Solar Financing Solutions for The City of Napa Gopal Shanker December 12, 2008.

Solar Financing Solutions

for

The City of Napa

Gopal ShankerDecember 12, 2008

Outline of Presentation

• Global Energy Issues and Implications

• The City of Napa's Energy Situation

• The City of Napa's Energy Solution

• Next Steps

Global Energy Issues

AB 32Kyoto Protocol

Carbon Tax/Trading

Demand

Supply

Climate Change

BRIC Nations

Peak OilPeak Natural Gas

Petropolitics“Foreign Oil”

Black / Brown outs

Security

SmogMonoculture

Soil DepletionFertilizer Runoff

Health Effects

AsthmaCancer

Agricultural / EcologicalConsequences

On its own, each issue increases the costs of fossil fuels or of using fossil fuels

Who we are determines what we focus on

Demand

Supply

Climate Change Security

“OldEnvironmentalist”

Health Effects

“MedicalProfessional”

Agricultural / EcologicalConsequences

“Patriot”“New

Environmentalist” “Businessman”

“Oil-man”

Solutions for these Energy Issues

Nuclear, Renewable Energy,

“Clean” Coal…

Demand

Supply

Climate Change

Energy from all sources, wars…

All renewable energy, coal…

Security

All renewableenergy except

large scale hydro…

Health Effects

Energy from all sources,

wars…

All renewable energy except

biomass…

Agricultural / EcologicalConsequences

These Issues are Converging!

Demand

Supply

Climate Change Security

Health Effects Agricultural / EcologicalConsequences

Only renewable energy fits in the

intersection of these circles

We can no longer develop/afford

solutions that solve one problem but

exacerbate others

As the convergence accelerates

Demand

Supply

Climate ChangeSecurity

Health Effects

Agricultural / EcologicalConsequences

The problems merge into a single issue

ENERGY TRANSITION

Renewable energyreplaces fossil fuels

We have made energy transitions before

• Whale blubber kerosene

• Kerosene electricity

• Warships: wind wood coal oil

• Electricity from coal electricity from natural gas

• And now…fossil fuels to alternatives

Why not make the transition now?

• Our biases prevent us from recognizing this as a problem of energy transition

• Until we eliminate these biases, we will engage in ineffectual arguments and develop ineffective solutions– Is Climate Change anthropogenic or not?– Food or fuel?– Drill, baby, drill!

Implications

• The transition is not just for a dedicated few, but for all

• If we don’t make the transition, we will be at serious local and global, economic, environmental, and social risk

• We need to accelerate the transition, because the convergence is accelerating

We are on the right track in Napa County but need to accelerate

• Goal: Energy Independence by 2012

• Napa Valley wineries have adopted solar (PV) at an extraordinary rate

• They have done so because the COMBINATION of federal, state, and utility incentives made solar affordable

• Non-tax paying entities can also benefit from these incentives now

Client’s Perspective on Solar

High Risk / High Return

Low Risk / Low Return

Can use tax credits and/or depreciation

Can use tax credits and/or depreciation

Cannot use tax credits and/or

depreciation

Cannot use tax credits and/or

depreciation

• Until now, the PPA was the only viable solar financing option for non-tax paying clients. But it provides little more than a hedge against inflation, because the benefits of going solar have to be shared with the PPA provider.

Recent developments benefiting local governments and schools

• 30% Investment Tax Credit for solar photovoltaics has been extended for 8 years

• California AB 2466– Local governments and schools can receive a bill

credit (based on the TOU electricity generation component only) for electricity produced off-site

• National Development Council has pioneered, using The Gasser Foundation as a pilot, a solar financing solution for non-tax paying entities

Outline of Presentation

• Global Energy Issues and Implications• The City of Napa's Energy Situation• The City of Napa's Energy Solution• Next Steps

Electricity Benchmark forThe City of Napa

• Annual Usage (kWh): 2,645,926• Annual Bill: $393,958• Average Rate (per kWh): $0.15

Electricity Projections

Period Cost of Electricity

• Last 12 Months (~) $393,958• In 25th year $1,595,110• Over 25 years $21,614,313

Assumptions

6% annual escalation rate

Annual Energy Bill

Cumulative Energy Bill

Outline of Presentation

• Global Energy Issues and Implications• The City of Napa's Energy Situation• The City of Napa's Energy Solution• Next Steps

PV System Metrics

Current Energy BillElectricity $393,958

PV SystemPV System Size (kW DC) 1,484 Unit Cost of PV System (per DC kW) $8,000

Cost of PV System $11,875,520

Unsubsidized, simple payback (in years) 30

NDC Proposals

$0.15/kWh $0.22/kWhPayment at Closing $12,280,520 $12,280,520

Investor Equity Contribution $4,767,142 $5,345,314Local Bank Contribution $6,000,000 $6,000,000City of Napa Contribution $1,513,378 $935,206

+ 5 annual payments to NDC each of $524,000 $524,000+15 annual payments to local bank each of $524,000 $524,000

Rebate Level

Cumulative Energy Bill

Cumulative Energy Bill(NDC Proposal @ 22 cents/kWh)

Cumulative Energy Savings (NDC Proposal @ 22 cents/kWh)

Cumulative Energy Savings (NDC Proposal @ 15 cents/kWh)

Cumulative Energy Savings(Both NDC Proposals)

National Development Council Proposal

$0.22/kWh $0.15/kWh DifferencePayment at Closing $12,280,520 $12,280,520 $0

Investor Equity Contribution $5,345,314 $4,767,142 $578,172Local Bank Contribution $6,000,000 $6,000,000 $0City of Napa Contribution $935,206 $1,513,378 -$578,172

+ 5 annual payments to NDC each of $524,000 $524,000 $0+15 annual payments to local bank each of $524,000 $524,000 $0

0Cumulative Payments -$11,415,206 -$11,993,378 $578,172Cumulative Savings $10,199,107 $9,620,935 $578,172

Rebate Level

Outline of Presentation

• Global Energy Issues and Implications• The City of Napa's Energy Situation• The City of Napa's Energy Solution• Next Steps

Next Steps

• Sign Letter of Intent with NDC / Récolte to develop turnkey solar installation and financing solutions

• File solar rebate applications (Récolte)• Study sites/bills to determine whether on-site

or off-site generation makes more sense– Compensation at full retail versus TOU generation

• Get pre-qualified for financing

California Solar Initiative Trigger Tracker (http://sgip-ca.com)