Expanding Financing for Solar
PV
2
Solar Ready II: Regional Partners
3
Chad Laurent
Meister Consultants Group
chad.laurent@mc-group.com
Who Are We?
Using
global
best
practices to inform local
decisions
100 Consultants
7 offices worldwide
U.S. HQ in Boston
15
years
experience
5
Solar Ready: Technical Assistance
One to One
Assistance
Regional
Workshops
Training
Materials
Resource
Toolkit
6
Agenda
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Solar Technologies
Solar Photovoltaic (PV)
Solar Hot Water
Concentrated Solar Power
8
Solar Technologies
Solar Photovoltaic (PV)
Solar Hot Water
Concentrated Solar Power
9
Some Basic Terminology
Cell
Panel / Module
Some Basic Terminology
Array
Some Basic Terminology
Production
Kilowatt-hour (kWh)
e- e- eCapacity / Power
kilowatt (kW)
Some Basic Terminology
Residence
5 kW
Factory
1 MW+
Office
50 – 500 kW
Utility
2 MW+
Solar Development in the US
In 2013, the US solar industry installed
131,000 new solar installations
of which
94% were residential projects
World Solar Market
Top 5 Countries Solar Operating Capacity (2013)
Germany
26 %
USA
8.6%
Source: REN 21
Germany
China
Italy
USA
Spain
Rest of World
$/W
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Global Market & Module Prices
160
35
140
30
120
25
100
20
80
GW
15
60
40
10
20
5
0
0
GW Installed
Module cost ($/W)
US Solar Market
US Installed PV Capacity (MW)
14000
12000
10000
8000
6000
4000
2000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Falling PV Prices
US Average Installed Cost for Behind-the-Meter PV
$14.00
Cost per Watt DC
$12.00
$10.00
$8.00
Price in 2013 is
almost half of
what it was in
2009
$6.00
$4.00
$2.00
$-
Tracking the Sun VII: The Installed Cost of Photovoltaics in the US from 1998-2013 (LBNL);
Solar Energy Industries Association Solar Market Insight Q2 2014
The Cost of Solar in the US
Comparison of US and German Solar Costs
$6.00
$5.00
$ per Watt
$4.00
Non-Hardware Cost
Hardware Cost
$3.00
$2.00
$1.00
$US Solar Cost
German Solar Cost
Source: NREL (http://www.nrel.gov/docs/fy14osti/60412.pdf)
LBNL (http://emp.lbl.gov/sites/all/files/lbnl6350e.pdf)(http://www1.eere.energy.gov/solar/pdfs/sunshot_webinar_20130226.pdf )
The Cost of Solar in the US
Comparison of US and German Solar Costs
$6.00
$1.60
Solar Soft Costs
$1.40
Other Paperwork
$5.00
$1.20
$ per Watt
$ per Watt
$4.00
$3.00
$1.00
Permitting &
Inspection
$0.80
Column1Costs
Financing
$0.60
$2.00
Non-Hardware Cost
Hardware Cost
Customer Acquisition
$0.40
$1.00
$0.20
$-
$0.00
US Solar Cost
Installation Labor
German Solar Cost
Source: NREL (http://www.nrel.gov/docs/fy14osti/60412.pdf)
LBNL (http://emp.lbl.gov/sites/all/files/lbnl6350e.pdf)(http://www1.eere.energy.gov/solar/pdfs/sunshot_webinar_20130226.pdf )
US Solar Resource
Source: National Renewable Energy Laboratory
21
Florida Solar Market
Cumulative Installed Capacity
250
Megawatts
200
150
100
50
0
2007
2008
2009
2010
2011
2012
2013
1,500.00
1,000.00
California
Arizona
New Jersey
North Carolina
Massachusetts
Nevada
Colorado
Hawaii
New Mexico
New York
Texas
Pennsylvania
Maryland
Florida
Georgia
Ohio
Connecticut
Tennessee
Delaware
Oregon
Indiana
Missouri
Louisiana
Illinois
Vermont
Washington
Wisconsin
Michigan
District of Columbia
Utah
Minnesota
Virginia
New Hampshire
South Carolina
Kentucky
Rhode Island
Maine
Iowa
Montana
West Virginia
Alabama
Arkansas
Idaho
Kansas
Mississippi
Wyoming
Oklahoma
Nebraska
Alaska
North Dakota
South Dakota
Megawatts
US Solar Market
Installed Capacity (MW) 2013
5,500.00
5,000.00
4,500.00
4,000.00
3,500.00
3,000.00
2,500.00
2,000.00
1.13 % of
US Capacity
500.00
0.00
Source: U.S. Solar Market Trends 2013
Florida Solar Market
Florida
US
5.8
39
watts per person
watts per person
CleanTechnica. Top Solar Power States per capita vs. Top Policy Leaders. June 25, 2013.
