Ahead of the Curve: Architectural Solar and How to Pay For It

Presented by:

AGENDA

Ø Introductions

Ø Trends Transforming the Building Industry

Ø Innovation Overview: Architectural Solar

Ø Innovation Overview: SolarPACE Financing

Ø Use Case

Ø Take-Aways

Ø Q + A

INTRODUCTIONSRob Watson is an international leader in market transformation for green buildings, known by many as the “founding father of LEED.” Under Rob’s direction, LEED became the largest and fastest-growing international standard by which green buildings are measured. Rob’s inspiring career has seen tenures at the Natural Resource Defense Council.

The ECON Group, one of Rob’s various current organizations, is a building optimization company with the unique ability to optimize both environmental performance and economic return throughouth the building lifecylce. Their LeenOps platform bridges the gap between building sustainability and the bottom-line.

Rob WatsonCEO & Chief

Scientist

INTRODUCTIONSChris Klinga has 10 years of experience as a trained mechanical engineer and licensed structural engineer, deeply involved with integrating the solar and building industries. Through construction experience, work with Solaria and leadership in the Architectural Solar Association, Chris is a driving force bringing about design-driven solar solutions.

Solaria has developed a technology platform that unlocks the potential for solar energy allowing it to be ubiquitously accessed through innovative and optimized solar technologies. Solaria is cutting costs, improving efficiencies and pioneering decentralized power generation, enabling the trend toward sustainable building and supporting the architects and developers involved.

Chris KlingaSenior Project

Engineer

INTRODUCTIONSJoshua Kagan focuses on cultivating channel partnerships and working with direct owners of commercial real estate to create accretive market-based solutions that positively impact the planet and unlock value. Prior to joining CleanFund, he ran the Carbon War Room’s global energy efficiency division. Prior to the War Room, he was a Senior Analyst with cleantech VC firm Atlas Capital Investments.

CleanFund is a national leader in Commercial PACE financing, solving big challenges for the $60 billion solar and energy efficiency market for U.S. commercial buildings. A direct capital provider with 100% focus on Commercial PACE, CleanFund offers project financing solutions to both owners and developers of high-performance buildings.

Joshua KaganVP of Business Development

1. TRENDSThe innovations driving the building industry towards sustainability

The Problem

LEED was a good start, but the industry is structurally incapable of delivering full sustainability.◍ Still missing the forest for the

trees

Buildings still use the most energy of all sectors, though less than 20 years ago, in spite of adding 30% more floor area.

TAKING STOCKThe Solution

Green is the norm in new construction, though existing stock is stubbornly hard to penetrate.

Wellness will be a good hook.

Multiple innovations in design technology and finance coming together to leverage fractal networks.

BUILDING A MOVEMENTInnovations

◍ Design tools finally catching up.

◍ Architectural Solar (BIPV) beginning to take-off.

◍ PACE provides access to better capital. Finally capitalizing sustainability vs. expensing it.

Transforming the Market Industryand the Way We Think

◍ Industry needs dramatic consolidation.

◍ Buildings as strategic assets vs. cost centers.

AHEAD OF THE CURVE

Ø Big Data or Big Garbage?Ø Self-Sufficiency is GrowingØ Building as Branded Service

Inter- and Intra-connection of data-sharing devices is growing wildly, but on a foundation of questionable data.Nonetheless, the network effect will lead to good mix of independence and interdependence. Utilities beware! Emphasis on building services means asset utilization with grow significantly w/opportunity for financial innovation. Good for environment, but new construction will contract—almost exclusively for replacements.

2. ARCHITECTURAL SOLARInnovative applications maximizing generation and building performance

SOLARIA

Silicon PV Cells

IntegratedMfg. Line

Solaria transforms conventional PV cells into optimized PV solutions through a proprietary module architecture and manufacturing process

PowerVision™Transparent architectural

glass delivers energy efficiency and high power

density.

PowerSpandrel™Architecturally appealing,

opaque solution with industry leading power density.

PowerXT™High Efficiency solar module

with best in class shade tolerance.

