

$$

$$$$$$C-Pace Capital Provider ContractorProperty Owner

$$


Town Land Records

Property/ECMs

Lien$$$

Mortgage Holder



Funding Agreement


“M&V”

Financial Conduit

Agreement

130

Recap:▪ Audit

▪ Notification to Mortgage Holder / Consent

▪ Project Review by Program Administrator

▪ Referral out to Qualified Capital Providers

▪ Capital Provider Selected by Owner

▪ Negotiations Funding Agreement

▪ Assessment & C-PACE Services Agreement & Financial Conduit Agreement (CEFIA – Owner – Cap Provider)

▪ Caveat on the Property (CEFIA – Town/City)

▪ Funding Disbursement(s) & Project Work Commences

▪ Project Completion

▪ Finalization of the Lien on the Property, Payment Schedule, etc.

▪ Owner Enjoys More Efficient Building & Repays Funding via Tax Bill


▪ Full Assessment & Fast Track project data are entered & tracked in CEFIA’s Data Management Platform (CDMP)

M&V: Data Management Platform

CDMP is powered by SRS’s cloud-based software platform

CDMP facilitates key project data & analytics management across the entire project life cycle (project development through M&V)

Benefits to Other Stakeholders


BridgeportNorwalk


Southbury

Capital Providers

• Low risk investment opportunity• Senior lien• Secure repayment

mechanism (taxes)• Legal and technical

structure administered by CEFIA

Mortgage Lenders

• Improves Building Financials/Risk• Lowers OPEX• SIR>1• No acceleration

• Creates a more attractive building for occupants and owners

• Finances deferred maintenance needs

Municipalities

• Creates economic development & jobs

• Reduces energy costs for businesses

• Reduces pollution

The Customer (Building Owner):PACE Addresses Key Barriers


BridgeportNorwalk


Southbury

Near term plan to sell?

Lack of funding?

Cannot assume more debt?

Insufficient payback/ROI?

Split incentives?

Uncertain savings/technical expertise?

Tax obligation fixed to property

100% upfront, 20 year financing

PACE assessments qualify as OPEX

Positive cash flow in year 1

Assessment/savings pass to tenants

Technical underwriting / SIR>1

PACE Project Example$1,500,000 add to Building Value (8.9%)

134

30 Year Old, 200,000 ft2 commercial

building

[email protected]

Jessica Bailey, Director C-PACE

Clean Energy Finance and Investment Authority

mailto:[email protected]

Thank you!