Real Estate Impacts of Alternative Energy Technology

WEBINAR SERIESZeroNet Energy Solutions

March 16th, 2011

znesolutions.com

#001

The Impact of Alternative Energy Technology and Legislation

on Real Estate

brought to you buy:

ANALYZE

SOLVE

IMPLEMENT

OPTIMIZE

2010

2015

2020

2025

2030

LEGISLATION AB32 is the Global Warming Solutions Act of 2006, which sets the 2020

greenhouse gas (GHG) emission reductions goals (to 1990 levels) into law.

Prop 23 would have

suspended AB32, but was soundly defeated

in November 2010.

Jan 2011 – ARB completes rules regarding market mechanisms, including

‘cap-and-trade’.

Jan 2012 – GHG rules and market mechanisms adopted by ARB (incl. cap-and-trade) take effect and are legally enforceable

2012-2015 – Yr. 2012 limits reduced 2% per year, applied to Utilities & large

industrial plants.

2015-2020 – Yr. 2012 limits reduced 3% per year, applied to a wider array of

businesses/fuel distributors.

LEGISLATION

Cap-and-Trade: The portion of AB32 imposed by the ARB for purposes of achieving the AB32 GHG reduction goal. It initially impacts Utilities and

large industrial plants, then is applied to a wider business audience including fuel distributors, beginning Yr. 2015.

2015

2020

2025

2030

LEGISLATION

AB32 is the Global Warming Solutions Act of 2006, which sets the 2020 greenhouse gas (GHG) emission reductions goals

(to 1990 levels) into law.

“CARROTS”

• Up to $0.30/sf tax deduction for interior lighting improvements.

• Up to $0.60/sf tax deduction for high efficiency HVAC system

• UP to $1.80/sf combined tax deduction for 50% energy reduction for whole building

• Reduce companies’ and business owners’ energy bills by $40b per year and spur a clean energy renovation boom by implementing a tax credit up to $4.50/sf for energy improvements

• Most of this focus is in California

CURRENT FEDERAL TAX INCENTIVE FOR UPGRADING COMMERCIAL PROPERTIES TO

ENERGY-EFFICIENT SOLUTIONS

PENDING LEGISLATION (OBAMA’S ‘BETTER BUILDING INITIATIVE’)

ZNE smart-factHVAC alone accounts for 31% of the electricity usage in the United States.

• 30% Federal Tax Credit or Grant for Renewable Energy Production implementation (solar, wind, fuel cell).

• MACRS Accelerated Depreciation Benefit – up to $500,000 in 1st year.

• Various State and local rebates and incentives.

• Various Utility Company rebates.

• Enhanced Real Estate Values.

“CARROTS”

ENHANCED REAL ESTATE VALUER

eal E

stat

e V

alue

Real Estate Value

Ene

rgy

Red

uctio

n

INCREASE IN REAL ESTATE VALUE WITH REDUCTION IN ANNUAL ENERGY COSTS

$5,1

83

$15,

548

$31,

095

$51,

825

$77,

738

$108

,833

$145

,110

$186

,570

$233

,213

$285

,038

$342

,045

$404

,235

$471

,608

$544

,163

$621

,900

$704

,820

$792

,923

$886

,208

$984

,675

$1,0

88,3

25

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000 ($60,000)

($50,000)

($40,000)

($30,000)

($20,000)

($10,000)

$0

Source: Nevin/Watson: evidence of Rational Market Valuations for Energy Efficiency

SAMPLE ANALYSIS

John ManionSenior Vice President(949) 468-2306

SAMPLE ANALYSISCASH FLOW ANALYSIS

SAMPLE BUILDING - 25,494SF COMMERCIAL BUILDING IN IRVINE (ALL ENERGY COMPONENTS)

YEAR

PRE-ZNE ENERGY COSTS(1)

EST. ENERGY COSTS

WITH ZNE SYSTEM(2)

ENERGY GENERA-

TIONSCE

REBATE

$4.50/SF TAX CREDIT AND

30% FEDERAL

TAX CREDIT

FEDERAL DEPREC-

IATION BENEFIT (MACRS)