PV C ov e rage VL T

Module Powe r(W atts)

Module Are a (S qF t)

Powe r D e nsity

(W att/sqft)

PowerV ision 43% 51% 150 25.0 6.0

PowerS pandrel 100% 0% 350 21.7 16.1

PowerXT 100% 0% 400 22.7 17.6

SOLARIA PRODUCT SUITE

Rooftop PV

Canopies

Architectural Structures

Window Awnings

Rainscreens

Balustrades

Sloped Glazing

Vertical Spandrel Glazing

Vertical Vision Glazing

Weather Barrier Shading

Messaging

ShadingGlare Control

SafetyBird -Safe

ShadingWeather Barrier Sound Barrier

Shading

Applications Multi-Functional Advantage Solaria Advantage

Appe

aran

ce

Bifacial Capability

Efficiency

Bird Safe

THE SOLARIA ADVANTAGE

Roof

top PV

Cano

pies

Arch

. Stru

ct.Aw

nings

Rains

creen

s

Balus

trade

sSlo

ped G

lazing

Span

drel

Glas

sVis

ion G

lass

Mul

ti-Fu

nctio

nal V

alue

Most IntegratedHigh

Market Barriers

Least IntegratedLow

Market BarriersApplications

ENHANCED BUILDING PERFORMANCE ENABLED BY C-PACE FINANCING

COMPELLING ECONOMICS

2009 2010 2011 2012 2013 2014 2015 2016 *

Commercial $64.62 $59.93 $40.96 $35.75 $36.62 $31.00 $30.87 $28.70

Residential $87.23 $76.48 $53.59 $50.39 $45.57 $43.63 $42.46 $40.92

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

Cost

Per

SQ

FT

NREL PV Installed Cost Per Sqft (Commercial 200 kW)

Areas based on module area and average yearly efficiencies outlined in NREL Q1 2016 Benchmark Report (Fu et al. 2016)All figures 2009-2015 Ref. Fu et al. 2016 *2016 data based on .49 cent module price in SEIA Solar Market Insight Report 2016 Q4 and NREL 2015 BOS Data.

INCREMENTAL COST $1.17 / Watt - Baseline Installation Cost *+ $0.62 to $3.50/watt Incremental BIPV Module Cost **

$1.79 - $4.67/Watt : Total Incremental Cost($27-$70/sqft @15.6% Effic.)Traditional Solar Installation Cost (Fu et al. 2016)

5 MW Utility PV = $1.82 100 kW Commercial PV = $2.29/W Residential PV = $2.93/W

* Includes typical PV labor without module & racking install (~$0.05/watt or 70% of install labor)** Cell, encapsulant and additional glass costs.

ITC VALUE

Approximate Insulated Curtain Wall Installed Price $80-120 / sqft Typical - $80 / sqft Assumed

What is the Tax Basis on a Curtain Wall?There is precedence for 100% but it will vary based on the installation.50% Assumed in analysis.

100% = $34-$51/sqft50% = $17-$26/sqft

◍ Architectural Solar enables C-PACE to encompass more of a building’s cost

◍ C-PACE enables financing for integrated applications otherwise hard to finance

A SYMBIOTIC RELATIONSHIP

3. SolarPACE FINANCINGInnovative finance solution enabling accretive efficiency and renewable projects in commercial buildings

CleanFund is a nationwide financing platform that solves big challenges for the $60 billion energy efficiency and solar market for U.S. commercial properties.

We make renewable energy, water conservation, energy efficiency, seismic strengthening and other building improvements easy and affordable for commercial property owners.

Our products leverage a new financial technology – property assessed clean energy (PACE) – that is based upon centuries-old land-secured financing. Payments are billed and collected in the form of property taxes.

ABOUT CLEANFUND

WHAT IS PACE?◍ PACE exists because lowering the carbon footprint of the built environment is

in the public interest – just like other bond financings that show up on property tax bills (schools, roads, fire stations).

◍ The power of PACE is based upon two simple provisions:

• Secured as a parcel assessment• Billed and paid via ordinary property taxes

◍ PACE has achieved strong growth nationwide:

• Legislation passed in 33 states & D.C.• 45 active PACE programs nationwide

Active PACE ProgramsPACE Legislation Passed

Source: PACENation

WHAT PROBLEMS CAN PACE SOLVE?

Upfront project cost/lack of funds 100% third party financed

Tendency that only “low-hanging fruit” projects get done

Inability or unwillingness to take on additional debt

Split incentives

Owner might be selling building

Up to 30 year financing enables deep retrofits to be accretive

Property assessment treated as an operating expense, not debt

Tenants share cost/savings in NNN leasesTransferable to next owner

Barrier Solution

Most Soft Costs

Energy Efficiency

WHAT CAN BE FINANCED?Air Sealing & Ventilation Envelope EV Charging

Insulation Windows Elevator Modernization

HVAC Systems Refrigeration Building Controls

Lighting Compressed Air

Water Conservation Renewable EnergyLow Flow Fixtures

Grey/Black Water

Rainwater Harvesting

Irrigation & Controls

Solar

Wind

Fuel Cell

Cogeneration

Seismic (CA)Permits

Architectural, Engineering Plans

Measurement & Verification

Seismicstrengtheningimprovements

may qualify

THE SolarPACE ADVANTAGE

Compared to other financing options, SolarPACE yields both the highest ongoing Net Present Value and better non-discounted cash flows for 20 year term.

