Finance
Emerging
Renewable
Technologies
David
McAndrew
Federal Energy
Management
Program
The Federal Angle:
Why We’re Motivated
Regulation
Produce, Use, or
Both
Requirement Level
Energy Policy Act (EPAct) of
2005*†
Use, Electric
• 3% FY 2007-2009
• 5% FY 2010-2012
• 7.5% FY 2013…
Executive Order (E.O.) 13423
Use, All RE
50% EPAct 2005 Goal must
come from “new” sources (1999
and newer)
E.O. 13514 (Section 9)
Use, All RE
Individual GHG agency goals
28% average reduction
President Obama’s Climate
Action Plan
Electric Use
20% by 2020
* Defines “renewable energy” as electric energy generated from solar, wind, biomass, landfill gas,
ocean (including tidal, wave, current, and thermal), geothermal, municipal solid waste, or new
hydroelectric generation capacity achieved from increased efficiency or additions of new capacity at an
existing hydroelectric project.
†A
double counting bonus exists for renewable projects on Federal or Native American land.
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The Federal Angle:
Why We’re Different
Unlike the Private Sector, Federal Agencies are constrained by
the statutory and regulatory framework within which we operate.
– Competition in Contracting Act – unless an exception applies, the Government
must always openly compete contracts
– 40 USC 591, FAR Part 41 - 10 year contract max for Civilian Agencies
•
Federal Acquisition Regulation (FAR) Part 41 prescribes the acquisition process.
– 10 USC 2922a DOD authority – 30 year authority only recently construed by OSD
to apply to all types of energy generation (few examples)
– Environmental regulations (NEPA).
– Anti-Deficiency Act (Gov’t can’t spend money before it’s appropriated—criminal
penalties apply).
– Misc. Receipts Act (31 U.S.C. § 3302(b)) (Government must return income to
Treasury—can’t augment appropriations.)
– Government may always Terminate for Convenience (T4C).
– Agencies unable/unwilling to pay premium for renewable electricity.
– 40 USC 591 – Agencies must buy electricity in compliance with state law
– Office of Management and Budget (OMB) review of projects.
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It’s Complicated…
Agreements
 PPA: Federal Site, DESC or Western, and Developer
 Land Use Agreement: Federal Site and Developer (not shown on diagram)
 Interconnection/Net Metering Agreement: RE Developer (or Federal Site) and Utility
• REC Contract: Developer and Utility
• Excess Electricity Contract: Developer and Power Purchaser
Federal Agency
DESC,
Western or
Other
Contracting
Agent
Utility
(or other for
REC sale)
REC Payment
RECs
IAA
(for Western only)
PPA
Power Payment($)
Renewable
Developer
Electricity (MWh)
Western Area Power Administration’s Renewable Resources for
Federal Agencies (RRFA)
Via Inter-Agency Agreement, Western acts as Agency’s agent and contracts to
purchase renewable energy from the developer’s project on Agency host’s land.
Agency then buys the renewable power from Western.
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Interconnection/Net Metering
Agreement
Possible Additional Agreements
• Interagency Agreement (IAA): Western and Federal Site
Power
Payment ($)
Federal tax
and other
incentives
Excess
Electricity (if
any)
Utility or other
Excess Electricity
Purchaser
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Federal On-Site Renewable PPA
Basic Structure
Private entity installs, owns, operates and maintains customer-sited renewable
equipment and the Site purchases electricity through a PPA.
•
•
Pros
– RE developer (or partner) eligible for tax incentives, accelerated depreciation
– No agency up-front capital required/Minimal risk to government
– RE developer provides O&M
– Known long term electricity price for portion of site load
– Eligible for EPAct 2005 Section 203 double bonus towards RE goal
Cons
– Transaction costs
– 10-year Civilian Contracting Authority (DOD can contract up to 30 years)
– Limited Federal Sector experience, but expanding rapidly
Site hosts third party
owned and operated
RE resource and
purchases RE.
RENEWABLE ENERGY
Developer constructs
RE resource on Federal
land/building and sells
energy to Site.
$ per kilowatt hour
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Federal On-Site Renewable PPA
Partnering with Western
Private entity installs, owns, operates and maintains customer-sited
renewable equipment. Western Area Power Administration (Western)
contracts with the developer for the purchase of the electricity on behalf of
the Federal facility. (Site must be within Western’s service territory.)
• All PPA Pros plus:
– Long-Term Contracting Authority (up to 25 years)
Western purchases RE
from developer on
behalf of the Agency.
RENEWABLE ENERGY
Developer constructs
RE resource on Federal
land/building and
generates RE.
Site hosts third party
owned and operated
RE resource.
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Federal On-Site Renewable PPA
Partnering to Respond to Utility Call for RECs
Utility issues call for RECs, Site responds with RFP for industry partners. Site
competitively selects industry partner. Industry partner and agency submit joint
bid to utility Renewable Portfolio Standard RFP. Industry partner constructs
resource on host Agency’s land and sells RECs and/or Power to the utility.
