April 30, 2014
Connecticut Microgrid Program –
Overview
Agenda
▪ What is the Connecticut Microgrid Program?
▪ CEFIA Overview
▪ Financing Challenge for Microgrids
▪ Financing Options and Tools
Department of Energy and Environmental Protection
What is the Connecticut
Microgrid Program?
What is the Connecticut Microgrid Program?
The purpose of the Connecticut Microgrid
Program is to solicit proposals to build
microgrids in order to support critical
facilities (as defined by Connecticut General
Statutes, Section 16-243y, as modified by
Public Act 13-298, Section 34) during times
of electricity outages.
The Program was developed in response to
the recommendation of the Governor’s Two
Storm Panel regarding the use of microgrids
as a method for minimizing the impacts to
critical facilities associated with
emergencies, natural disasters, and other
events when these cause the larger
electricity grid to lose power.
Clean Energy Finance and Investment Authority
CEFIA Overview
Who is CEFIA?
Help ensure Connecticut’s energy
security and community prosperity by
realizing its environmental and
economic opportunities through clean
energy finance and investments.
Support the Governor’s and legislature’s
energy strategy to achieve cleaner,
cheaper and more reliable sources of
energy while creating jobs and
supporting local economic development
CEFIA is Connecticut’s “Green Bank”
…transitioning programs away from
government-funded grants, rebates, and other
subsidies, and towards deploying private capital
…CEFIA was established in 2011 to develop
programs that will leverage private sector capital
to create long-term, sustainable financing for
energy efficiency and clean energy to support
residential, commercial, and industrial sector
implementation of energy efficiency and clean
energy measures.
CEFIA Structure
Bert Hunter
EVP and CIO
Residential
Bryan Garcia
President and CEO
Statutory
&
Infrastructure
Commercial
&
Industrial
Institutional
Legal
IT
External
Relations
HR
Marketing
8
CEFIA + Connecticut Microgrids
Financing Challenges for
Microgrids
Financing Challenge for Microgrids
▪ Microgrids are small, self-contained electricity, heat, and/or cooling
distribution systems that coordinate and distribute energy supplied
from one or more generation sources to a network of one or more
users in a spatially defined area.
▪ Existing incentives, financing tools, and rate structures for distributed,
clean energy resources generally operate on an individual generator,
individual customer basis. Microgrids link one or more generators to
multiple users.
▪ Existing incentives and financing tools for distributed, clean energy
resources are designed categorically around customer building types
(e.g. municipal/ commercial/ residential). Microgrids serve all
customer types simultaneously.
Financing Challenge for Microgrids (cont)
▪ Microgrids may confer multiple benefits to both developers and
customers, including reduced energy costs, reduced GHG emissions
and/or increased energy security and reliability. Some benefits, such
as cleaner energy resources or enhanced energy security and
reliability, may be achieved only at a cost premium.
▪ Financing implies a project will earn a lender a return on investment.
Microgrids are challenged where energy savings cannot carry
investment and financing costs.
▪ Making microgrids economical is a demand and supply side equation.
Microgrid customers must in aggregate provide a demand profile that
fits the operating profile of the generator(s).
CEFIA’s Role in Financing Microgrids
Education /
Outreach /
Application
DEEP
Construction
Operation
Technical
Feasibility
Grants
Milestones for
Grant
Disbursements
Performance
Reporting
Financial
Viability
“Bankability”
Financing
Agreements
EPC Milestones
for Loan
Disbursements
Financial
Reporting
Distributions
Applicant Support
Application
Administration
CEFIA
Selection /
Documentation
Evaluation
Financing
Support
Program and
Incentive
Overview
CEFIA’s Role in Financing Microgrids
Sources
DEEP Grants $15M Available
Uses
•
•
Interconnection Costs
Engineering & Design Costs
•
•
EPC Cost for Generation Assets
Balance of System Costs
CEFIA Direct Financing $5M Available
CEFIA Programs >$100M Available
Private Capital
CEFIA Evaluation Criteria
Proforma Requirement (1/2)
Sources
Uses
• DEEP grant
• Equipment & Labor
• Upfront utility incentives
• Design & Engineering Fees
• CEFIA debt
• Grid & end user integration
• Subordinated debt
• Senior debt
• Tax equity
CEFIA will assist in
developing a
financing plan if
desired, does not
need be fully
“baked”
• Developer and / or owner equity
• Siting & Permitting
• Warranty/Insurance
Proforma Requirement (2/2)
Project Revenue
Project Costs
▪ End users
▪ Ongoing
– Direct offset to energy purchases
– Debt
– “Reliable Power” payments
– O&M
▪ Public sources
– Fuel
– Federal, state & local incentives
– Warranty/Insurance
– Other grants
– Servicing
▪ Regulatory/Energy Markets
– Renewable energy credits
– Net metering/Virtual net metering
– Demand response
– Other (i.e. capacity payments,
ancillary grid services, etc.)