STATE DEPREC-

IATION BENEFIT (MACRS)

TOTAL ANNUAL SAVINGS

CUM-ULATIVE SAVINGS

INCREASE IN REAL ESTATE

VALUE(4)

TOTAL ANNUAL

GAIN/ (LOSS)

CUM-ULATIVE SAVINGS

0 Gross Project Cost for ZNE System: ($1,235,490) ($1,235,490) ($1,235,490) ($1,235,490)

1 ($89,149) ($34,634) $63,746 $13,317 $414,675 $320,868 $82,509 $895,114 ($340,376) $637,456 $1,532,570 $297,0802 ($93,607) ($36,366) $66,934 $13,317 $36,768 $9,455 $126,473 ($213,902) $31,884 $158,357 $455,4383 ($98,287) ($38,185) $70,280 $13,317 $36,768 $9,455 $129,819 ($84,083) $33,460 $163,279 $618,7174 ($103,202) ($40,095) $73,794 $13,317 $36,768 $9,455 $133,333 $49,250 $35,140 $168,473 $787,1905 ($108,362) ($42,099) $77,484 $13,317 $36,768 $9,455 $137,023 $186,273 $36,900 $173,923 $961,1136 ($113,780) ($44,204) $81,358 $81,358 $267,631 $38,740 $120,098 $1,081,2117 ($119,468) ($46,413) $85,426 $85,426 $353,057 $40,680 $126,106 $1,207,3178 ($125,442) ($48,734) $89,697 $89,697 $442,754 $42,710 $132,407 $1,339,7249 ($131,714) ($51,170) $94,182 $94,182 $536,936 $44,850 $139,032 $1,478,756

10 ($138,300) ($53,729) $98,891 $98,891 $635,827 $47,090 $145,981 $1,624,73711 ($145,216) ($56,416) $103,836 $103,836 $739,663 $49,450 $153,286 $1,778,02312 ($152,478) ($59,237) $109,029 $109,029 $848,692 $51,930 $160,959 $1,938,98213 ($160,101) ($62,199) $114,480 $114,480 $963,172 $54,510 $168,990 $2,107,97214 ($168,106) ($65,309) $120,204 $120,204 $1,083,376 $57,240 $177,444 $2,285,41615 ($176,511) ($68,573) $126,216 $126,216 $1,209,592 $60,120 $186,336 $2,471,75216 ($185,336) ($72,001) $132,527 $132,527 $1,342,119 $63,110 $195,637 $2,667,38917 ($194,602) ($75,601) $139,153 $139,153 $1,481,272 $66,260 $205,413 $2,872,80218 ($204,333) ($79,381) $146,111 $146,111 $1,627,383 $69,580 $215,691 $3,088,49319 ($214,550) ($83,350) $153,417 $153,417 $1,780,800 $73,060 $226,477 $3,314,97020 ($225,277) ($87,517) $161,088 $161,088 $1,941,888 $76,710 $237,798 $3,552,768

Internal Rate of Return after 20 Years (excl. increase in RE value) = 19%Internal Rate of Return after 20 Years (incl. increase in RE value) = 50%

Cumulative Savings From ZNE Energy System

($2,000,000)

($1,000,000)

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

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

YEARCum. Savings w/o RE Value Increase Cum. Savings w/ RE Value Increase

SAMPLE ANALYSISSAMPLE COMMERCIAL PURCHASE

25,494sf COMMERCIAL BUILDING - IRVINE

Buiding Sq.Ft. 25,494sf Purchase Price $4,206,510Purchase Price/SF $165

RENEWABLE ENERGY INVESTMENTSolar roof top $716,250Solar light poles $64,800Solar carport $255,840HVAC $254,940Cool roof $67,188Lighting conversion $15,000

Total Cost of Energy Upgrades $1,374,018Total Purchase Price w/ Energy Invest. $5,580,693

IMMEDIATE RENEWABLE ENERGY CREDITS/GRANTSHVAC $38,241Lighting Conversion $38,241Cool Roof $58,397Solar Roofing $225,679Street Lights $19,440Solar Carport $68,150

Total Immediate Credits/Grants $448,148

Down payment without Energy Investment ($420,651)

Down payment with Energy Investment ($558,069)Immediate Cash Back w/ Energy Investment $448,148

Effective Down Payment w/ Energy Invest. ($109,921)

• Plus immediate $637,456 increase in Real Estate Value.

