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Confident Decisions Definitive Returns
AltaE Webinar Series: Making the Business Case for Commercial Solar
July 25, 2013
Welcome
• First in the series of webinars designed to inform enterprises, commercial real estate owners, and related professionals on the opportunity to evaluate, recommend, approve and deploy solar projects
• Attendees will be muted
• Type in questions in Q&A box
• Presentation slides will be available on our website www.altaenergyinc.com after the presentation
• Next webinar: “Unlocking the Economic Potential:
Assessing the Feasibility of Your Property for Solar”
Agenda
• Introductions
• Webinar objectives
• Solar market overview
• Business case tools
• Putting the tools to use • Don Fritts, Aetna Building Maintenance
• Q & A
Today’s Presenters
• Sam Lee Founder & CEO, Alta Energy Inc.
Alta Energy, Inc. is a company dedicated to enable volume adoption of renewable energy solutions in the commercial & industrial segment - by streamlining deployment process to be effective & efficient, yielding an optimized solution every time.
• Don Fritts Director of Facility Services, Aetna Building Maintenance
• Over 35 years of experience in the Office and Building Services field
• Facility Management certification in 1997
Aetna Building Maintenance has been providing a unique range of sustainable solutions for corporate and industrial clients for over 75 years . Founded in 1936, and headquartered in Columbus, Ohio, Aetna Building Maintenance has 11 operations branches in five states: Columbus, Dayton, Springfield, Canton, and Cincinnati OH; Louisville and Lexington, KY; and Huntington and Charleston, WV; Indianapolis, IN; Nashville, TN. Client portfolio includes universities and colleges, manufacturing and distribution centers, airports, and numerous office and government centers.
Webinar Objectives
Provide tools to help C&I property owners and users: • Objectively evaluate solar viability
• Consistently identify opportunities to deploy solar projects which meet your criteria
• Effectively create business case for each property
• Confidently complete right solar projects
The Growing Solar Market
• Total installed PV capacity in U.S. > 10 GW
• > 3.3 GW installed in US in 2012
• Expected to grow another 30% to 4.3 GW in 2013
• Why is solar growing? • Economically makes sense –
C&I install costs fell to $3.92/W in Q1 ‘13
• Monetize untapped real estate assets
• Hedge against volatility of rising utility rates
The Problem: The Complexity
Decisions on renewable energy are often ad-hoc and disjointed
• No objective criteria set
• Property “portfolio” not considered
• Difficult to aggregate
• Each property is unique
• Complex eco-system
• Who to trust?
Making the Case: Five Steps
1. Understand your corporate goals
2. Determine the criteria for a viable solar project
3. Understand the choices involved in commercial solar projects
4. Analyze your portfolio to identify the best projects
5. Present your recommendations to company decision-makers
1. Understand Your Corporate Goals
What is your company’s primary motivation? • Lower operating costs
• Hedge against volatile & rising energy costs
• Create additional revenue stream
• Meet corporate sustainability goals
Company A: Financially Driven 1. Project IRR > 12% 2. Purchase and own system 3. Target offset percentage > 30% 4. Green metrics - CO2 offset > 500M
tons/year
2. Determine Your Criteria for a Viable Solar Project
What are the key, measurable factors that will determine viability? • Financial, sustainability or other?
• Quantifiable and specific
• Prioritized
Company B: Sustainability Driven 1. Meet publicly-stated goals for renewable
energy generation 2. Maximize offset percentage 3. Project IRR > 8% 4. May consider third party owned
Company C: Balanced Approach 1. Project IRR > 9% 2. Help to meet publicly-stated goals for
renewable energy generation 3. Balance offset and capital risk 4. Flexible ownership approach
3. Understand the Choices Involved
Each project is unique in its location and requirements, thus influencing key choices:
Ownership Structure Self-financed Leveraged with debt Power Purchase Agreement Tax lease Not for profit
Incentives Available Federal ITC State and local tax benefits Rebates (CBI) Performance-based incentives Feed-in tariff
Technology/Design Choice Roof, canopy or ground mount Maximize production Minimize cost Roof condition factors Duration of system
Vendor Selection Developer, PPA & integrator EPC vendors and contractors Financiers: Tax equity & debt Technology and product vendors Post install service providers
4. Analyze Your Portfolio to Identify the Best Projects
Methodically analyze your portfolio to gain a holistic view of viable projects, both current and future
Property-Specific Data Roof condition and clutter Parking lots/garages? Structural considerations System size estimation Location and shading
Incentive Analysis Usability of tax credits Available incentives Qualification criteria Application or bidding? Timing and limitations
Utility Consideration Electrical usage at location Type of usage Utility tariff analysis Any third-party energy?