CEFIA seek projects where
revenue less cost over time
(max. financing period of
useful life of equipment) is
sufficiently valuable to attract
affordable capital needed to
build the microgrid
Project Finance
▪ Financing strategies
How is $$ coming back over time?
– ESA/PPA
– ESPC
– C-PACE
– Tax exempt lease purchase
– Bonds
▪ Risk
How sure are the Capital Providers
that the $$ will come back over time?
– Performance guarantee
– Equipment warranties
– Other insurance
– Operational history of developers,
contractors, and operators
– Creditworthiness of obligor(s)
– PACE lien
– Green bank debt, reserves or other
credit enhancements
Financing Website
www.energizect.com/microgrids

Links to CEFIA Financing
Program Pages

Review microgrid financing
Frequently Asked
Questions

RFQ for Capital Providers

Schedule an appointment
to meet with CEFIA about
financing opportunities for
your microgrid project
CEFIA Contacts
Genevieve Sherman, Senior Manager, C-PACE
860.257.2889
Genevieve.Sherman@ctcleanenergy.com
Alexandra Lieberman, Senior Manager, Clean Energy Finance
860.257.2177
Alexandra.Lieberman@ctcleanenergy.com
Appendix
CEFIA Programs
C-PACE
Commercial & Industrial Property-Assessed Clean Energy
Financing Options & Tools: C-PACE
▪ Commercial Property Assessed Clean Energy is 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
Financing Options & Tools: C-PACE
Benefits:
▪ Existing, low cost, long-term financing tool
▪ Can finance all costs, including end-user efficiency improvements,
DE/microgrid ‘readiness,’ interconnection, and ‘soft costs’.
▪ Financing is secured by a lien on the benefitted property (as opposed to
an ESA with a customer) and is transferrable regardless of ownership.
This provides microgrid developer secure recoupment of fixed costs.
Challenges:
▪ Each property must be individually assessed
▪ Each property must have mortgage lender consent
▪ Municipal facilities are not included
▪ Qualifying improvements must be permanently affixed
Enabled by Public Act 12-2 (June 2012)
▪ Commercial, industrial, multi-family property, & non-profit
▪ Requires the consent of the existing mortgage lender
▪ Requires SIR>1
▪ Permanently affixed EXCEPT district heating & cooling
– Includes generator and pipe infrastructure
– Potential for microgrids in FY2014
▪ Enables municipalities to opt-in
▪ Enables CEFIA to administer a statewide program
C-PACE Amendment
▪ (1) "Energy improvements" means (A) participation in a district heating
and cooling system by qualifying commercial real property, …or (D)
installation of a solar thermal or geothermal system to service
qualifying commercial real property, provided such renovation, retrofit
or installation described in subparagraph (B), (C) or (D) of this
subdivision is permanently fixed to such qualifying commercial real
property;
▪ (2) "District heating and cooling system" means a local system
consisting of a pipeline or network providing hot water, chilled water or
steam from one or more sources to multiple buildings;
▪ CEFIA recommended change in language to “community-based
clean energy systems” to include microgrid infrastructure
Potential option: C-PACE “host facility” with power sharing
▪ A single qualifying facility hosts
the microgrid generator
▪ The host facility finances
generator using C-PACE,
monetizes tax credits, utility
incentives, electric and thermal
RECs, sales of thermal energy
and power.
10%
40%
▪ Facilities interconnected to
microgrid craft ‘power sharing’
arrangement with host facility
around islanding and
maintaining of critical loads.
30%
CEFIA Programs
Additional Options
Financing Options & Tools:
CHP and AD PILOT PROGRAMS
The CHP Pilot Program, administered by CEFIA, is a three-year $6
million dollar pilot program to provide grants & loans to CHP projects.
The Anaerobic Digestion Program, administered by CEFIA, is an
ongoing, $5 million dollar pilot program to provide grants & loans to AD
projects.
▪ Focus is on financing; potentially via C-PACE.
▪ Open RFP; applications accepted on a rolling basis.
▪ Cannot be used with LRECs.
Financing Options & Tools: LEAD BY EXAMPLE
Lead by Example is an Energy Savings Performance Contracting
program for public facilities in the State of Connecticut.