GETTING PROJECTS DONE

4. WORKING TOGETHERDriving synergies between building performance and net operating income

CASE STUDY: Application of PowerSpandrel & PowerVision

Vision Areas

Spandrel Areas

West ElevationEast Elevation

South Elevation

Power(kW)

Area (sqft)

Weighted Average

EUI (kWh/sqft/yr)

Production Savings (kWh/yr)

Performance Savings(kWh/yr)

Total Savings (kWh/yr)

PowerVision 25.6 4,278.0 5.6 24,057 8,377 32,434

PowerSpandrel - Spandrel Area 277.5 17,224.0 13.3 229,693 0 229,693

303.1 21,502.0 11.8 253,750 8,377 262,126

Total

Rooftop Potential~200 kW

~292,000 kWh/yr

CASE STUDY: INSTALL ASSUMPTIONS

SYSTEM DETAILSNameplate capacity (kW) 303Year 1 net energy (kWh/year) 253,750Building Performance Savings (kWh/yr) 8,377System Area 21,502System Power Density (watts/sqft) 14.09System EUI (kWh/sqft) 11.80

Frit Replacement Area 4,278.00Non Frit Replacement Area 17,224.00Frit Replacement % 25%

SYSTEM COST ASSUMPTIONSUtility Rate 0.135$ Utility Rate Increase 3%Incremental Installation Baseline Cost/Watt 1.17$ Incremental Module Cost/sqft 40.00$ Frit Offset Cost per sqft 10$ Baseline Curtainwall Cost per SQFT 80$ O & M Cost Per/kW 7$

FRIT OFFSET DETAIL

FINANCING PARAMETERSDebt fraction (% of installed cost) 100.00Financing term (years) 30Financing rate (%/year) 6.00

ANALYSIS PARAMETERSAnalysis period (years) 30Inflation rate (%/year) 2.50%Real discount rate (%/year) 7.00%

TAX AND INSURANCE RATESFederal income tax rate 35%State income tax rate 8.84%Sales tax 7.75%Insurance rate (%/year) 0.5%Property Tax (%/year)

Assessed percentage 0%Annual decline (%/year) 0%Property tax rate 1.25%

ITC % 30%ITC Curtainwall Impact 50%Bonus Depreciation 0%

BIPV Financial Output

Total Per Watt Per SqftBaseline Installation Cost $354,510 $1.17 $16.49Incremental Module Cost $860,080 $2.84 $40.00Frit Cost Deduction -$42,780 -$0.14 -$10.00Total Incremental Installed Cost $1,171,810 $3.87 $54.50

Total Incremental Installed Cost $1,171,810 $3.87 $54.50Baseline Curtainwall Cost $1,720,160 $5.68 $80.00Total Install Cost $2,891,970 $11.40 $134.50

ITC Curtainwall Tax Basis $860,080 $2.84 $40.00ITC Solar Tax Basis $1,171,810 $3.87 $54.50Total ITC Tax Basis $2,031,890 $6.71 $94.50

ITC Value, End of Year 1 (30%) $609,567 $2.01 $28.35

Depreciation Basis Percentage 85%Depreciation Basis (Pre Bonus Depreciation) $1,727,106.50 $5.70 $80.32Depreciation Value, End of Year 1 $140,692 $0.46 $6.54Depreciation Value, End of Year 6 $691,271 $2.28 $32.15

Total Incremental Installed Cost $1,171,810 $3.87 $54.50Tax Deductable Operating Expenses $7,980 $0.03 $0.37kWh Savings (After Taxes) -$20,984 -$0.07 -$0.98ITC Value, End of Year 1 (30%) -$609,567 -$2.01 -$28.35Depreciation Value, End of Year 1 -$140,692 -$0.46 -$6.54

