2.24 MW Solar Project Proposal

2.24MWPhotovoltaicSolarArray

275HartzWay,Secaucus,NewJersey

SOLARPROJECTDEVELOPMENTXIAOLU,BRANDONMCNULTY,GRANTVANWYNGAARDEN

August2016

SOLARPROJECTDEVELOPMENT275HARTZWAY,SEACACUS,NEWJERSEY PAGE1OF24

CONTENTS ExecutiveSummary......................................................................................................................................2

ProjectSummary..........................................................................................................................................3

ProposalRecipients......................................................................................................................................3

Assumptions.................................................................................................................................................3

EnergyConsumptionandRate.................................................................................................................3

EnergyProduction....................................................................................................................................5

Financial...................................................................................................................................................6

WeightedAverageCostofCapital(WACC)..........................................................................................6

Incentives.....................................................................................................................................................8

FederalInvestmentTaxCredit.................................................................................................................8

SolarRenewableEnergyCredits(SRECs)..................................................................................................8

EligibilityandApplication.....................................................................................................................9

FederalMACRSBonusDepreciation........................................................................................................9

PropertyTaxExemption...........................................................................................................................9

EdisonGreenEnergyFinancing..............................................................................................................10

Interconnection..........................................................................................................................................10

Financialproposals.....................................................................................................................................11

Party1–LincolnEquityGroup...............................................................................................................12

Party2–BuildingTenants......................................................................................................................13

Party3–Investor...................................................................................................................................14

DevelopmentFee...................................................................................................................................15

LevelizedCostofEnergy(LCOE).................................................................................................................15

SocialBenefits............................................................................................................................................16

WorksCited................................................................................................................................................17

AppendixA(ProjectDesignImages)..........................................................................................................18

AppendixB(SystemAssumptions).............................................................................................................21

AppendixC(FinancialModels)...................................................................................................................22

AppendixD(PSE&GRateSchedule)...........................................................................................................23

AppendixE(ProductSpecifications)..........................................................................................................24


EXECUTIVE SUMMARY Thisisaproposalfora2.24MWphotovoltaicsolararrayrooftopsystemtobeinstalledat275HartzWay,Seacacus,NJ,withintheterritoryofPSE&G.Thetotalsystemcostisexpectedtobe$5,040,000anditwillproduce2,240,000kWhinyearone(degradedat0.5%peryear).Thesystemhasausefullifeof20years,whichisthetermoftheproposedcontractsunderthisproposal.

ThisproposalhasbeenpreparedforthreedistinctpartiesthatwillreceiveaproposedbenefitsummarizedinTable1(BenefitsbyParty).

Table1(BenefitsbyParty)Party Investment NPV IRR Payback

Investor

$5.04million $70,290 6.44% 7.7years

BuildingOwnerLincolnEquityGroup

$460,596(RoofLease)

Off-TakersThreeretailtenants

$621,473(EnergySavings)

Thissolarphotovoltaicsystemwillavoid42.4millionpoundsofcarbondioxideoveritslifetime,equaltotaking203carsofftheroadforthetwenty-yearlifetimeofthesystem.


PROJECT SUMMARY Thisprojectcomprisesthreeseparateproposalsrelatedtothesolarinstallationat275HartzWayinSeacacusNewJersey.Theprojectentailstheinvestmentof$5.04millionfora2.24MWsolarphotovoltaicinstallationontherooftopofthepropertytooffsetelectricityconsumptionofthreeofthefourtenants.Thisproposalhasthreerecipients:thebuildingowner,theoff-takers(tenants),andaninvestor.Theoff-takersarebeingproposedaPPAratebelowtheestimatedutilityratecurrentlycharged,thebuildingownerisproposedaroof-leasepaymentforgivingroof-rights,andtheinvestorisproposedfinancialgaininreturnforinvestmentcapital.