▪ Implementation of energy savings measures with no upfront capital
▪ The costs of energy savings measures are paid for by future
guaranteed savings from utility budget
▪ Municipalities can finance projects outside of capital budgets
Financing Options & Tools: LEAD BY EXAMPLE
Lead By Example provides a clear, streamlined, transparent process as
well as legal, procurement, and financial confidence
▪ Designed to mitigate risk for agencies and municipalities:
– payment is contingent on appropriation of funds
– vendor’s energy savings guarantee must be ≥ total project costs
– vendor pays if there is an energy savings shortfall
▪ Pre qualified vendor list, standard contracts, energy technical
assistance and financing technical assistance.
– Honeywell, Trane, Schneider Electric, Ameresco, ConEdison Solutions,
Johnson Controls, NORESCO, Pepco, Siemens
Municipalities can finance generators using ESPC
CEFIA can provide advice and support on financing options,
introductions to capital providers and financial institutions
– Tax‐exempt municipal lease/loan
– Conventional bank financing
– Tax‐exempt municipal bonds (general obligation, revenue)
▪ Potential to bundle microgrids into a single ESPC
Financing Options & Tools: CEFIA Microgrid Pilot
CEFIA will be spearheading a Microgrid Pilot Financing Program in
2013 – 2014 for Round 2 participants. Leveraging its existing programs,
CEFIA will offer:
▪ Advice and support on financing options & preparing applications for
CEFIA financing programs (e.g. C-PACE, CHP, Lead By Example)
▪ Introductions to capital providers and financial institutions
▪ Direct financing support & credit enhancements
Financing Options & Tools: Net Metering
Virtual Net Metering
▪ A municipal customer identifies a Host Account (behind whose distribution company
meter a Class I renewable resource is installed) and designates up to 5 Beneficial
Accounts (which must be accounts of the same municipal customer) to whom Virtual
Net Metering credits shall be allocated
–
At the Host Account, during a monthly billing period, the total energy produced is netted against the
total energy consumed
–
Resulting excess kWh produced at Host Account may be used to calculate a credit to offset the
generation portion of the bills for the Beneficial Accounts
On-Site Net Metering
▪ Class I renewables with capacity of 2,000 kW or less and Class III renewables with
capacity of 6,500kW or less can benefit from the excess power their onsite facilities
produce.
–
–
Net excess generation (the amount produced less the total kWh used onsite) during a monthly
billing period is carried over to the following month as a kilowatt-hour (kWh) credit until the end of
the billing cycle year (March 31).
At the end of the year, the utility pays the customer for any remaining kWh credits at the wholesale
rate.
Financing Options & Tools:
Renewable Energy Credits
ZREC/LREC
▪ United Illuminating and Connecticut Light and Power conduct yearly
auctions for Solar PV (ZREC) and Fuel Cell (LREC) projects for 15year per MWh incentive payments, essentially a Feed-in-Tariff
– Next round launches April 2014
NEPOOL
▪ Regional market for Class I and Class III RECs. The Northeast Power
Pool (NEPOOL) is comprised of CT, ME, MA, NH, RI, and VT.
– States needing to meet RPS requirements can purchase, and generators can sell
RECs into the pool, which NEPOOL Generation Information System (GIS) issues
monthly. http://www.nepool.com/
Financing Options & Tools: Federal Tax Benefits
ITC
▪ The Federal Investment Tax Credit allows offset their taxes by taking
a 30% credit of the build expenditures for Solar, Fuel Cells, small
Wind and Geothermal and 10% for Microturbines and CHP plants
– Reducing to 10% for projects placed in service after December 31, 2015
MACRS
▪ The Modified Accelerated Cost-Recovery System allows owners of
renewable equipment to take accelerated depreciation discounts.
– For a solar project, the value of this tax benefit can be roughly 20-30% of the
installed cost
Additional Potential Funding: U.S. DOE Energy
Storage Program
U.S. DOE
▪ The U.S. DOE Office of Electricity Energy Storage Program supports
state-sponsored electricity storage efforts, including energy storage
within microgrids under the CT DEEP Microgrids Program. This
support can take various forms:
– Technical support (project engineering)
– Financial support (project funding)
– Performance support (project monitoring and analysis)
To support state-sponsored energy storage deployment, the
DOE/Sandia energy storage program contracts with Clean Energy
States Alliance (CESA). This is accomplished through CESA’s Energy
Storage Technology Advancement Partnership (ESTAP).
For more information, contact Todd Olinsky-Paul at
Todd@cleanegroup.org