Solar Development in the US
In 2013, the US solar industry installed ove
145,000 new solar installations
of which
94% were residential projects
Solar Job Growth
Solar Job Growth in the US
200,000
180,000
160,000
140,000
120,000
100,000
SEIA
Estimates
80,000
60,000
The Solar
Foundation
40,000
20,000
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: SEIA Estimates (2006-2009), The Solar Foundation’s National Solar Jobs Census
2014 (2014), The Solar Foundation’s National Solar Jobs Census 2014 (2011-2014).
26
Solar Economic Growth
$16,000,000,000
$14,000,000,000
$12,000,000,000
~40% CAGR
$10,000,000,000
$8,000,000,000
$6,000,000,000
$4,000,000,000
$2,000,000,000
$0
2006
2007
2008
2009
2010
2011
2012
Source: SEIA/GTM Research – 2009/2010/2011/2012 Year in Review Report
http://www.seia.org/research-resources/us-solar-market-insight
2013
27
Benefits: Stabilize Energy Prices
Florida Residential Electricity Prices (cents/kWh)
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 200 2000 2001 2002 2003 2004 2005 2006 2005 2006 2007 2008 2009 2010 2011 2012
Source: EIA Data
Benefits: Valuable to Electric Grid
 Avoided Energy
Purchases
 Avoided T&D Line Losses
 Avoided Capacity
Purchases
 Avoided T&D Investments
 Fossil Fuel Price Impacts
 Backup Power
29
Value of Solar
In many cases the value is greater than the retail
rate
Source: Rocky Mountain Institute
30
Agenda
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
A Policy Driven Market
Federal
Investment Tax
Credit
Accelerated
Depreciation
Qualified Energy
Conservation
Bond
State & Utility
Renewable
Portfolio
Standard
Net Metering
Interconnection
State
&
Utility
Solar Access
The Current Financing
Landscape
Direct
Ownership
Third-Party
Ownership
Direct Ownership
$
Customer
$
Utility
Direct Ownership: Benefits
Direct Ownership
Upfront Cost
High
O&M Costs
Yes
Electricity Costs
None
Development Risk
Yes
Performance Risk
Yes
Difficulty
Value to Customer
Availability
Complex
Higher ROI for Customer
Everywhere
Third Party Ownership
Third Party Ownership
Power Purchase Agreement
e- eCustomer
$ $
Incentives
Developer
Third Party Ownership: Benefits
Direct Ownership
Third Party Ownership
Upfront Cost
High
Low to None
O&M Costs
Yes
No
None
Predictable Payments
Development Risk
Yes
No
Performance Risk
Yes
No
Complex
Easy
Higher ROI for Customer
Shared Benefits
Everywhere
Only in some states
Electricity Costs
Difficulty
Value to Customer
Availability
Third Party Ownership
100
90
80
70
California
60
Arizona
Colorado
% 50
Massachusetts
40
New Jersey
30
New York
20
10
0
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
2014
Source: GTM Research/ Solar Energy Industries Association, U.S. Solar Market Insight 2012 Year-inReview
& U.S. Solar Market Insight Q2 2014
Third Party Ownership: State
Policy
Third Party Ownership is not always
available
Authorized by state or otherwise currently in use, at least in certain jurisdictions within in the state
Apparently disallowed by state or otherwise restricted by legal barriers
Status unclear or unknown
Puerto Rico
Third Party Ownership: Cost
Weighted Average Cost of Capital
16.0%
14.0%
12.0%
10.0%
Third Party
Ownership can
be expensive
8.0%
6.0%
4.0%
2.0%
0.0%
Third Party Ownership
Direct Ownership with Debt
DOE WACC Targets
Source: National Renewable Energy Laboratory (NREL) 2013
DOE WACC Targets
Source: National Renewable Energy Laboratory (NREL) & Rocky Mountain Institute 2013
Over 20 years Loans can beat PPA
Source: EnergySage
LCOE of Loans vs. PPA
LCOE for Residential Solar PV based on Financing
$0.30
San Diego
Res. Retail
Rate
$0.25
$0.20
$0.20
$0.15
$0.26
$0.14
$0.15
5-Year Loan
10-Year Loan
$0.16
$0.10
$0.05
$-
Source: NREL (2014)
20-Year Loan
20-Year PPA
SDG&E Res.
