finance | Energy Policy Innovation Council

Crowdfunding and Renewable Energy: Could it Revolutionize Large-Scale Renewable Project Financing?

Posted on March 11, 2014 by brbarker

The essentials

Crowdfunding presents a new model for public investment in large-scale renewable projects.
Crowdfunding would allow businesses access to an estimated $2 trillion in capital from the general public. It has been successfully applied to financing utility- and commercial-scale solar projects by Mosaic, a California-based start-up company.
Rewards-based crowdfunding (as opposed to “donation-based” crowdfunding) is the funding of a company or project by selling small amounts of equity to many investors with an expectation of return on investment.
At this time, only residents of New York and California can participate in crowdfunding investments. However, the 2012 JOBS Act obligates the SEC to issue regulations allowing start-up companies to raise up to $1 million in capital via crowdfunding from the general public across the country.
The new crowdfunding regulations will likely be issued in the third quarter of 2014.
When crowdfunding regulations are issued, it will allow the general public to invest small amounts in renewable energy with a reasonable expectation of return on investment.

The essentials

(download full brief here)

Property Assessed Clean Energy (PACE) offers a path for building owners to fund energy efficiency upgrades and renewable energy projects.
Under the PACE framework, a local government provides the up-front capital for a building owner to install an energy efficiency project and/or a renewable energy system on their building. The building owner repays the capital over the course of 20 years through a property assessment tax.
PACE is being successfully used in 12 states and Washington, D.C. for commercial properties. Many states also allow PACE financing for residential properties, but most residential financing programs have been shelved for now while the Federal Housing Finance Agency (FHFA) issues rules related to lien seniority for mortgaged homes.
Developing a PACE program in Arizona would require passage of PACE-enabling legislation. PACE-enabling bills have been introduced in past legislative session, but have not been signed into law.
During the current 2014 session, State Reps. Orr (R) and Sherwood (D) are sponsoring PACE-enabling bill HB 2206.

Posted on August 24, 2013 by brbarker

The essentials

A Master Limited Partnership (MLP) is a business structure that is taxed as a partnership but has the ability to issue stock ownership interests much like a corporation.
Federal legislation has boosted market capitalization investments in MLPs from $2 billion in 1994 to ~$480 billion in 2013.
The MLP Parity Act (introduced to the House and Senate on April 24, 2013) proposes to expand MLP eligibility to the renewable energy.

Posted on June 24, 2013 by brbarker

The essentials

In January of 2013, U.S. Congress approved a one year extension of the Production Tax Credit (PTC) for Wind Power in the American Taxpayer Relief Act, as a part of the “fiscal cliff” budget negotiations. The Wind Power PTC currently expires on January 1, 2014.
The PTC provides temporary support for the development of wind power by providing a 2.2cents/kWh subsidy for wind power produced over the wind farm’s first 10 years of operation, starting when construction begins.
Wind facility construction must begin before January 1, 2014 in order to qualify. Residential wind power production is exempt from the tax credit.
Of all new generating capacity installed from 2007-2011, 35% was wind power. In 2012, the percentage grew to 44%. (AWEA).

Posted on May 24, 2013 by brbarker

The essentials

Solar Phoenix 1 & 2 are a series of city-sponsored residential solar financing programs.
The Solar Phoenix program is a federally-recognized public-private partnership that allows Phoenix home owners to finance solar panels through leasing at low or no upfront costs.
The National Bank of Arizona funded both Solar Phoenix 1 & 2 with $25 million to initiate the program. The City of Phoenix partnered with Solar City for the first iteration and currently partners with Paramount Solar to provide panels, installation services, and maintenance.
The leased solar panels are expected to generate sixty to eighty percent of a residence’s power demand.

Posted on June 24, 2012 by brbarker

The essentials

A Power Purchase Agreement is a contract between multiple parties, one who generates electricity for the purpose of sale (the seller) and one who is looking to purchase electricity (the buyer).
The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination.
A PPA is the principal agreement that defines the revenue and credit quality of a generating project and is thus a key instrument of project finance.
There are many forms of PPA in use today. PPA’s vary according to the needs of buyer, seller, and financing counterparties.
PPA’s have grown popular because the installation, operation, and maintenance costs associated with rooftop solar systems can be overly expensive for individual property owners.

Posted on March 28, 2012 by brbarker

The essentials

A Qualified Energy Conservation Bond is a qualified tax credit bond allocated by the Treasury Department to all 50 states, Washington, D.C. and tribal governments.
Federal funds are available for local energy efficiency programs, renewable energy production, technology research and commercialization projects throughout Arizona.
About $67 million has been allocated to Arizona.
The funds are not being used due (at least in part) to lack of intergovernmental communication and guidance.

Posted on March 24, 2012 by brbarker

The essentials

Governor Jan Brewer signed AZ State Rep. Amanda Reeve’s (R-6) bill HB2830 into law in April 2012.
Before bill HB 2830 was passed, the only state public institutions authorized to enter into performance contracts for energy efficiency projects were K-12 schools (see A.R.S. §15-910.02).
The HB 2830 additions expand performance contracting authority to public universities, towns, cities, and counties throughout AZ, and extend these institutions’ performance contracting authority to include renewable energy generation projects.
This policy provides risk management and financing solutions to government entities as they retrofit existing buildings for greater energy and water cost savings.