• Plus $320k+ in 1st year accelerated depreciation.

• Plus $63k+ savings in 1st year energy cost.

SOME OF THE CONSEQUENCESPROS

• Dramatic increases in renewable energy investment, with a positive economic impact that favors California.

• Dramatic increases in CRE improvements and transactions, and resultant high multiplier effect.

• Energy savings reduces cost-of-business, offsetting the forced costs of implementation.

• Increased loan size limits to promote energy upgrades and retrofits.

• U.S. begins to reduce foreign oil dependency and adopt energy efficiency measures that are prevalent in many other industrialized countries.

CONS• Higher tax burdens with more government

involvement and debt.

• Some ‘clean energy’ technologies cause long-term side effects (car batteries, etc.).

• Lenders are slow to react.

• Powerful industries/lobbyists delay implementation.

• Flawed implementation rules associated with ‘cap-and-trade’ and other programs.

• Initial higher costs of business may drive jobs from California.

ZeroNet Energy Solutions (ZNE) offers ENERGY Analysis, Reduction, Production and Monitoring solutions

for the following business segments:

IndustrialCommercial

Residential (master plans)Government / Military / Public

TransportationHospitality

Continuing CareEnergy Farms

Non-profits

1. Measure your energy demand

2. Propose cost effective solutions inclusive of all tax credits, grants, deductions and rebates

3. Implement the solution and optimize your system

ZNE : OUR PROCESS

Inefficient!

Traditional HVAC Systems

Set Temp

60Hz

Compressor

0Hz

90º F

73º FToo cool!

Too warm!

Too cool!

Too warm!

ON

OFF OFF

ON

OFF

ON

Long duration!

High starting current creates energy loss

Uncomfortable!

75º F77º F

Conventional ON/OFF control

Schematic Design Phase

INVERTER Compressor Advantages

Set Temp75º F

60Hz

Compressor

0Hz

150Hz

30Hz

Starting current at low level

Room temperature is steady

High rotation speed up to 100-120Hz generates accelerated performance!

Keeps rotation speed at low levels after temperature is stabilized.

Adjust rotation speed precisely to keep steady room temperature

90º F

ON

Very Efficient!

Comfortable!Very Fast!

Smooth INVERTER control

Schematic Design Phase

ENERGY REDUCTIONHVAC (cont.)

* Based on EnergyPro Building Energy Analysis | Office Building

ENERGY REDUCTIONHVAC

* Based on EnergyPro Building Energy Analysis | Office Building

Variable Refrigerant Flow (VRF)

ENERGY REDUCTIONHVAC (cont.)

* Based on EnergyPro Building Energy Analysis | Office Building

VRF Systems Worldwide

LED & CFL LIGHTINGConverting to LED & CFL based lighting offers an 80-600% energy savings in the category.

Why?1. Long Lasting2. Durable3. Cool4. Low maintenance5. Highly efficient6. Cost-effective7. Practical for use with Solar

ENERGY REDUCTIONLIGHTING

ZNE smart-factMany cities in the US are replacing their incandescent traffic lights with LED arrays because the electricity and maintenance costs can be reduced by 80% or more.

ENERGY PRODUCTIONSOLAR

Rooftop/Ground Mount StreetlightsCarport

ENERGY PRODUCTIONSOLAR (cont.)

Solar Panel

Luminaire

Control BoardCharge ControllerBatteries

Motion Sensors

ENERGY MONITORING

Mark Boud – [email protected] Goodsell – [email protected]

Michael Story – [email protected]

For a copy of today’s webinar, or a complimentary energy analysis:

Contact

Michael Story | [email protected]

znesolutions.com

ZNE ENERGY SERVICESAnalysis | Reduction | Production | Monitoring