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Welcome to Today’s Webinar:Winning Renewable Energy Investment Strategies for Fortune 1000 Firms

Tuesday, April 8, 201411:30 a.m. EST

Craig Schultz, Principal

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Why Now?: Drivers of Increasing Viability for RenewablesWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

• Renewable energy cost & performance improvements• Ongoing high levels of Federal incentives for many renewable energy

technologies– Investment Tax Credit (ITC) & accelerated depreciation (MACRS)

• State, local, and utility incentives in many markets• Wide range of financing options• Volatility in market electricity prices (desire to hedge costs)

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

50,000

100,000

150,000

200,000

250,000

300,000

U.S. Renewable Generation Capacity (excluding traditional hydro)

MW

Source: EIA, U.S. Dept. of Energy

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Renewable Energy Transaction Types: A SpectrumWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

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Financing Types: Self-Purchase vs. PPA/LeaseWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

Self-Purchase Power Purchase Agreement (PPA) or Lease

Customer provides capital (with or without external debt) and needs to monetize investment tax credit

and accelerated depreciation

Renewable developer provides capital; no upfront capital cost to end-use customer

Most money is paid upfront, with typically modest O&M costs thereafter

Monthly payments based upon asset’s electricity output or fixed schedule

Customer is responsible for all asset decisions, though often enters into long-term O&M contract

Often a turnkey service; developer finances, permits/interconnects, owns, operates, and

decommissions asset

Key contract is < 2-year engineering, procurement, & construction (EPC)

Key contract is 15- to 25-year PPA or lease (with site easement if on-site);

However, PPAs are not allowable in certain states

Counterparty risks relevant, but not long-term Counterparty risks central and long-term

No fixed duration for investment Expensive buyout options intra-term; extension, purchase, or removal options at contract

conclusion

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Growing Popularity of PPA Financing for On-Site Solar PVWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

2011 2012 2013 2014 YTD0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Self-Finance Third-Party Finance (PPA)

Source: California Solar Initiative (CSI) for “Large Commercial” Systems

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Typical 2 MW+ Renewable Project LocationsWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

Renewable Energy Technology On-Site Off-Site

Rooftop or Parking Canopy Solar PV

Ground-Mount Solar PV

Biomass and Biogas

(if local feedstock exists)

Wind

Geothermal

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Common Renewable Energy Transaction ExperienceWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

• Do not expect that thoughtfully

reviewing, selecting, and executing a $2MM - $50MM renewable energy transaction will be easy

• Short-term rollercoaster to secure smooth and sustainable electricity supply for 15-25 years

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Inside the Rollercoaster RideWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

1. Internal Support Obtained/This Might Work

2. Realize the # of Pieces Involved

3. Strong Interest from Qualified Vendors

4. Complications: Contract Length, Counterparty Risks,

REC Sales, Etc.

5. Initial Complications Resolved

6. Board or Sr. Mgmt. Produce

Unexpected Questions

7. Close Deal Internally

8. Negotiation of Contracts & Wait for Commissioning

9. Operating Project/Fin’l & Environmental Gains

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Catalog of Information Needed from PPA or Lease BiddersWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

1. Price & payment schedule

2. Inclusions and exclusions in bid

3. Equipment to be used

4. System layout/design and engineering (including total capacity)

5. System performance and degradation

6. Warranties (equipment as well as any on workmanship and performance)

7. Construction, installation, and commissioning process and schedule

8. Interconnection and permitting process

9. Integration of system with facility warranties

10. Insurance, safety, and vandalism protection

11. Monitoring

12. O&M

13. Assistance with RECs and other incentives

14. Financial standing of vendor

15. Designation of specific people who would likely manage project

16. List of planned subcontractors and how they have worked with prime contractor

17. Statements of whether contractors have been in bankruptcy or had lawsuits against them

18. Summary of local renewable energy experience

19. References

20. Copy of supplier’s standard legal contract

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Weighing Bid Information According to Customer PrioritiesWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

Meeting bid specsPriceOutputExperience (industry & local)Financial strengthDesign & technologyEquipment & labor source of originOther procurement pref-erences

Adapted from national webinar presented by ICF staff for U.S. Department of Energy

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Summary: Do’s and Don’ts for Renewable Energy TransactionsWINNING RENEWABLE ENERGY STRATEGIES FOR FORTUNE 1000 COMPANIES

Do’s Don’ts

Analyze hourly (8,760 hours/year) renewable electricity production vs. your rate

structure

Be in a hurry as these are 20-year+ investments (but try to implement by Dec. 2016 when investment tax credit declines)

Select the technology type & capacity that matches your electricity consumption

Expect a perfectly smooth process

Decide how communications (environmental claims) about project will be managed

Sole source the transaction (there are many qualified renewable developers and EPCs)

Involve senior management early in the process

Assume exorbitant increases in conventional utility power prices (doing so would inflate

the renewable project returns)

Review counterparty/credit risk carefully (especially for PPAs/leases)

Open new facilities without first considering their energy supply

Determine whether you will need outside assistance (legal, financial, engineering) to

complete the transaction

Neglect on-site clean fossil fuel generation (e.g., combined heat-and-power) as a

possible solution

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Craig Schultz manages renewable energy projects ranging from market assessments and feasibility analyses to project selection, policy formulation, negotiation, and implementation. Mr. Schultz has spent 18 years in the energy industry, working with solar, wind, and other renewable electricity projects as well as conventional energy supply, pricing, and risk management.

His professional focus has been on helping energy market participants manage the costs and volatility of their energy transactions and helping them optimize their conventional and renewable energy assets. He has been the lead advisor for many successful renewable energy projects.

Mr. Schultz received his MBA from The University of Chicago Booth School of Business with beta gamma sigma honors and his Bachelor’s in Economics from Wesleyan University with phi beta kappa honors.

Today’s Featured ICF Speaker

Craig.Schultz@icfi.com+1.202.669.6200

http://www.icfi.com/about/our-people/icf/s/schultz-craig