Tier 2/3
Additional Local Benefits
Source: John Farrell, Institute for Local Self-Reliance
Florida Barriers
 PPAs not allowed
 Tangible personal property tax for thirdparty owned systems?
– the exemption provided by H.B. 277 applies
only to real property improvements
Agenda
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Lending for Solar
Is lending for
different from lending for
or
?
Why Lend for Solar?
Cost
Benefit
+ Installed Cost
Generate + Avoided Energy Cost
s Savings
+ Maintenance
+ Excess Generation
- Direct Incentive
Generate + Performance
s
Revenue
Incentive
Solar = Positive Cash Flow
Estimated Cumulative Cash Flow from a Hypothetical 5 kW
Project
$20,000.00
$15,000.00
$10,000.00
With Solar
$5,000.00
$$(5,000.00) 1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
$(10,000.00)
Without Solar
$(15,000.00)
$(20,000.00)
$(25,000.00)
$(30,000.00)
$(35,000.00)
Year
Cumulative Cash Flow (Retail Electricity)
Cumulative Cash Flow (PV Project w/ Debt)
Growing Market Opportunity
US Annual PV Installation Capacity
5000
4500
Installed Capactiy (MW)
4000
3500
3000
2500
2000
1500
1000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Solar Energy Industries Association
Customers Want Solar
131,000 new solar installations in
2013
94% were in the residential market
Total market size valued at $13.7
New Lending Product Opportunity
Fewer than 5%
of the
6,500 banks in the US
are
actively financing solar PV
projects
Why Lend for Solar?
Percentage of New Residential Installations Owned by Third Party in
CA, AZ, CO, and MA
Third Party Owned Residential Market Share
100
90
80
70
Local
lenders have the opportunity to
60
provide
many of the benefits of third party
50
40
ownership
with fewer drawbacks
30
20
10
0
Q1 2011
Q2 2011
California
Q3 2011
Q4 2011
Arizona
Q1 2012
Colorado
Q2 2012
Q3 2012
Q4 2012
Massachusetts
Source: GTM Research/ Solar Energy Industries Association, U.S. Solar Market Insight 2012 Year-inReview
Why Lend for Solar?
Direct Ownership
Third Party Ownership
Upfront Cost
High
Low to None
O&M Costs
Yes
No
None
Predictable Payments
Development Risk
Yes
No
Performance Risk
Yes
No
Complex
Easy
Value to Customer
Higher ROI
Shared Benefits
Availability
Everywhere
Only in some states
Electricity Costs
Difficulty
Why Lend for Solar?