Portfolio View
Currently Viable: • Meets criteria • Incentive available • Able to qualify
Viable in Near Future: • Will meet criteria • Incentive coming • Rates changing
Possible; Watch: • Criteria within range • Proactively watch for
incentive changes, price declines and/or tariff changes
Unlikely: Track • Not likely within 2 yrs • Track for changes
5. Present Your Findings
Effectively communicate findings and gain continuing support throughout the organization
Outline Process
Analyze Portfolio
Identify Viable Projects
Deploy Successfully
Track and Report
“Going Solar”
Analyze Property Portfolio
Site & Utility Data
Available Incentives
Vendors and Technologies
Operate & Maintain
Financing O&M
Options & Vendors
Apply Incentives & Contracting
Determine Systems /
RFP
Qualify
Vendors / Solicit Bids
Contract Vendors
Oversee Install
Utility
Connection
Successful Deployment Starts With Careful Planning
Don Fritts Dir. of Facility Services
• Offers broad array of customized facility, office and building support services throughout the Midwest
• Corporate headquarters to small remote satellite offices; serving international ABM properties and outside clients
• Sustainability is a key focus
Aetna “Going Solar”
Aetna’s corporate ”go solar” goals • Be a good corporate citizen
• Cut expenses and eliminate escalating costs
• “Walk the walk” – set example for clients
Where to begin? • Corporate threshold for return on investment
• Concerned about vendor bias
• Marketing potential
Portfolio Overview
Incentive analysis
Different utilities
Analyze for critical
decision making data
Consider corporate
goals based on research
Multiple properties in multiple
states
Financial and C-suite
approval
Building Details Roof Area: ~9,000 ft2
Usable area: 80% (HVAC equip.) Roof Type: TBD Roof Tilt: Flat
Electric Bill Details: Utility: Columbus Southern Power Rate Type: General Service (GS-2) Average Rates: $0.07/kWh
Solar System Details: Module Type: Class A 255W Number of Modules: 170 Base Cost: $3.75/Watt Gross System Cost: $160,000 System Size: 43 kW Annual Production: 50 MWh
Columbus, Ohio
0.07
0.08
0.09
0.10
1990 1995 2000 2005 2010
IRR 25 20 15 10 5 0
Aetna PSATS® REPORT – Columbus 4/26/12 Location: 646 Parsons Ave, Columbus, OH
Current Status Goal: Maximize IRR
Ow
ner
Pu
rch
ase
Rooftop System Overview
System Size: 43 kW
System Azimuth: 180°
Panel Tilt: 30°
Avoided CO2: 8 MT/yr
Current Status
Federal Incentives
Market Trend
State Incentives
Utility Incentives
Panel Prices
Installation Costs
Utility Columbus Southern Power
Rate Structure General Service
Average Elec. Price $0.07/kWh
30% Federal Tax Credit Modified Accelerated Depreciation Renewable Energy Technology Program – Utility Rebate ($1.50/W))
Good Poor
Incentive Summary
IRR: 7%
Payback Period: 9 years
Gross Cost: $162k
Net Cost (Gross – ITC): $114k
Net Present Value: $10k
25 Yr Electricity Savings: $153k
Electricity Offset: TBD
• Present to Aetna Management • Full Property Solar Deployment Analysis
Next Steps
Marketplace Snapshot
Ohio Commercial Electricity Price
$/k
Wh
State/Utility/Local Summary
31%
Aetna Modeling
$-
$50,000
$100,000
$150,000
$200,000
$250,000
1% 2% 3% 4% 5% 6%
25
Ye
ar E
lect
rici
ty S
avin
gs
Annual Electricity Price Inflation Rate
Economic Analysis
Utility Rate
Database
Physical/Geo
Database
Solar Engineering
Inputs
Client Data &
Requirements
Web Sources Manually Sourced Direct Interface
Feed
Incentive Database
Prdts&Tech Database
Total Savings on Electricity
Vendor Bid Summary
Projected IRR 9-10%
Rooftop Capacity 54.1 kW
Price [$/W] $3.87/W
Gross Cost $210k
Net Cost (Gross – ITC – Rebate) $72k
Quoted System Efficiency 1,141 kWh/kW
• Required : U.S. made panels
• 32% annual electricity offset
• Warranties • 1 year workmanship
• 25 year panel
• 10 year inverter
• 25 year racking
• Production guarantee at 90% of 1st year production w/ 0.5% decliner for 10 years
• Installer experience • 1.5 MW installed in OH
• 4.5 MW in USA
• Strong safety rating
• Last full year: $14M revenue
Aetna Results
• System live for 4 months
• Currently offsetting 40-50%
• Meter points backwards on optimal days
• Beating expectations- even on hot, sunny days with AC
• Set conservative and realistic goals, allowing them to exceed expectations
Lessons Learned
• Portfolio overview to identify “best” opportunity
• Facts and figures are critical to presenting your case
• Neutral party consulting/analysis is key
• Solar may pencil out in smaller properties
• Clients and community want to learn from our experience
• Monitoring other properties for right time
• Multiple contractor teamwork – solar, roof, HVAC
Summary
1. Understand your corporate goals
2. Determine the criteria for a viable solar project
3. Understand the choices involved in commercial solar projects • Ownership structure
• Government/Utility incentives
• Technology choices
• Vendor type
4. Analyze your portfolio to identify the best projects
5. Present your findings to the company decision-makers
Deploy solar on right property at right time
Questions & Answers
Any Questions?
Please use the WebEx Q&A
feature on right of your screen to submit your
questions
Contact Information
Still have questions? Contact Us: Email: [email protected] Tel: 650-345-2582 (ALTA) www.altaenergyinc.com
Upcoming Webinar: “Unlocking the Economic Potential:
Assessing the Feasibility of Your Property for Solar”