The State of Solar in NY Outlook & Opportunity Presented by: Scott Kerner, 02/12/2013
Scott Kerner Background • National Director of Sales – Commercial & Utility • 10+ years experience in commercial debt and equity working for Business Loan Express, a subsidiary of Allied Capital Corporation. • Commercial business development salesman of the year in 2007 and 2008 • A/R Factoring Salesman of the year 2 years in a row • Business Development rookie of the year in 2005
OnForce Solar Background • OnForce Solar develops, designs, engineers, finances, installs and maintains solar energy systems. • Ranked in the Inc. 500 past three years in a row. Last year 42nd fastest growing company in the country, # 4 in energy and #3 in New York City. • Largest solar integrator in New York City. Based in the Bronx.
OnForce Services Overview Design & Procurement & Service & SREC / NYSERDA Financing Options Advisory Services Engineering Construction Monitoring Management •High ‐ level • Direct •In ‐ house design •Construction •Operations & •Solar Renewable corporate and and engineering management Maintenance Energy Credit ownership project advisory expertise for professionals (O&M) contracts (SREC) advisory services including: commercial and and management • Purchase industrial systems services •SEI ‐ trained, •System Monitoring •Site & facility NABCEP certified & IT Support • Lease Structure assessment installers, Master •Handling NYSERDA Electricians filings •Support program •Capital Lease identification •Electrical & •Distribution / Structural management of all •Operating Lease Engineers NYSERDA •Detailed incentives economic •PPA Structure modeling and project forecasting
The NY Market • What we’re seeing – Consumer comfortableness with solar as an investment in their buildings/businesses and as a combined strategy with energy efficiency initiatives. – Rapid adoption of solar energy in owner occupied businesses in New York City and throughout NYS. – Much greater awareness of energy consumption. People no longer just pay their Con Edison bills blindly. Business owners measuring, monitoring and acting.
The NY Market (cont) • What's driving the market? – Con Edison & LIPA Rates are the highest rates in the continental US (Hawaii has the highest rates in the country) – NYSERDA & LIPA are one of the most aggressive incentive programs in the country. – Typical payback is between 3-5 years. After that, virtually free electricity for decades. – The above factors make NY one of the most stable solar markets in the country with some of the best economics in the country.
Incentives driving the market - NYSERDA • NYSERDA – NYSERDA has 2 programs: – The first program is net metering at $1.50 per watt capped at 50 kW ($75,000 of incentive money) – The second program, NYSERDA has earmarked $300,000,000 over the next 5 years specifically to deploy large scale solar systems within New York City. – OnForce Solar received $3,000,000 in 2011 & $3,000,00 in 2012 from NYSERDA as first installments of a potential $30,000,000. – This is a production based incentive with the monies paid out over a 4 year basis.
Incentives driving the market - LIPA • LIPA – NYSERDA has 2 programs: – The first is net metering at $1.30 per watt capped at 100 kW ($130,000 of incentive money). – The second program, LIPA recently announced a Feed In Tariff (FIT). • This is a game changer. • This lends a tremendous amount of stability to the equation and enable owners/developers to bring their LIPA contract “to the bank”.
Business Solar Finance Options - Purchase – Purchase • Large and Small scale solar. • Customer is responsible for the full payment of the system and will be given a payment schedule that resembles: – Deposit – Receipt of Rebate Approval – Receipt of Permit Approval – Delivery of Solar Modules – Completion of Construction – Final Intertie Sign Off (when the system is turned on) • All government incentives/rebates go to the client
Business Solar Finance Options – Capital Lease – Capital Lease • Large and Small scale solar. • OnForce Solar is aligned with 2 nationally recognized banks to offer capital leases through specific solar programs. • Customer does not have to make an upfront investment – 100% financing options – Rates around 4.75% fixed over 7 years – No lien on the property. Collateralized by the equipment (UCC’s). • All government incentives/rebates go to the client • These transactions are viewed as an asset & a liability and will appear on the balance sheet.
Business Solar Finance Options – Operating Lease – Operating Lease • Large and Small scale solar. • Perfect for strong companies without large tax appetites. • Customer does not have to make an upfront investment – 100% financing options • The bank will monetize all of the tax credits and depreciation • The consumer gets all of the electricity, state incentive (NYSERDA or LIPA) and City incentive (property tax abatement) if there is one. • These transactions are viewed as off balance sheet transactions and are fully expensed (at customers marginal tax rate) • No lien on the property. Collateralized by the equipment (UCC’s).
Business Solar Finance Options - PPA – Power Purchase Agreement (PPA) • Large and Small scale solar. • Customer receives a reduction in their current electric bill. – Savings are in the 10 – 30% range of their supply & delivery portion of the bill. – Terms for these transactions are between 15 and 20 year contracts. – All government incentives/rebates go to the PPA holder (aside from property tax abatement) – The 5 boroughs offer a 10% property tax abatement (2.5% per annum for years 2, 3, 4 and 5 and capped at $62,500 per annum). – Bloomberg just deployed 1.8 MW system at their NJ headquarters under a PPA contract. ~60% of their facilities energy will come from solar.
Solar Finance for investors – The ultimate in predictability • Renewable energy finance is a rapidly growing opportunity. – ~10-15% unlevered returns on average, compared to bonds and treasuries yielding ~3% – Predictable revenue / long term contracts – Stable revenue – Significant tax incentives – Solar can not increase the tax assessed value of a property, but will increase the value of the property by lowering the operating expenses, while increasing the net operating income.
Notable Recent Activity • Who is participating? – Google – Over 1 Billion in renewable projects to date including wind farms and residential solar leases. – Berkshire Hathaway – Just purchased the Topaz & Antelope Solar Farms (which will be the worlds largest solar generating facilities when complete) for a total of 1.1 GW, enough energy to power 1M homes. ROI estimated at 16.4% – Morgan Stanley – 300M last year into residential leases.
Notable Recent Activity (cont.) – Met Life – Partnered with BP solar to own and operate the largest solar farm in the eastern US at Brookhaven National Laboratory on Long Island. The project is 32 megawatts and LIPA is purchasing all of the energy through a PPA – General Electric – 5 Billion globally in solar generating assets. This is aside from it’s investments in panel manufacturing. GE has under construction the largest US solar manufacturing facility in Aurora CO at 400 MW annually
General Outlook • We believe we will see a steady increase in investor and bank comfortableness with solar as an asset class. • Solar adoption at the consumer level will continue to accelerate as module prices decline, utility rates rise and incentives remain robust. • Solar is here to stay.
Contact Scott Kerner National Director of Sales – Commercial & Utility OnForce Solar, Inc. 728 East 136 th St. Bronx, NY 10454 347-590-5450 (office) 646-303-5215 (cell) scott@onforcesolar.com
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