ThisbuildinglieswithintheterritoryofPublicServiceEnterpriseGroup(PSE&G),whocurrentlyisbillingthetenantsanestimatedblendedconsumptionchargeof$0.103/wattthatwillbeoffsetbythesolarenergyproductionofthePVsystemandtheoff-takerswillinsteadbecharged$0.080/watt.Theeconomicfeasibilityoftheprojectreliesongovernmentallyfundedincentiveprograms,including:

1. FederalInvestmentTaxCredit(ITC)2. SolarRenewableEnergyCredits(SRECs)3. MACRS(Bonusaccelerateddepreciation)4. NJPropertyTaxExemption

PROPOSAL RECIPIENTS Thisprojectcomprisesthreeseparateproposalsrelatedtothesolarinstallationat275HartzWayinSeacacusNewJersey.Theproposalhasbeenpreparedforthefollowingprospectiveparties:

1. BuildingOwner–LincolnEquitiesGroup,LLC(LEG)2. Off-Takers–ThreeBuildingTenants3. Investor

ASSUMPTIONS Energy Consumption and Rate Theproposedoff-takersofthesystem’selectricityarethethreeretailtenantsofthebuilding.ThefourthtenantisEquinixInc.,whohousesadatacenteratthefacilityandhasbeenexcludedfromthisproposalbecauseoftheircopiousenergyconsumption.

Theelectricityconsumptionoftheretailtenantstobeoffsetbythissystemhasbeenestimatedtobe3,066,000kWh/year.ThiselectricityconsumptionhasbeencalculatedusingtheassumptionsincludedinTable2(ElectricityConsumption).

Table2(ElectricityConsumption)Tenant Occupied

SquareFootageElectricityConsumption(kWh/sq.ft.)

TotalConsumption(kWh/year)

3xRetail 219,000 14 3,066,000EquinixDataCenter 183,9001 400 Total 403,8692

1(LincolnEquitiesGroup,LLC)


Theaveragegenerationservicerateisestimatedtobe$0.103/kWh.ThisisestimatedbasedonPSE&G’sLargePowerandLightingService–Secondary(LPL-S)ratescheduledesignedforcommercialandindustrialcustomersexceeding150kWofdemand.Furthermore,thefollowingsite-specificdataassumptionsappliedtotherateschedule:

1. Therateofconsumptionisassumedtobeflatduringbusinesshours2. Businesshourswereassumedtobe8am-8pmeveryday,whichfellwithintheon-peakhoursfor

weekdays,andoff-peakforweekends

ThegenerationserviceratecalculationisbasedonthePSE&GrateschedulethathasbeenincludedinAppendixD(PSE&GRateSchedule),thecalculationsareincludedinTables3through6.

Table3(PSE&GDeliveryChargesLPL-S)DeliveryCharges Rate Charge($)ServiceCharge 372.11DistributionkWCharges:$/kW

AnnualDemandCharge 3.604 SummerDemandCharge 8.574

DistributionkWhCharges:$/kWh CIEPStandbyfee 0.000161 493.63 SocietalBenefitsCharge 0.008221 25,205.59 Non-utilityGenCharge 0.003464 10,620.62 SecuritizationTransitionCharge 0.011131 34,127.65 SystemControlCharge 0 - SolarPilotRecoveryCharge 0.000161 493.63 GreenProgramsRecoveryCharge 0.002907 8,912.86

Table4(PSE&GSupplyChargesLPL-S)SupplyCharges Rate Charge($)BasicGenerationService:$/kWh SummerOn-Peak 0.090367 65,967.91 SummerOff-Peak 0.05185 15,140.20 WinterOn-Peak 0.084929 123,996.34 WinterOff-Peak 0.054014 31,544.18CapacityCharge:$/kWGenObligation Summer 5.6304 3,941.28 Winter 5.6304 3,941.28 Summer 8.8839 6,218.73 Winter 8.8839 6,218.73

2(LincolnEquitiesGroup,LLC)


SupplyCharges Rate Charge($)TransmissionCharge:

$/kWTransmissionObligation 6.7883 4,751.81TotalApplicableperkWhCosts($) 341,946.54

AnnualConsumption(kWh) 3,066,000AverageRate($/kWh) 0.11152855

Table5(EnergyConsumptionEstimates)HoursofUse 12hrs/day7days/wkSquareFootage 219,000Averageconsumptionperarea(kWh/squarefoot) 14AnnualConsumption(kWh/yr) 3,066,000PeakAnnualDemand(kW) 700PeakSummerDemand(kW) 700SummerOn-PeakConsumption(kWh) 730,000SummerOff-PeakConsumption(kWh) 292,000WinterOn-PeakConsumption(kWh) 1,460,000WinterOff-PeakConsumption(kWh) 584,000