Agency gets cheap power or other “consideration for the use of the land.
*Every large-scale solar project at a Federal site has involved the local utility.
• Examples: NREL, Brookhaven, Ft. Carson
• Cons
Developer constructs
– Tough to predict timing of utility requirements
RE resource on Federal
– Have Site team ready to spring into action
land/building and sells
– Need good state incentives
RECs to utility.
Utility issues call for
RECs.
7 | FEDERAL ENERGY MANAGEMENT PROGRAM
Site hosts third party
owned and operated
RE resource.
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Other Deal Structures
• ESPC
–
–
–
–
New OMB position (Oct 2012) Government must take title to equipment
Energy savings from efficiency measures may buy down RE cost
Tax credits and grants not available
Biomass CHP projects are good candidates
• UESC
– Energy savings from efficiency measures may buy down RE cost
– Term 25 years Civilian, 30 years DOD/2922a, DOD must own Equip
• Partnering with local utility company
– Utility constructs, owns, and operates array on Federal land and sells
electricity to the host Agency but retains RECs. Same term issues as
other PPAs
– Utility constructs, owns, and operates the array on Federal land,
incorporates it into rate base and takes the power and RECs to meet
system needs, provides agency consideration
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Key Issues
• Contract structure considerations
–
–
–
–
–
Is the PPA model legal in the state/utility service territory?
Is the renewable developer subject to Commission oversight?
Commission approval requirements (for REC sale or other)?
Will RE project affect facilities status at NERC/FERC
40 USC 591: Electricity purchases must abide by state law
• Coordination with the local utility
– Utility rate impacts – possible tariff change, standby charges, etc.
– Demand Charge impacts if project goes down
– Interconnection requirements – application, cost, study
requirements and timeframe
– Renewable system tie-in options
– Net Metering (and Feed-In Tariff if applicable) rules
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Mecha
nism
Agency
Tenor
Authority
Link
http://www.law.cornell.edu/usc
Civilian
10 Years
3rd
40 U.S.C. §501
ode/40/501.html
40 USC 591
http://www.law.cornell.edu/usc
ode/text/40/591
Party
PPA
ESPC
WAPA
20+ Years
43 U.S.C. 485h(c)
DoD
30 Years
10 U.S.C. 2922a
All
25 years
Civilian
25 years
DOD
30 years
UESC
w/Sec Def
ode/10/2922a.html
42 USC 8259 –ECM def
ode/42/8287.html
42 U.S.C. 8256
http://www.law.cornell.edu/usc
ode/42/8256.html
10 U.S.C. 2913,
http://www.law.cornell.edu/usc
10 U.S.C. 2922a
ode/text/10/2913
10 U.S.C. § 2667
VA
75 years
38 U.S.C. §§ 8161 et seq.
NASA
unlimited
51 U.S.C. § 20145
10 | FEDERAL ENERGY MANAGEMENT PROGRAM
http://www.law.cornell.edu/usc
http://www.law.cornell.edu/usc
appvl
EUL
ode/43/485h.html
42 U.S.C. 8287
5 yrs or unlt’d
DOD
http://www.law.cornell.edu/usc
http://www.law.cornell.edu/usc
ode/text/10/2667
May be expired
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Example Projects
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Fort Carson PV Project in CO
• 2 MW, 3200 MWh in first year (~2%
of Ft. Carson’s load)
• Fixed, non-escalating energy rate
• 17-year contract, with 3 year option
(utilizing Western)
• No cost 20 year lease (using 10 USC
2667 lease authority – DOD only)
• RECs sold to Xcel Energy (20 year
contract)
• Ground-mounted, fixed system
covering 12 acre former landfill
• First Solar thin film, 25 year warranty
• Came on-line December 2007
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USCG Petaluma PV Project in CA
•
•
•
•
855 kW ground-mounted, fixed PV on slightly less than 4 acres
PPA price is 13¢/kWh in the first year, with 3.5% annual escalation
One year contract with 24 one year renewal options
Irrevocable 25 year license
• Developer receives 25¢/kWh
California Solar Initiative (CSI)
performance based incentive
(PBI) payments for first 5
years
• Site retains RECs
• Construction completed
October 2009
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Long Island Solar Farm
• BNL served has array host
• BP Solar Project Developer
• 20-year contract between LISF and National Grid for
purchase of 100% of output and RECS
• 20-year easement between BNL and LISF
• Largest array in North America when energized
• Peak capacity 32 MW (AC)
• Annual Energy Output 44,000,000 kWh
• 200 acres of land, ~160,000 panels
• Ground mounted crystalline solar PV modules
• Energize date ~ November 2011
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Contacts and Questions
David McAndrew
Federal Energy Management
Program
202-586-7722
david.mcandrew@ee.doe.gov
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