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 Bryan Garcia Bert Hunter President and CEO EVP and CIO Statutory Commercial Institutional Residential & & Infrastructure Industrial 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 / Selection / Outreach / Evaluation Construction Operation Documentation Application Applicant Support DEEP Milestones for Technical Performance Grants Grant Application Feasibility Reporting Disbursements Administration Financing CEFIA Support Financial EPC Milestones Financial Financing Viability for Loan Reporting Program and Agreements “Bankability” Disbursements Distributions Incentive Overview
CEFIA’s Role in Financing Microgrids Sources Uses • Interconnection Costs DEEP Grants $15M Available • Engineering & Design Costs CEFIA Direct Financing $5M Available CEFIA Programs > $100M Available • EPC Cost for Generation Assets • Balance of System Costs 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 CEFIA will assist in developing a • Subordinated debt • Siting & Permitting financing plan if desired, does not • Senior debt • Warranty/Insurance need be fully “baked” • Tax equity • Developer and / or owner equity
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 – Warranty/Insurance – Federal, state & local incentives – Servicing – Other grants ▪ Regulatory/Energy Markets CEFIA seek projects where – Renewable energy credits revenue less cost over time – (max. financing period of Net metering/Virtual net metering – useful life of equipment) is Demand response sufficiently valuable to attract – Other (i.e. capacity payments, ancillary grid services, etc.) affordable capital needed to build the microgrid
Project Finance ▪ Financing strategies ▪ Risk How is $$ coming back over time? How sure are the Capital Providers that the $$ will come back over time? – Performance guarantee – ESA/PPA – Equipment warranties – ESPC – Other insurance – C-PACE – Operational history of developers, – Tax exempt lease purchase contractors, and operators – Bonds – 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 ▪ C ommercial P roperty A ssessed C lean E nergy 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 A senior PACE lien is provides 100% Repayment through put on the property upfront, low-cost, property taxes and stays regardless long-term funding 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 10% ▪ The host facility finances generator using C-PACE, monetizes tax credits, utility incentives, electric and thermal RECs, sales of thermal energy and power. 40% ▪ Facilities interconnected to microgrid craft ‘power sharing’ arrangement with host facility around islanding and maintaining of critical loads. 30%
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