Table6(AverageGenerationServiceRate)

Item Rate(/kWh) Consumption(kWh) Charge($)

DeliveryFeesbasedonConsumption

79,853.97SummerOn-peak 0.090367 730,000 65,967.91SummerOff-peak 0.05185 292,000 15,140.20WinterOn-peak 0.084929 1,460,000 123,996.34WinterOff-peak 0.054014 584,000 31,544.18Totalconsumption 3,066,000 AverageGenerationServiceRate 0.10322981

Energy Production Theproposedsystemof2.24MWhasbeendesignedinHelioscopewithimagesofthedesignincludedinAppendixA(ProjectDesignImages).ThissystemincludestheequipmentlistedinTable7(Equipment)withproductsheetsincludedinAppendixE(ProductSpecifications).


Table7(Equipment)Equipment Model NumberPanels TrinaSolar,TSM-PD14315(315W) 7,119

(17fieldsegments)Inverters SolarEdge,SE33.3KU(33.3kW) 54Ballastedracking DynoRaxxEvolutionFR(Ballasted,no-penetration) 7,119

BasedontheHelioscopedesign,thissystemhasanameplatecapacityof2.24MW.BasedonPVWattsoutputfortheparameterslistedinTable8(PVWattsParameters),thesystemisexpectedtoproduce2,802,240kWhannually(1,251kWh/kWx2.24MW).PVWattsinputandoutputvalueshavebeenincludedinAppendixB(SystemAssumptions).

Table8(PVWattsParameters)Parameter Value AssumptionWeatherData (TMY3)NewarkInternationalAirport,NJ 7.0milesfromsiteModuleType Standard ArrayType Fixed(roofmount) Azimuth 161.15° Tilt 10° SystemLosses 12.5 Roof-topinSnowZoneDCtoACSizeRatio 1.3 InverterEfficiency(%) 98 GroundCoverageRatio 0 AnnualProduction/kW 1,251kWh

Financial Weighted Average Cost of Capital (WACC) TheconceptofWeightedAverageCostofCapital(WACC)hasbeenusedtovaluethefuturecashflowsfromtheprojectforallpartiesintermsofpresentvalue.Aspositiveandnegativecashflowsinthefuturedifferfromthevalueofcashflowsnow,wemustdiscountthoseflowsaccordingly.Bothpositiveandnegativecashflowsarediscountedequallyusingtheparticularparty’sestimatedWACC.

Investor TheinvestorhaspositivecashflowsfromtheprojectintheformofaPPAfromtheoff-taker.Theinvestoralsohaspositivecashflowsintheformoffuturecostavoidanceandgovernmentincentives.Theinvestor’sestimatedWACChasalsobeenusedtodeterminethevalueofthesavingsfromtheEdisonloanastheWACCwouldbethealternativesourceofthesefundsandthedifferencebetweentheWACCandthe2%Edisonloaninterestontheloanprincipleisthecalculatedsavings.Finally,theinvestorhasnegativecashflowsintheformofaroofleasetothebuildingownerandthesetoohavebeendiscountedattheinvestor’sestimatedWACC.


ToestimatetheInvestor’sWACC,wehaveassumedthatthe100%ofthecapitalwillbeintheformofequity.TodeterminethecostofequitywehaveappliedtheCapitalAssetPricingModel(CAPM),whichhasderivedaWACCof6.045%usingthisformulaandassumptionslistedinTable9(InvestorWACC):

CostofEquity=rf+(rm–rf)Βasset=6.05%

Table9(InvestorWACC)Notation Variable AssumedValue AssumptionRationalerf Risk-freerateofreturn 1.59% Theyieldof10yearUStreasury

bondsasofAugust8,20163rm ExpectedMarketReturn 10.5% Historicalcompoundedannualrate

ofreturnfortheS&P5004Βasset AssetBeta 0.84 Green&RenewableEnergy

unlevered,cashadjustedAssetBeta5

Off-Taker and Building Owner Fortheoff-takerandbuildingowner,wealsoassumeda100%equityportionfortheirWACCbecausewithoutdetailsoftheirfinancialstrengthacostofdebtcouldbeverydifficulttoestimateaccurately.SincethesepartieshavenoinitialcapitaloutlayandtheWACCisappliedonlyasadiscountfactortotheirfuturecashflowwithlimitedopportunitycost,thecostofequityseemsappropriateasaproxyfordiscountingtheirfuturecashflows.Toestimatetheircostofequityweappliedthesameapproachasfortheinvestor,onlyusingdifferentbetastoreflecttheirindividualnon-systemicrisk.TheirWACCcalculationsareincludedbelowinadditiontotheirbetaassumptionsinTable10(AssetBetaforOff-Taker&BuildingOwner).

