Boma 2011 presentation

Overview of Solar Renewable
Energy Incentives & Benefits

Presented to

Building Owners & Managers Association
New Jersey

May 25, 2011

www.entechgroupinc.com/energy © 2011 The Entech Group, Inc. All Rights Reserved. 1.800.571.8661
Please refer to the Limitations section at the end of this presentation.

Renewable Energy

Renewable & Alternate Energy Sources:
• Solar
• Geothermal
• Natural Gas

Energy Conservation Programs
• Energy Star Certification
• Sustainable Development
• Leadership Energy and Environmental
Design (LEED)


Energy Management

Electricity Costs Are Over 26% of Operating Expenses
with Costs Continuing to Rise.
Energy Management is important to owners and
operators because there is a need to:
• Measure Savings
• Manage Usage & Costs
• Manage Procurement
• Promote Environmental
Stewardship

Source: Independent Building Owners & Managers Association (BOMA) Advisory Board – May 2010


Federal Energy Laws & Policies
Tax Relief Unemployment
Energy Improvement Insurance Reauthorization
and Extension Act of and Job Creation Act of 2010
2008 12/17/10
9/17/08

Due To Expire
American Recovery 12/31/11
and Reinvestment • 30% ITC Rebate
Act of 2009 • First Year Bonus
2/19/09
Depreciation of
100%
Small Business Jobs • Extended Section
Act of 2010 179 Deduction of
9/27/10
$500,000

2008 2009 2010 2011 2012


How a Solar System Works

Solar
Array
Electrical Electric
Distribution Grid
Panels
Utility
Meter
Inverter

Electricity from Grid

Electricity from
Solar

Surplus Solar
Electricity to Grid Electricity to Facility


Net Metering
Solar electric generating facilities that qualify for the
NJCEP SREC program are “Grid Connected” and
subject to “Net Metering” regulations.
• Net metering permits surplus
electricity to be delivered to the grid
for credit causing the electric meter
to run backwards.
• If the annual solar production is
greater than the facilities
consumption, the surplus electricity
will be credited at the ‘Wholesale
Rate,’ typically at $.07/kWhr.
$.07/kWhr.
• If there is a loss of power from the
grid, the solar system will
automatically shut down.
Note: Solar electric production occurs during midday, reducing the more expensive ‘On- Peak’ electric
rate, typically $0.22 to $0.25/kWhr.


Benefits of Solar
• Federal and State incentives
“underwrite” approximately 40% to
50% of the solar system cost.
• Earn residual income the first year and
even more thereafter.
• Eliminate 20% to 50% of your electrical
costs per year for the life of the system.
• Pays for itself within 2 - 5 years.
• Hedge against energy price volatility,
inflation, and potential carbon legislation
costs.
• Increases property value but not real
estate taxes.
• Provides significant environmental
benefits.
• Demonstrates corporate responsibility.

Incentives For Solar
Federal Investment Tax Credit/Grant (ITC)
(ITC)
30% Grant (expires in 2011)

Section 179 Deduction
Deduct up to $500K for Qualifying Equipment

First Year Bonus Depreciation Tax Benefit
100% Depreciation in Year 1 (2011 only)
Total
Benefits
6 Year Depreciation Tax Benefits
(Modified Accelerated Cost Recovery System – MACRS)

Solar Renewable Energy Certificate Earnings
SREC 15 Year Program

Electrical Energy Savings
25+ Years of Avoided Electrical Costs


New Jersey Clean Energy Program (NJCEP) -
Solar Renewable Energy Certificate

Provides for Generation and Trading of Solar Renewable
Energy Certificates (SRECs) by Solar Owners

• NJCEP requires electric utilities to supply a percentage
of their electricity from solar.
• Utilities can meet their requirements by purchasing
SRECs from solar electric owners.
• If utilities do not purchase SRECs they must make an
Alternate Compliance Payment (ACP).
• A SREC is a Tradable Commodity with Monetary
Value.


Solar Renewable Energy Certificates
(SRECs) in New Jersey
• One SREC = 1,000 kW hours of solar production
• ACP was set at $693 for 2010 and will drop 3% each year
• Estimated SREC Values:
• 2011: $650 - 2014: $450 - 2019: $350

11SREC
SREC
11SREC
SREC
11SREC
SREC
11SREC $78,000
= SREC
11SREC
SREC
11SREC
=
SREC per year

Typical 100 kW system produces About 120 SRECs
about 120,000 kWh per year. per year.


How SREC Transactions Work
Currently, a 100 kW
system will earn
$78,000 per year

Every 1,000 kW
Produced = 1 SREC

1 SREC

Utility companies
purchase SRECs
to meet their Commodity Exchange
renewable is similar to Stub Hub
energy goals.


The Solar Energy Advancement and Fair
Competition Act (A3520)
• Signed into law on January 18,
2010, by Governor Corzine.
Corzine.
Gwhrs / Energy Year
• The Act requires electric suppliers 6000

to procure a minimum of 195
Gigawatt hours (GWH) of electric 5000
power from solar generators in
2010 and increases to 5,316 4000
GWH by 2026.
• The BPU is required to establish a 3000
15 year Solar Alternative
Compliance Payment (SACP) 2000
schedule. Prior to this
requirement, the SACP extended
1000
out 8 years.
• If the average SREC price 0
decreases for 3 years or if the
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
supply of SRECs meets or exceeds
demand for 3 years the
requirement increases by 20%.