Direct Ownership
Third Party Ownership
Upfront Cost
High
Low to None
O&M Costs
Yes
No
None
Predictable Payments
Development Risk
Yes
No
Performance Risk
Yes
No
Electricity Costs
Difficulty
Complex
Value to Customer
Higher ROI
Availability
Everywhere
Moderate
Easy
Moderate Shared Benefits
Only in some states
Agenda
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Loan Options







Solar specific
Title I HUD
Home equity loan
Home equity line of credit
On-bill
PACE
Commercial loan
Process
Customer
Acquisition
Loan
Approval
and
origination
Servicing
Aggregation/
Warehousing
Securitization
Value Chain for Solar Loans
 Installation
 Operations and Maintenance
– Bundled within the loan (Mosaic, Dividend
Solar)
– Responsibility of system owner (Admirals,
PACE)
Challenges to lending to Solar PV asset class
 Lack of historical performance and credit data
 Regulatory treatment of solar loans
– Tax deduction if home equity loan
– PPA is off-balance sheet
 Complications with the characterization of solar
assets as fixtures versus personal property
 Rights of secured lender in foreclosure situations
 Experience
 Longer amortization schedules
Source: NREL
Examples
Between October 2013 and October 2014 at
least nine new solar-specific loan
programs were announced and several more
have begun operations.
 Admirals Bank; Digital Credit Union (with SunPower and
Sungage); Dividend Solar; Lightstream; Mosaic;
OneRoof Energy; SolarCity; Sungage Financial; WJ
Bradley (with SunEdison)
Source: NREL
HUD Energy Efficient Mortgage
 The dollar amount of costeffective energy
improvements, plus cost of
report and inspections, or
 The lesser of 5% of:
– The value of the property, or
– 115% of the median area
price of a single family
dwelling, or
– 150% of the conforming
Freddie Mac limit.
Title 1 Home Improvement Loan
Maximum Loan Amount:
 Single family house - $25,000.
 Multifamily structure - an
average of $12,000 per living
unit, up to a total of $60,000.
Maximum Loan Term:
 20 years.
Loan Security: Over $7,500 must
be secured by a mortgage or
deed of trust on the property.
HUD FHA PowerSaver
 For single family homes
 Up to $25k for terms of
15 (or in some cases 30)
years
 Interest rates between
5-7% and secured by
mortgage or deed
 11 participating lenders
 Available through
5/4/2015
Admirals Bank
Secured
 Up to $25,000
 Up to 20 year term
 Fixed rate 4.95% - 9.95%
 Secured by 1st or 2nd
position lien
Unsecured
 Up to $15,000
 Up to 10 year term
 Fixed rate 9.99% - 11.99%
 Bridge loan
SunPower Loan Program
 Panel manufacturer
partnered with
Admirals
 Up to $60,000 dollars
for 5-20 year terms
 Preferred interest
rates from Admirals
 Bundled with 25-year
performance
guarantee and
warranty
Mosaic Home Solar Loan Program
 Crowdfunding
provider
 Up to 20 year terms
with no money down
 Integrates ITC into
loan payment
 Bundled with
Enphase O&M
package
 Interest rates vary
 Nationwide online
portal
OneRoofEnergy SolarSelect
 All access solar
provider
– Previously lease-only
 SolarSelect Platform
– Lease
– PPA
– Loan options
 Not all programs
nationwide
– Based on West Coast
Lightstream Home Improvement Loan
 Division of Suntrust
 Unsecured home
improvement loans
for energy projects
 Up to $100,000
 Terms up to 7 years
 Rates from 4.999.24%
 Some loans available
for small business
 Nationwide
GreenSky Home Improvement Loan
 Online credit provider
 Unsecured home
improvement loans
for range of credit
scores
 Rates begin at 3.99%
 6-144 month terms
 No income verification
for up to $25,000
Digital Federal Credit Union
 Up to $50,000 dollars
 Separate no interest
loan for tax credit
 Second full-term loan
 $100 million dollar
facility for residential
solar
 Nationwide for
members
Empower Loan
 Enables institutional
investors to access
residential solar market
– Climate Bonds Initiative




Direct lending service
No money down
Rates begin at 6.5%
Bundled with 15-year
production guarantee,
warranties and monitoring
 Nationwide online intake
platform
SolarCity MyPower Loan
 4.5% over 30 years
 Customer takes the 30%
federal tax credit
 Monthly payment based on
amount of energy the system
produces
 Offered in Arizona,
California, Colorado,
Connecticut, Hawaii,
Massachusetts, New York
and New Jersey
Property Assessed Clean Energy
The local government finances the up-front
costs of the energy investment, which is
repaid through a special property tax
assessment.