Off-TakerCostofEquity=rf+(rm–rf)Βasset=9.79%

BuildingOwnerCostofEquity=rf+(rm–rf)Βasset=10.77%

Table10(AssetBetaforOff-Taker&BuildingOwner)Entity AssumedAsset

BetaValueAssumptionRationale

Off-Taker(Retail)

0.92 Retail(General)unlevered,cashadjustedAssetBeta6

BuildingOwner(DiversifiedRealInstateInvestor) 1.03 RealEstate(General/Diversified)

unlevered,cashadjustedAssetBeta7

3(U.S.DepartmentofTheTreasury)4(Investopedia)5(NYUStern)6(NYUStern)7(NYUStern)


INCENTIVES Federal Investment Tax Credit TheFederalInvestmentTaxCredit(ITC)isacorporateincometaxcreditequalto30%ofthebasisthatisinvestedineligiblepropertythathascommencedconstructionbeforetheendof2019.Thiscreditcanbeclaimedinthefirsttaxyearfollowingconstructionandtheentireamountcanbeclaimedagainsttaxableincomefromthatyear.Inthecaseofinsufficienttaxableincomeinthatgivenyear,thecreditcanberolledbackoneyearorforward20years.ThecalculationofITCamountforthisprojecthasbeendetailedinTable11(FederalInvestmentTaxCredit).

Table11(FederalInvestmentTaxCredit)TotalEligibleSystemCost

ITCRate TotalCredit

$5,040,000 30% $1,512,000

ToapplyfortheITC,IRSForm3468mustbecompletedandsubmittedtotheIRSatthetimeofclaim.Form3468canbeaccessedonlineat:https://www.irs.gov/pub/irs-pdf/f3468.pdf

Solar Renewable Energy Credits (SRECs) SolarprojectsinstalledinNewJerseythatareregisteredwiththeSRECRegistrationProgramarequalifiedtogenerateSolarRenewableEnergyCertificates.SRECsarebundledinminimumdenominationsofonemegawatt-hourofproductionandNewJersey’sSRECprogramprovidesameansforSRECstobecreatedandverified.TheprogramallowselectricsupplierstobuyandretirethesecertificatesinordertomeetsolarRPSrequirements.ThepriceofSRECsisdeterminedprimarilybytheirmarketavailabilityandthepriceofthesolarAlternativeCompliancePayment(ACP).TheSRECrevenueforthisprojecthasbeencalculatedusingtheproductionandSRECpriceassumptionsincludedinTable12(SRECRevenue).

Table12(SRECRevenue)Year SolarEnergy

Production(kWh)SRECPrice($)

SRECRevenue

1 2,802,240 100 $280,2242 2,788,229 100 $278,8233 2,774,288 100 $277,4294 2,760,416 100 $276,0425 2,746,614 100 $274,6616 2,732,881 100 $273,2887 2,719,217 100 $271,9228 2,705,621 100 $270,5629 2,692,092 100 $269,209

10 2,678,632 100 $267,863

SREC’saregeneratedoncethesolarprojecthasbeenauthorizedtobeenergizedbytheElectricDistributionCompany(EDC).Additionally,PSE&GoffersaSolarLoanProgramthatallowscustomersto


takealoanfromtheutilityforupto40-60%ofthecostofthesystem.CustomersmaythenrepaytheloanusingtheSRECsproducedbytheirsystematabasementprice.ThisPSE&Gsolarloanprogramhasbeenexcludedfromthisproposalforvariousreasons,mostnotablythebuildingownerandfirstprioritylienrequirementsthatwouldbemetorassumedunpalatablefortheinvestorofthisproposal.

