Jason Gifford's presentation at REV 2012: http://www.revermont.org/main/events/conferences/

1. Drivers of Change for
Distributed Resources in
Vermont: Trends in
Policy, Cost & Financing
Jason Gifford, Senior Consultant
Sustainable Energy Advantage, LLC
October 1, 2012

2. Sustainable Energy Advantage, LLC
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through Analysis, Strategy & Implementation
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• Interdisciplinary consulting & • Power market and public policy analysis,
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Solar-specific version also available
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3. Framing a Discussion of
Key Trends for Distributed Generation
• Purpose of this presentation: To stimulate a discussion of how
trends in policy and cost are influencing the characteristics and
volume of distributed generation in New England
• Overarching questions:
1. How is the policy and market landscape for DG changing?
2. Will tomorrow’s DG projects look the same as yesterday’s? (Size, location,
financing and ownership, power use/sale).
3. Is the current wave of DG proposals throughout the region anomalous, or can
we expect the same level of interest in the future?
• ID Drivers for Increasing () or Slowing () development
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4. Policy Drivers -- Federal
• Production Tax Credit (PTC):
– ~$22/MWh, 10 yrs, available to wind projects on-line
before 12/31/2012 (extension uncertain)
– 50% of face value available to biomass, landfill gas,
anaerobic digestion & small hydro
• Investment Tax Credit (ITC):
– 30%, for solar and small (≤ 100 kW) wind in service by
12/31/2016 (or to large wind in lieu of PTC until 12/31/12)
• Section 1603 cash payment in lieu of ITC:
– For projects w/ safe harbor in place by 12/31/2011
• MACRS depreciation:
– 50% bonus in 2012, standard thereafter
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5. Policy Drivers – State (1)
Policies “Tilt” toward state preferences
“Tilt” Policies:
Least Cost, Regional In-state or Emerging
Tech. Preferences
Solar REC Carve-outs, Virtual Net
Interstate Commerce Clause
Metering, Community-based Renewable
challenges
Energy Pilot Program
Appetite for cost premium of Feed-in Tariffs, Standard Offers
Tilt policies? and LT PPA Auctions
Pushes for relaxing imports, In-State Offshore Wind Policies
new ties, eligibility expansion
Utility-Owned solar, LT Contract RFP;
NESCOE Regional Residential PV Program;
Procurement
Fuel cell and AD incentives
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6. Policy Drivers – State (2)
• LREC, ZREC, Res PV, utility-owned & FC programs  up to 40% of incremental
CT CT-I demand in the 2015 to 2018 timeframe.
• ZREC, LREC RFP prices << expected  increase installations
• Increased NM cap to 6% of load
• Solar Carve-out: development skyrockets, accelerating demand target.
Policymakers explore increasing 400 MW target
MA • adds LT PPA set-aside for AD, biomass & hydro < 6 MW (0.4% of load)
• extends sunset for utility ownership of up to 25 MW solar to 2014
• “Solarize” programs expand in MA, start in CT
• DG Standard Offer for 40 MW
RI • Falling prices, more could follow
• SPEED Standard Offer increased by 77.5 MW to reach a total 127.5 MW over
VT 10 yrs
As implementation accelerates… 5

7. … Price Pressure Increases
MA • solar PPAs $60 to $100/MWh*
• SRECs (broker strips) ~$175/MWh (‘12 – ’15)*
CT • ZREC auction produces lower than expected bid prices (RECs only)
• Solar 250 kW – 1 MW = $117/MWh
• Solar up to 250 kW = $135/MWh
• Based on these bids, solar < 250 kW priced at $148/MWh
RI • 2011/2012 SO Ceiling Price for solar > 500 kW = $289/MWh
• Most recent winning bid price: $209/MWh (1,500 kW solar project)
• All recent winning bids for 151kW-500kW at cap of $316/MWh
• Ceiling prices for all technologies, all sizes under review
VT • Initial standard offer pricing produces
• ~50 MW of “applications accepted” (contracts)
• 126 MW in “applications not yet processed”
• Review of standard offer prices to be conducted over the next
several months.
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* Data are empirical. Not an offer to transact.

8. Wind Trends: Cost & Performance
Improving
Installed Cost Trend
“Lag between turbine prices and project costs should lead to
substantial project-level installed capital cost reductions by
2012-13”
“Turbine price quotes in 2011 for “standard” technology are
reportedly as low as $900/kW (Tier 1: ~$1,100-1,250/kW, with
average at ~$1,100/kW); higher costs typical for smaller
orders, larger rotors/towers, etc. (also more-favorable terms
for buyers and improved technology; balance-of-plant costs
also reportedly lower than in recent past)”
Production Trend
“Move to Lower Wind Speed Sites and Increased Curtailment
Hide the Very Real Increases in CFs Witnessed in Individual
Wind Resource Classes”
“Technology advancement for lower wind speeds has
narrowed the gap in LCOE between lower and higher wind
speed sites”
Source: Wind Power Economics: Past, Present, and Future Trends;
Ryan Wiser Lawrence Berkeley National Laboratory, December 14,
2011
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9. DG Wind Snapshot
Community Scale : Customer-Sited
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Source: http://www.windpoweringamerica.gov/newengland/projects.asp

10. Installed Cost of Solar Dropping Fast
But are challenges on the horizon?
Residential Real Installed Cost Trends,
Various Forecasts, 2010-2025
• Recent Module Prices drop:
From: NYSERDA New York Solar Study Jan. 2012 – Global supply glut
– Recent cost/kW near low end of range
• But…
– Anti-dumping actions & trade disputes
– Prices below cost
– Manufacturer bankruptcies, closures
–  could increase or level off
Source: NY Solar Study
(NYSERDA, 2012)
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11. Levelized Cost of Energy, by
Technology for 2011 and 2025 (2011$)
Source: NY Solar Study (NYSERDA, 2012)
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12. Putting It All Together:
Different Market Segments Can Diverge Sharply
Based on Economics and Policy
VT Dataset limited to approved
Standard Offer solar
Source: NY Solar Study (NYSERDA, 2012)
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13. A Snapshot of MA Solar Market Segments
Shows Evolution
Public Private Development Public Private
Operating
Capacity 500- 25 - 500 - Pipeline Growth 500- 500 -
Growth < 25 25-500 1000 > 1000 < 25 500 1000 > 1000 < 25 25-500 1000 > 1000 < 25 25 - 500 1000 > 1000
MW/Mo (Since MW/Mo (Since
Sep '11) 0.0 0.4 0.1 0.7 0.5 1.1 0.4 0.7 Sep '11) 0.1 0.4 0.4 7.9 0.5 1.1 1.8 20.6
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14. Observations on Market Development
& Project Financing
• Policy approaches influence financing:
– Competitive bid vs. Standard Offer
– Annual allocation vs. long-term target
• The value of a long-term contract with a creditworthy entity should not be
understated. Determines availability of debt @ project level.
• Ownership & financing landscape: at least 3 types of players
1. Small developers seeking project finance partnerships w/ local banks
2. Large developers assembling portfolio of projects – for resale
3. Utility affiliates, funds, strategic investors – finance on equity basis, later apply
debt at the portfolio level, have ability to be patient
• Market Summary:
– MA & CT: market activity, interconnection requests up sharply; current exuberance not likely
sustainable, but targets likely to be met – even if expanded – as industry develops.
– VT & RI: bids will exceed available contracts for foreseeable future; policy targets may limit
the opportunity to develop a sustainable market were it not for the regional demand for DG.
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15. Sustainable Energy Advantage, LLC
Jason Gifford
tel. 802.846.7627
jgifford@seadvantage.com
www.seadvantage.com
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