Source: Department of Energy
Property Assessed Clean Energy
City creates type
of land-secured
financing district
or similar legal
mechanism
Property owners
voluntarily signup for financing
and make energy
improvements
Source: Department of Energy
Proceeds from
revenue bond or
other financing
provided to
property owner
to pay for energy
project
Property owner
pays assessment
through property
tax bill
(up to 20 years)
Property Assessed Clean Energy
Advantages Over Conventional Loan:
 Longer term
 Repayment transfers with ownership
 Low interest rates
 Interest is tax deductible
 Lower transaction costs
Property Assessed Clean Energy
www.dsireusa.org / April 2013.
29 states,
Source: DSIRE
+ Washington DC,
authorize PACE (27
states have passed
legislation and HI
permits it based on
existing law).
Limitations of residential
PACE financing
Source: pacenow.org
Source: pacenow.org
PACE: Resources
Resource PACE How to Guide for Local Governments
This report is designed for
local government officials in
getting a PACE program
established in their region.
rael.berkley.edu
Source: Renewable and Appropriate Energy Laboratory, University of California, Berkley
Qualified Energy Conservation
Bonds
 QECBs are similar to Build America Bonds
(BABs)
 Interest on QECBs is taxable but the
federal government offers a direct cash
subsidy to the bond issuer to subsidize the
interest costs.
– Subsidy of 70% of the Qualified Tax Credit
Bond Rate
Qualified Energy Conservation
Bonds
 Reduce energy consumption in publically
owned building by at least 20%
 Implement green community programs
 Rural development
 Renewable energy facilities (wind, solar,
biomass)
 For certain mass commuting projects
 Local governments and municipalities with
100,000 or more in population
Qualified Energy Conservation Bond
Qualified Energy
Conservation Bond
$
QECB
US Treasury
+ 3.7%
QECB
Local Gov
Project
6%
annual
coupon
$
Bond Holders
+ 2.3%
net
interest
cost
Examples
 Los Angeles Dept. of Water and Power –
wind and solar project expansion and
development
 Boulder, CO – QECBs for commercial
PACE
 San Diego and Richmond, CA – streetlight
replacement
 North Carolina Agricultural Finance
Authority – loans for solar projects on
agricultural land
Learn More
Resource EPC QECB Guide
 Monthly updates
to QECB
utilization and
case studies
Learn More
Resource Local Lending for Solar PV
A guide for local
governments seeking to
engage financial
institutions.
www.solaroutreach.org
Learn More
Resource NREL Analysis
Analysis and overview of
banking and lending
opportunities for US Solar
PV market.
Agenda
Welcome & Introductions
Overview of Solar Markets
Solar Market Drivers and Finance Landscape
Why Lend for Solar?
Current Solar Financing Options
Discussion
Chad Laurent
Meister Consultants Group
chad.laurent@mc-group.com
SAPC Analysis
 Master Limited
Partnerships
 Real Estate
Investment Trusts
(REITs)
 Solar Securitization
 Securitization Library:
https://financere.nrel.go
v/finance/content/securit
ization-library
NREL Solar Access to Public Capital Working Group
 NREL Solar Access to Public Capital
(SAPC) working group
– Developed standard residential lease
and commercial power purchase
agreement (PPA) contracts
– Working Group
• PV project development standards
• Unofficial ratings guidance for rating agencies
• Collecting performance and credit data
– Technical Reports and Analysis
https://financere.nrel.gov/finance/solar_sec
uritization_public_capital_finance
oSPARC
 Open Source
Performance and
Reliability Clearinghouse
 http://www.sunspec.org/o
sparc/
 a nationwide network of
solar PV power plants
that report daily in order
to answer the question of
how solar PV performs
over the long term