Eligibi l ity and Application SRECregistrationmustoccurnolaterthan10businessdaysafterexecutionofthecontractforpurchaseorinstallationofthephotovoltaicpanels.

Thecompletedregistrationpacketandallrequireddocumentsaretobesubmittedonline.

CompleteinstructionsandformsrequiredforSRECregistrationwithNewJerseyBoardofPublicUtilities(BPU)canbefoundat:http://www.njcleanenergy.com/renewable-energy/programs/srec-registration-program/registration-forms

Federal MACRS Bonus Depreciation UnderthefederalModifiedCostRecoverySystem(MACRS),businessesmayrecoverinvestmentsincertainpropertythroughdepreciationdeductions.Forsolarphotovoltaicsystems,thetaxablebasisoftheequipmentmustbereducedby50%ofanyFederaltaxcreditsassociatedwiththesystem.The50%bonusdepreciationallowsbusinessestodepreciate50%ofthebasiswhiletheremaining50%isdepreciatedunderthenormalMACRSschedule.Forthisproject,theMACRSschedulecalculationhasbeendetailedinTable13(BonusMACRSSchedule).

Table13(BonusMACRSSchedule)Year Depreciation

RateDepreciableBasis

Depreciation

1 60.0% $4,284,000 $2,570,4002 16.0% $1,713,600 $685,4403 9.6% $1,028,160 $411,2644 5.8% $616,896 $246,3305 5.8% $370,566 $246,3306 2.9% $124,236 $124,236

ToapplyforthebonusMACRS,IRSForm4562mustbecompletedandsubmittedtotheIRSatthetimeofclaim.Form4562canbeaccessedonlineat:https://www.irs.gov/pub/irs-pdf/f4562.pdf

Moreinformationonthisincentiveprogramcanbefoundat:https://www.irs.gov/pub/irs-pdf/p946.pdf

Property Tax Exemption TheNJBoardofPublicUtilitiesoffersapropertytaxexemptionfor100%ofthevalueaddedbyarenewablesystem.Asthevalueofthepropertyappreciateswiththeinstallationofthesystem,additionalpropertytaxwouldtraditionallybeapplied.Thisincentivehoweverwaivesthatadditionaltaxbysubtractingtheassessedvalueofthesystemfromtheassessedvalueofthepropertypriortodeterminingpropertytaxesowed.


Theapplicationforcertificationofrenewableenergysystemtoapplythisincentivecanbeaccessedat:http://www.state.nj.us/treasury/taxation/pdf/other_forms/lpt/cres.pdf

Sincethisincentivehasnonetbenefitascomparedwiththefinancialstatepriortotheinstallationofthesystem,nobenefitsrelatedtothisincentiveprogramhavebeenincludedinthefinancialassessmentsofthisproposal.

Edison Green Energy Financing *Duetodiscontinuationofthisprogram,theincentivehasbeenexcludedfromthisproposal.

TheEdisonGreenEnergyFinancingprogramoffersloansfrom$250,000to$2millionwithafixedfive-yeartermand2%interestrate.Borrowersmustbeabletosupplyequalloanvalueofcashfromnon-stategrants,deeplysubordinateddebtorequity.

INTERCONNECTION Tobefinanciallyviableandoffsetthefluctuationsofsolarenergyproductionandconsumption,thissolarprojectwillberegisteredasabehind-the-meternetmeteredprojectwithPSE&G.Thisrequiresacomplicatedapplicationandapprovalprocessinadditiontopotentialhardwareupgradestoconnectandhandleexcesspowergoingtothegrid.ThestepsinthiswithPSE&Ginclude:

1. Application:Complete,signandsubmitthePSE&Gapplicationform,submissionsaremadebyemailtoCINETMETER@PSEG.comormailedtothisaddress:PSE&G–NetMeterDepartment,750WalnutAve,Cranford,NJ07016.Theapplicationformcanbeaccessedat:https://www.pseg.com/home/save/solar/pdf/InterconnecctionApplication-Level2-3.pdf

2. PreliminarySolarProjectApproval:SincethisisaLevel3project,additionaldocumentationmayberequiredandthereviewperiodwillbedependentuponthedegreeofstudyrequired.Thisisundeterminedatthisstagebecauseasignificantassessmentofthegrid’scapacity,proximityofexistingenergysources,andthesitesexistinggridconnectinginfrastructure.Followingthisreviewprocess,PSE&Gwillemailaprojectapprovalordenial.