Solar Finance Options

• Ownership Investment
• Capital Outlay
• Loan
• Lease
• Operating
• Capital
• Solar Power Purchase Agreement


Factors of Influence
• Company Balance Sheet
• Federal Benefits & Incentives
• Renewable Solar Energy System
Components
• Commodity Value of SREC
• Electrical & Inflation Rates


Ownership, Power
Purchase &
Lease Arrangement

Renewable Energy Electrical & Energy
Project Fees Production

Capital Budgeting & Factors of Influence
on Internal Rate of Return (IRR) for
Renewable Energy Project

Energy Policies & Federal & State
Legislation Incentives

Advances in Energy
World Wide Renewable Portfolio Renewable Energy
& Green Certificate Values
Economic Factors Standards (RPS)
Technology


Commercial Building – 200 kW


Cash Flow – Capital Investment
Project Economic Inflow Over 15 Years

Electric Savings & Solar Renewable Energy Certificate $2,313,732
(SREC) Income
Federal Incentives & Benefits $575,309
Potential Revenue $2,889,041
Project Economic Outflows
Solar Renewable Energy Project Investment + O&M ($994,466)
Potential Investment ($994,466)
Net Expected Income (Pre Tax) $1,894,575

3000000

2500000
Cash Amount

2000000

1500000

1000000

500000

0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
-500000

-1000000
Years

Cash Flow – Operating Lease
Project Economic Inflow Over 15 Years

Electric Savings & Solar Renewable Energy Certificate $2,313,732
(SREC) Income
Potential Revenue $2,313,732
Project Economic Outflows
Solar Renewable Energy Project Payments + O&M ($1,016,995)
Potential Investment ($1,016,995)
Net Expected Income (Pre Tax) $1,296,737

2500000

2000000
Cash Amount

1500000

1000000

500000

0
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Power Purchase Agreement
A customer hosts the solar system and agrees to purchase
the electricity produced under a 15 to 20 year contract.

Benefits:
• Provides a capital free
means to obtain solar
energy.
• Assured of obtaining
electricity at a
predictable price for 15
to 20 years.
• Electricity will be less
expensive and less
inflationary than utility
supplied electricity. Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20


Carbon Credits & Environmental
Benefits for a 200 kW System

Solar Renewable Energy System (200kW) will:
• Provide Avoided Greenhouse Gasses (Over a 30 Year Period):
Carbon Dioxide CO2 – 1,923 tons
Nitrous Oxide NOx – 13,394 lbs
Sulfur Dioxide SO2 –8,631 lbs
Equivalent tree absorption of CO2 = 70 acres
• Produce Carbon Credits - A Potential Tradable Commodity

Project Timeline
Project Overview & Timeline (estimate based on 200 kW)
Week
Description
-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Pre-Feasibility Solar
Appraisal & Audit

Contract Review &
Execution

Project Assessment –
Permitting & Engineering

Site & Roof Upgrade
(if required)

Procure Solar Equipment

Project Construction

Post-Solar Roof
Inspection & Certification

Local, State & Utility
Inspections

Interconnection &
Commissioning

Training & Education

Public Relations &
Marketing
*Subject to change based on project conditions

Typical Commercial Installations

Merck
Whitehouse Station, NJ Tiffany & Co.
Whippany, NJ


Trends: Solar Parking Canopies

GE Charging Stations


Trends: Ground Mount Trackers

Single Axis Trackers

• Higher Efficiency
• 20% less area over fixed
tilt systems
• 60% less area over thin
film systems

• Most Energy Per Acre

Trends: Thin Film Applications
• Advantages:

• Light-weight (<2 lbs/sq. ft.)
Light-
• Low Cost Materials
• Ease of Installation
• Efficiencies are Improving


Limitations
The estimates, projections, figures and other fiscal representations (the “Projections”)
contained herein are made on the basis of incomplete information and without the
benefit of knowing what will actually happen in the future with a particular matter or
any other item. The Projections shall not be relied upon as final. The ultimate project
fees, costs and other financial considerations may be different than the Projections.

Information contained herein contains “forward looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs, plans, projections,
objectives, goals, assumptions or future events or performance are not statements of
historical facts and may be “forward looking statements”. Forward looking statements
are based on expectations, estimates and projections at the time the statements are
made that involve a number of risks and uncertainties which could cause actual results
or events to differ materially from those presently anticipated.

IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S.
Federal tax advice contained herein is not intended or written to be used, and cannot
be used by you or any other person, (i.) for the purpose of avoiding any penalties that
may be imposed under the Internal Revenue Code, or (ii.) in promoting, marketing or
recommending any Federal tax transaction(s) or matter(s) addressed herein.

This document contains computer enhanced images that are general in nature and
provided for demonstration purposes only and they are not intended to be relied on for
any other purpose.

The information and content provided within this document is general in nature and is
for informational purposes only. It is not intended, and should not be construed, as a
recommendation, or legal, tax or investment advice, or a legal opinion. You should
contact your tax advisor, lawyer and Certified Public Accountant to help answer
questions about your individual or business specific situation or needs prior to taking
any action based upon this information.

Contact Information

1 (800) 571-8661
571-
www.entechgroupinc.com/energy

Thomas A. Furey, P.E., LSRP
tfurey@entechgroupinc.com
Joseph P. Colucci
jcolucci@entechgroupinc.com


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