End of Year 1 Cost $408,547 $1.35 $19.00Payback Period 3.44 years

10 Year NPV 213,918$ 10 Year IRR 10%

20 Year NPV 126,770$ 20 Year IRR 12%

Assumes 50% of Curtainwall Cost

ITC + Depreciation > $54.50

BIPV FINANCIALS

BIPV Financial Output

Total Per Watt Per SqftBaseline Installation Cost $354,510 $1.17 $16.49Incremental Module Cost $860,080 $2.84 $40.00Frit Cost Deduction -$42,780 -$0.14 -$10.00Total Incremental Installed Cost $1,171,810 $3.87 $54.50

Total Incremental Installed Cost $1,171,810 $3.87 $54.50Baseline Curtainwall Cost $1,720,160 $5.68 $80.00Total Install Cost $2,891,970 $11.40 $134.50

ITC Curtainwall Tax Basis $860,080 $2.84 $40.00ITC Solar Tax Basis $1,171,810 $3.87 $54.50Total ITC Tax Basis $2,031,890 $6.71 $94.50

ITC Value, End of Year 1 (30%) $609,567 $2.01 $28.35

Depreciation Basis Percentage 85%Depreciation Basis (Pre Bonus Depreciation) $1,727,106.50 $5.70 $80.32Depreciation Value, End of Year 1 $169,340 $0.56 $7.88

Total Incremental Installed Cost $1,171,810 $3.87 $54.50Tax Deductable Operating Expenses $93,111 $0.31 $4.33kWh Savings (After Taxes) -$20,984 -$0.07 -$0.98ITC Value, End of Year 1 (30%) -$609,567 -$2.01 -$28.35Depreciation Value, End of Year 1 -$169,340 -$0.56 -$7.88

End of Year 1 Cost $465,030 $1.53 $21.63Payback Period 3.44 years

10 Year NPV 1,385,728$ 10 Year IRR 10%

20 Year NPV 1,298,580$ 20 Year IRR 12%

BIPV Financial Output

Total Per Watt Per SqftBaseline Installation Cost $354,510 $1.17 $16.49Incremental Module Cost $860,080 $2.84 $40.00Frit Cost Deduction -$42,780 -$0.14 -$10.00Total Incremental Installed Cost $1,171,810 $3.87 $54.50

Total Incremental Installed Cost $1,171,810 $3.87 $54.50Baseline Curtainwall Cost $1,720,160 $5.68 $80.00Total Install Cost $2,891,970 $11.40 $134.50

ITC Curtainwall Tax Basis $860,080 $2.84 $40.00ITC Solar Tax Basis $1,171,810 $3.87 $54.50Total ITC Tax Basis $2,031,890 $6.71 $94.50

ITC Value, End of Year 1 (30%) $609,567 $2.01 $28.35

Depreciation Basis Percentage 85%Depreciation Basis (Pre Bonus Depreciation) $1,727,106.50 $5.70 $80.32Depreciation Value, End of Year 1 $140,692 $0.46 $6.54Depreciation Value, End of Year 6 $691,271 $2.28 $32.15

Total Incremental Installed Cost $1,171,810 $3.87 $54.50Tax Deductable Operating Expenses $7,980 $0.03 $0.37kWh Savings (After Taxes) -$20,984 -$0.07 -$0.98ITC Value, End of Year 1 (30%) -$609,567 -$2.01 -$28.35Depreciation Value, End of Year 1 -$140,692 -$0.46 -$6.54

End of Year 1 Cost $408,547 $1.35 $19.00Payback Period 3.44 years

10 Year NPV 213,918$ 10 Year IRR 10%

20 Year NPV 126,770$ 20 Year IRR 12%

BIPV FINANCIALS, cont.

CASE STUDY: FINANCING ASSUMPTIONS

Net Benefit Over Next 10 Years: $892,420

Term: 30 YearsFirst Payment Due: Dec. 2018First Payment Amount: $48,960Total Fixed Annual Payment: $97,912

C-PACE FINANCIALS

5. TAKE-AWAYSIt’s possible and it’s affordable.So, what are you waiting for?

LOOKING FORWARDØ Architectural Solar bridges the gap between energy

efficiency and net zero buildings.

Ø Financial innovations, such as C-PACE will increasingly support owners and developers seeking to build and occupy high-performance buildings.

Ø Convergence of improved design tools, technology improvements and financial instruments that properly value and finance sustainability will lead to an explosion of net zero buildings.

Questions?

Thank You!Joshua KaganVP of Business Development joshua.kagan@cleanfund.comCleanFund

Chris KlingaSenior Project Engineer cklinga@solaria.comSolaria

Rob WatsonCEO & Chief Scientist rwatson@econ.us.comECON Group

For slides, recording and more on the Solaria/CleanFund partnership visit: http://go.cleanfund.com/Solaria