3. Inspection&Bi-DirectionalMeterInstallation:Followingthesuccessfulcompletionofthesolarsystem’sconstruction,PSE&GmustreceiveaUniformConstructionCode(UCC)viaemail.20businessdaysfollowingthereceiptoftheUCC,PSE&Gwillperformasysteminspectionandifitpasses,abi-directional(net)meterwillreplacetheoldmeter.

4. PermissiontoOperate(PTO):Whenthesystempassesthisinspection,PSE&Gwillprovideanoticeknownas“PermissiontoOperate”,whichauthorizestheactivationofthesystem.

5. Turn-On:OncePTOisreceived,thesystemwillbeswitchedonanditwillstartproducingenergy.


FINANCIAL PROPOSALS Thisproposalpresentsthefinancialbenefitstothreeseparateparties,allofwhichstandtogainfinanciallyinexchangeforacommitment.Theoff-takersarerequiredtosign20-yearPowerPurchaseAgreements(PPAs)andcommittopurchasingtheenergyproductionofthesystemthroughoutitsusefullife,inexchangetheywillreceiveafinancialgainintheformofsubstantialenergysavings.Thebuildingownerwillreceiveafinancialbenefitofannualleaserevenueinexchangeforallowingthesystemtobeinstalledontheroofandothercommitmentsthatgoalongwitharooftopsystem.Theinvestorshallreceiveafinancialreturnontheirinvestment.Thecostandbenefitstoallthethreepartieshasbeenillustratedinthechart:Figure1(CumulativeBenefitsbyParty).

Figure1(CumulativeBenefitsbyParty)

-$6,000,000

-$5,000,000

-$4,000,000

-$3,000,000

-$2,000,000

-$1,000,000

$0

$1,000,000

$2,000,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Year

CummularveBenefitsbyParty

InvestorFreeCashFlow Off-TakerEnergySavings RoofLeaseRevenue


Party 1 – L incoln Equity Group ThisproposalincludesaroofleasepaymenttocompensatethebuildingownerinexchangeforgrantingroofrightsexclusivelyfortheinstallationandoperationofthesolarPVsystem.Astheownerofthebuilding,LincolnEquityGroup,LLC(LEG),willreceiveanannualroofleasepaymentfromtheinvestor.Inreturnfortheroofleasepayments,theLEGwillprovidefullaccesstothebuilding’sroof,electricalroom,andothernecessaryareasduringtheformaldesign,engineering,andconstructionphases.Onceconstructionhasbeencompleted,LEGwillalsoallowaccesstotheroofonanannualbasisformaintenanceworkofthepanels.Excludingfromthisproposalisanyworkrelatedtotheroofandstructuralpropertiesofthebuilding,thesewillremaintheresponsibilitiesofLEG.IntheeventofanyPPAoff-takerceasingtheirtenancyatthebuilding,LEGwillhavereplacementtenantsenterintothePPA,offsettingtheleavingtenant.

Thisroofleasewilltotal$50,000inthefirstyearofsolarenergyproductionandwillescalateby2.0%eachyear.Thetotalfuturevalueofthisroofleaseoverthe20-yearcontracttermis$1,214,868,withaNetPresentValueof$460,596.DetailsofthebuildingOwnerBenefitshavebeenincludedinFigure2(BuildingOwnerBenefits).

Figure2(BuildingOwnerBenefits)

FirstAnnualPayment $50,000AnnualEscalation 2.0%LeaseTerm(years) 20

TotalPayments $1,214,868WACC 10.77%

NetPresentValue $460,596

$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000

1 2 3 4 5 6 7 8 9 1011121314151617181920

Year

RoofLeaseRevenue


Party 2 – Bui lding Tenants Thisproposaloffersthethreeretailtenantsof275HartzWaywithaPowerPurchaseAgreement(PPA)thatentailsaperkWhchargefarlowerthanthecurrentconsumptionratetheyarebelievedtobepayingtheutility,PSE&G.Thetenantsareoffereda20years’agreementtopurchasetheenergyproducedbythesystemwhichwilloffsettheirpowerconsumptionfromthegridandbilledtothembyPSE&G.ThecurrentPSE&Gratetheyareassumedtobechargedis$0.103/kWh,theproposedPPArateis$0.080/kWhwithanannualescalationof2.0%,whichistheforecastedrateescalationfromPSE&Goverthetermofthecontract.Intheeventoftheterminationoftheleaseat275HartzWayandthetenantvacatingthepremise,thetenantshallcontinuetopaythePPArateuntilanewtenanthasoccupiedtheproperty.

