Presenting a live 90-minute webinar with interactive Q&A Financing Municipal Renewable Energy Projects: Negotiating Power Purchase Agreements for Municipalities Assessing Benefits and Risks of PPAs, Anticipating Regulatory Challenges, Structuring Key Provisions WEDNESDAY, AUGUST 17, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Paul R. Michaud, Counsel, Murtha Cullina , Hartford, Conn. David A. Soldani, Partner, Atkinson Andelson Loya Ruud & Romo , Fresno, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Municipal Power Purchase Agreements Benefits, Risks, and Regulatory Challenges Paul R. Michaud, Esq. 860-240-6131 | pmichaud@murthalaw.com August 17, 2016
The PPA Financing Arrangement A third-party provider designs, finances, builds, owns, operates and maintains the renewable energy system. Host customer (Municipality) agrees to site the system on its property and purchase the system’s electric output from the third - party provider for a predetermined period. This financial arrangement allows the Municipality to receive stable and often low-cost electricity, while the services provider or another party acquires valuable financial benefits, such as tax credits and income generated from the sale of electricity. 6
PPA – Key Participants • Renewable Energy Services Provider • Host (Municipality) • Local Utility • Special Purpose Entity • Equipment Manufacturer • Installer • Investor 7
Roles of PPA Participants Source: EPA 8
Municipality PPA Point-of-View $, RECS, Tax Credit HOST Municipality Services Provider Power 9
PPAs Not Allowed In Every State Source: www.dsireusa.org 10
Third-Party Ownership Restrictions • Typically where third-party sales (PPA) are illegal it is due the state’s definition of a public utility – only utilities are permitted to sell electricity • Some states enact legislation adding exceptions for certain types of facilities, like solar, to get around this barrier 11
Benefits of a PPA • No up-front capital costs for municipality • Predictable payments by the municipality to the third-party services provider • Third-party can take advantage of federal tax credit and pass savings to municipality • Municipality only pays for the power actually produced by the system • Third-party deals with complex system design and permitting process • Third-party services provider operates and maintains the system 12
Risks of a PPA • Breach of Contract by • Host facility outages either party • Rooftop needs replacement • Price of electricity drops • Grid outage • Developer goes out of • Limited liability of PPA business provider • Early Termination Fee 13
Municipal Constraints • Debt limitations in city codes, state statutes, and constitutions • Restrictions on contracting power in city codes and state statutes • Budgeting issues • Municipal politics (e.g. BOS v. BOE) • Authority to grant site interests and buy electricity 14
Regulatory Challenges • NEM and VNM are in regulatory flux: Aggregate caps being reached – states must decide how to proceed Increased amounts of solar PV on the grid • Rate Design Changes: Fixed Charges & Minimum Bills Demand Charges Standby Charges or Flat Fees 15
What is NEM and VNM? 95% of distributed PV systems are net-metered 16
Net Metering Source: www.dsireusa.org 17
Virtual Net Metering Source: www.dsireusa.org 18
Why are NEM and VNM in Flux? • Concerns about cost shifting • Efforts to become more granular in solar valuation and compensation • Traditional utility business model • Change in electric system – centralized generation to DG • Regulatory policy has not yet caught up with technology 19
Where are NEM and VNM in flux? • Arizona • Massachusetts • Arkansas • Mississippi • California • Montana • Connecticut • Nevada Florida New Hampshire • • Hawaii New Jersey • • Idaho New York • • Iowa Ohio • • Illinois Oregon • • Louisiana Pennsylvania • • Maine Rhode Island • • • Maryland • Vermont 20
What types of changes? • NEM & VNM Alternatives • Ratemaking: Fixed Charges v. Volumetric Charges • Value of Solar (VOS) 21
Fixed Charges: Past Year Source: www.dsireusa.org 22
Other Policy Considerations • Renewable Portfolio Standard (RPS) • Renewable Energy Credits (RECs) • Federal Tax Incentives • State Incentives 23
Source: www.dsireusa.org 24
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Federal Tax Incentives • Investment Tax Credit (ITC) 30% ITC for Solar, Fuel Cells and Small Wind • Incentive reduced over time starting in 2020 10% ITC for Geothermal, Micro-turbines and CHP • Modified Accelerated Cost Recover System (MACRS) 26
State Incentives • The Database of State Incentives for Renewables & Efficiency (DSIRE) is the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. • Established in 1995, DSIRE is currently operated by the North Carolina Solar Center at NC State University, with support from the Interstate Renewable Energy Council. • WWW.DSIRE.ORG 27
PPA Contractual Considerations • Performance Guarantees • Conditions Precedent • Interconnection costs included price? • Facility outage and grid outage • PPA Pricing 28
PPA Pricing Options - Fixed Source: NREL 29
PPA Pricing Options - Escalator Source: NREL 30
Municipal Pan to a PPA Identify location of Renewable Energy System Roof-top System (5-10 watts per square foot) Ground-mount System (1 megawatt per 4-5 acres) Issue a Request for Proposals (RFP) Alternative fee arrangements work well Draft and Negotiate Contracts PPA, Lease or Easement Permitting and Interconnection On the Developer Design and Construction On the Developer 31
Town of Stafford, CT – Ground- Mount Solar (2 MW) 32
Town of Stafford, CT – Landfill Solar (1 MW) 33
Thank You! Mr. Michaud is the Chair of the firm’s Renewable Energy practice group. Mr. Michaud’s experience extends to all elements of renewable energy project development, operations, finance, permitting, and construction including drafting and negotiating complex power purchase agreements, real estate leases, renewable energy certificate agreements, equipment procurement agreements, and construction agreements. Mr. Michaud represents a diverse client-base, including local and national solar, fuel cell, wind, CHP, small hydro and energy efficient companies, as well as municipalities in renewable energy and microgrid RFP matters. Mr. Michaud also represents renewable energy off-takers, including municipalities, commercial and industrial companies, hospitals and other health care facilities. In addition, Mr. Michaud represents renewable energy clients on regulatory matters before state public utility commissions and siting councils. He is the Founder and Executive Director of the Renewable Energy and Efficiency Business Association, Inc. (REEBA) where he has extensive experience as a certified lobbyist on renewable energy policy matters. 34
Financing Municipal Renewable Energy Projects Presented by: David A. Soldani, Esq. Cerritos • Fresno • Irvine • Pleasanton • Riverside • Sacramento • San Diego
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