Bridgewater Energy Partnership Workshop 5 May 30, 2017
The Energy Partnership A learning and action program for local businesses and organizations that encourages innovate energy solutions and increases the collective knowledge of energy sustainability. The Partners gather in hands-on workshops every 2 months, and are the stewards of the Living Energy Laboratory. Workshop Schedule Workshop 1 Tuesday September 27, 2016 @ 8AM - orientation Workshop 2 Tuesday November 22, 2016 @ 8AM - solar energy Workshop 3 Tuesday March 7, 2017 @ 8AM - energy poverty Workshop 4 Tuesday May 2, 2017 @ 8AM - heating, cooling & insulation Workshop 5 Tuesday May 30, 2017 @ 8AM - energy economics part 1 Workshop 6 Tuesday July 25, 2017 @ 8AM - energy economics part 2 Workshop 7 Tuesday September 26, 2017 @ 8AM – TBD Community Energy Fair October 20-21, 2017 Workshop 8 Tuesday November 28, 2017 @ 8AM - TBD Bridgewater Energy Partnership Workshop 5 – May 30 2017
Today’s Workshop Welcome & Introduction Workshop Topic of Focus (1 hr) Dr. Andrew Bagley: Solar Futures – Investing in the Energy Transition Networking break (20 mins) Current Energy Discussions (40 mins) Wrap-up and Next Steps You can follow along & take notes on your workbook Bridgewater Energy Partnership Workshop 5 – May 30 2017
Solar Futures – Investing in the Energy Transition Dr Andrew Bagley President Nova Solar Capital 30 th May 2017
Nova Solar Capital: Introduction • Established 2016 in Kentville • 5 Employees • Very strong backgrounds in finance, marketing, legal & general management • Strong community roots
Mission – To be a capital-oriented solar PV project development company • Project identification • Finance • Human resources • Material resources • Management – To give Nova Scotia a notable high value-added player in the solar PV sector.
Strategic Position Hardware Installers Banks Mass Retail | Industrial | Public Sector | Individual Retail Customers
Solar PV Costs are plunging Source: International Renewable Energy Agency (IRENA) Solar PV is expected to become the cheapest form of energy bar none by the mid 2020’s and perhaps earlier.
But: The Problem with Solar • Long term payoff from incremental benefit • Capital intensive • Short-term external financing • Equity’s expensive • No subsidies in Nova Scotia!
Solar Pays.. slowly… 14 year payback without subsidy @ 3.8%, but then it really pays off (5% power escalation rate)
And financing matters For a business, getting 3.8% 10 year loan means expensive equity is invested and payback takes a 3 year hit and ties up a lot of cashflow. It’s where we are!
With a 25 year 4% it’s rosy for everyone! For a business, getting 4% 25 year loan means equity invested and cash payout from year 1 – complete self-financing. Current 25 year bond yields 4%. Zero equity invested.
Solar PV as investment prospect • Characteristics: – Known and low risk investment cost – Predictable electricity output – Predictable (low) operating cost – Real asset for security – Low technology risk – Can be large scale • Implication: Returns look like fixed income and is very financeable. • Solar PV is not alone: wind, hydro & battery backup are similar
Who has lunch? Me, or my bond fund manager? Source: Bank of Canada Yield is the effective interest rate to maturity based on market price and coupon payments • Yields on long-term bond yields are down 50-60%% in a decade. • Just last year 70% of Japanese and 2/3 of German government debt was on negative yields. • Implication? Money now has to work for a living!
The YieldCo Funds from asset managers are participating in renewable energy assets through yieldCo’s. YieldCo’s have long-term yields between 4% and 9%. Canada’s Brookfield Renewable Energy is the world’s largest yieldCo.
And general institutional interest.. • Alberta Investment Management bought Fir Tree Partners solar unit. • Canadian Fiera Infrastructure bought the solar and wind assets of DE Shaw Renewable Investments in April and will buy more in 2017. • John Hancock Life Insurance bought 49% of Exelon’s clean energy portfolio. • Australian bank Macquarie is very active in acquiring solar assets worldwide. • UK exchange-listed closed-end funds are acquiring wind and solar assets. • According to the OECD pension funds, insurance companies, private equity and infrastructure funds increased their share of the European wind sector funding provision from 6% in 2010 to 37% in 2015.
Takeaways: • Look out for Nova Solar Capital. • Cost means Solar PV will become at least as common as wind. • Renewables need long-term financing. • Eye-watering low interest rates mean asset managers need new long-term assets. • Predictable costs and production of renewables are attracting growing institutional attention.
Networking Break
Financing the Low Carbon Future: Community- Scale Options The investment opportunity Saving energy (retrofits) results in avoided costs Generating energy (district energy, solar PV) generates a revenue stream Source: Vishan Chakrabarti . A Country of Cities. Metropolis Books. 2013 Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options The investment opportunity Saving energy (retrofits) results in avoided costs Generating energy (district energy, solar PV) generates a revenue stream Source: Vishan Chakrabarti . A Country of Cities. Metropolis Books. 2013 Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options The investment opportunity Saving energy (retrofits) results in avoided costs Generating energy (district energy, solar PV) generates a revenue stream Source: Vishan Chakrabarti . A Country of Cities. Metropolis Books. 2013 Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options The Town’s experience in energy investments Municipal operations (retrofits) $400,000+ in cumulative savings over 5 years Municipal generation (solar PV, wind) Demonstrated savings (thousands $$ per year, more planned) Retrofits (PACE) Year-1 results have demonstrated that homeowners are saving hundreds to thousands $$ per year, even after paying back all financing costs. Financing structure leaves Town revenue and cost neutral. Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options Where does the money come from? Three options. 1. Town (taxes or fees) Taxes Traditional funding source- property taxes Limited potential User fees (I.e. water/sewer) Thermal energy charge for district energy Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options Where does the money come from? Three options. 2. External funding (grants or loans) Traditional bonds Issued through the Municipal Finance Authority Significant opportunity Loans (line of credit, bank loan) Limited capital potential Grants (FCM, Government of NS, Government of Canada) Significant opportunity Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options Where does the money come from? Three options. 2. External funding (grants or loans) – Innovation: Neighborly – a local bond Source: https://neighborly.com/ Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options Where does the money come from? Three options. 3. Partnerships Public-Private-Partnerships (P3s) Highly complex Jointly-financed entities (Municipal energy corporation) Governance is complex Shared costs Bridgewater Energy Partnership Workshop 5 – May 30 2017
Financing the Low Carbon Future: Community- Scale Options Investment Vehicles The Town Municipally-owned subsidiaries Co-operatives Private companies Learn about real examples in North America: Bridgewater Energy Partnership Workshop 5 – May 30 2017
Energy Financing for our Local Organizations and Communities What creative financing and funding opportunities exist for our community and/or for your business / organization? Where does the money come from / who are the investors? For what is the money needed? Using what vehicle could the money get from point A to point B? Investment Recipient / Investors vehicle purpose Bridgewater Energy Partnership Workshop 5 – May 30 2017
Energy Financing for our Local Organizations and Communities Municipal Home Town of PACE energy Bridgewater program upgrades Bridgewater Energy Partnership Workshop 5 – May 30 2017
Upcoming Community Consultation Event is designed specifically for Energize Bridgewater stakeholders (advisory committee, energy partners, staff, Council, etc.). Please come if you are able! Event will be promoted publicly in case there is community interest Bridgewater Energy Partnership Workshop 5 – May 30 2017
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