ThetenantswillcontinuetopaytheirutilitybillstoPSE&G,whichwillbesignificantlyreducedduetotheconsumptionofthesolarpower.Thisprojectwillbenet-metered,thusanyenergyproductiongreaterthanconsumptionwillbedistributedtootherPSE&Gcustomersviathegridandthetenantwillhavenegativeconsumptionontheirbill,thiswillresultinacredittobeappliedinfuturemonthswhensolarproductionisbelowconsumption.

ThenetsavingsfromthisPPAoverthetermofthecontractareexpectedtototal$1,503,765forthethreetenants.TheNetPresentValueofthisPPAforallthreetenantsoverthe20-yearcontracttermisforecastedtobe$621,473.DetailsofthebenefitstotheOff-takershavebeenincludedinFigure3(Off-TakerBenefits).

Figure3(Off-TakerBenefits)

CurrentUtilityRate($/kWh $0.103ProposedPPARate($/kWh) $0.080

PPATerm(years) 20TotalSavings $1,503,765

WACC 9.79%NetPresentValue $621,473

$0

$20,000

$40,000

$60,000

$80,000

$100,000

1 2 3 4 5 6 7 8 91011121314151617181920

Year

PPAEnergySavings


Party 3 – Investor Thisproposalpresentsanexcellentopportunityforaninvestorthatisinterestedingenerousreturnswithrelativelowriskandonewhohasataxequityappetite.Inexchangefortheinvestor’s$5.04millioninvestment,theywillreceiveaninvestmentthatgeneratesaNetPresentValueof$70,290withanInternalRateofReturnof6.44%andapaybackperiodoflessthaneightyears.Withasolarenergyproject,thereisrelativelowriskasthetenantswillbesecuredwiththe20-yearPPAagreementandtheirneedforenergywillnotsubside.Thesetenantshavebeenpre-qualifiedthroughtheLEGpropertyleaseandintheunforeseeneventofdefault,replacementtenantscanovertakethePPAagreement.Oncecapitalhasbeeninjected,theprojectwillbecashflowpositiveonanannualbasisthroughthe20-yearlifespan,withanexceptiontoYear10whentheinvertersareexpectedtorequirereplacement.ThatcashoutlaywillbemostlyoffsetbyYear10positivecashflows.DetailsoftheInvestorcapitalrequirementsandbenefitsareincludedinTable14(InvestorBenefits)andFigure4(InvestorBenefits).

Table14(InvestorBenefits)CapitalCost $5,040,000

ProjectDuration(years) 20WACC 6.05%

NetPresentValue $70,290InternalRateofReturn 6.44%

Payback(years) 7.7

Figure4(InvestorBenefits)

-$6,000,000

-$5,000,000

-$4,000,000

-$3,000,000

-$2,000,000

-$1,000,000

$0

$1,000,000

$2,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Year

Revenue,ExpensesandFreeCashFlow

FreeCashFlow Revenue Expenses


Development Fee Tocompensatefortheworkincludedinthisproposalaswellasthefuturedesign,engineering,construction,procurement,operations,maintenance,andmanagementworkanupfrontservicefeehasbeenincludedtocompensateourteamwhowillmanagealloftheseresponsibilities.Thedevelopmentfeeischargedbythetotalsystemsizeas$0.15/wattandtotals$336,000.Paymentofthisfeeisdueaspartoftheentirecapitalinvestmentuponagreementofallparties.DetailsofthisfeeareincludedinTable15(DeveloperFee).

Table15(DeveloperFee)TotalProjectCost($/W) 2.25SystemBuildCost($/W) 2.10SystemSize(Watts) 2,240,000TotalFee $336,000

LEVELIZED COST OF ENERGY (LCOE) Theaveragecostofenergygeneratedbythesystemis$0.116/kWh.Thisexceedsthecalculatedgenerationservicerateof$0.103/kWhwhichtheoff-takerscurrentlypayPSE&G.However,theinvestorsareabletoselltheenergyatalong-termcompetitivePPArateof$0.08/kWhbecauseofthecashincentivesandtaxcredits.TheSRECcashincentivesbringthelevelizedcostofenergy(LCOE)downto$0.065/kWh.Theinvestmenttaxcredit,ifappliedinyearone,bringstheLCOEdownfurtherto$0.038/kWh.DetailsoftheseLCOEcalculationsareprovidedinTable16(LCOECalculations).

Table16(LCOECalculations) Without

IncentiveWithCashIncentive

Cashincentive&Taxcredit

NPVofCost 6,045,696 6,045,696 6,045,696NPVofBenefit 2,740,023 4,165,766TotalCost 6,045,696 3,305,673 1,879,931TotalEnergyProduced(kWh) 53,460,866 53,460,866 53,460,866LevelizedCostofEnergy($/kWh) 0.113 0.062 0.035


SOCIAL BENEFITS Thesystemwillprovidesocialbenefitsintheformofavoidedcarbondioxideemissionswhichdirectlycontributetoglobalwarmingandindirectlytoglobalwarming’smanysocialandenvironmentalcosts.Thesystemwillavoid42.4millionpoundsofcarbondioxideoveritslifetime,equaltotaking203carsofftheroadforthetwenty-yearlifetimeofthesystem.Thesesocialbenefitshavebeendetailedinthefollowingtables17throughto20.

Table17(PSE&GEnergyMix)PSEGFuelSources PSEGFuel

Mix8EmissionsIntensity9(Lbs.ofCO2perkWh)

Coal 25.52% 2.13Gas 20.01% 1.22Hydro 0.05% 0Nuclear 40.37% 0Oil 0.26% 1.7Renewable 13.79% 0Table18(AvoidedEmissions)AveragePSEGemissionsintensity 0.79lbs.ofCO2perkWhForecastedlifetimesystemgeneration 53,460,866kWhCO2emissionsavoidedoversystemlifetime 42,392,792lbs.ofCO2Table19(AvoidedCO2Equivalencies10)Homes’energyuseforoneyear 2,031Passengervehiclesdrivenforoneyear 4,062Passengervehiclesfor20-yearsystemlifetime 203Table20(EquivalentCO2Sequestered11)Treeseedlingsgrownfor10years 498,343AcresofU.S.forestsinoneyear 18,202

8(PSEG)9(U.S.EnergyInformationAdministration)10(USEnvironmentalProtectionAgency)11(USEnvironmentalProtectionAgency)


WORKS CITED CloudandColocation.Equinix–NewYork(Secaucus)DataCenterNY2.n.d.12August2016.

<http://cloudandcolocation.com/datacenters/equinix-new-york-secaucus-data-center-ny2/>.

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LincolnEquitiesGroup,LLC.275HartzWay.n.d.12August2016.<http://lincolnequities.com/project/275-hartz-way/>.

NYUStern.BetasbySector(US).n.d.8August2016.<http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html>.

PSEG.WhereYourEnergyComesFrom.August2016.<https://www.pseg.com/info/environment/envirolabel.jsp>.

U.S.DepartmentofTheTreasury.ResourceCenter.n.d.8August2016.<https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield>.

U.S.EnergyInformationAdministration.FrequentlyAskedQuestions.n.d.11August2016.<https://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11>.

USEnvironmentalProtectionAgency.GreenhouseGasEquivalenciesCalculator.n.d.11August2016.<https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator>.


APPENDIX A (PROJECT DESIGN IMAGES)

Before and after design, zoomed-out view

Before

After


Zoomed view of northern section (9 f ield segments)


Zoomed view of southern section (8 f ield segments)


APPENDIX B (SYSTEM ASSUMPTIONS) PVWatts Input

PVWatts Output


APPENDIX C (FINANCIAL MODELS)


APPENDIX D (PSE&G RATE SCHEDULE)


APPENDIX E (PRODUCT SPECIFICATIONS)

2.24 MW Solar Project Proposal

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