NewEnergyNews: Borrego Solar on SREC Funding and Tips for Talking With Banks; Borrego Solar’s CFO explains SRECs and the many ways of financing solar.

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The new challenge: To make every day Earth Day.

YESTERDAY

  • Weekend Video: Much More Inhofe Now
  • Weekend Video: Jon Stewart Talks Keystone, Politics, And Jobs
  • Weekend Video: Jon Stewart On How Keystone Opponents May Be Caught In Their Own Trap
  • THE DAY BEFORE

  • FRIDAY WORLD HEADLINE-A NEW WAY TO SEE CLIMATE CHANGE
  • FRIDAY WORLD HEADLINE-EU OCEAN WIND TO CUT COSTS, KEEP GROWING
  • FRIDAY WORLD HEADLINE-COST-COMPETIVE NEW ENERGY, GERMANY’S ‘GIFT TO THE WORLD’
  • FRIDAY WORLD HEADLINE-NEW ENERGY MATCHES COAL ON COST, CAPACITY IN TURKEY
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    THE DAY BEFORE THE DAY BEFORE

    THINGS-TO-THINK-ABOUT THURSDAY, November 20:

  • TTTA Thursday-TOP REPUBLICAN DROPS CLIMATE DENIAL
  • TTTA Thursday-FORD ELECTRIC CARS FOR ‘THE MASSES’
  • TTTA Thursday-MIDWEST SOLAR MAKES SENSE AND CENTS
  • TTTA Thursday-NEW ENERGY JOBS BY THE BAY
  • THE DAY BEFORE THAT

  • THE STUDY: THE MIDWEST GRID IS READY FOR 40% NEW ENERGY
  • QUICK NEWS, November 19: OHIO NEW ENERGY JOBS REPORT SUPPRESSED; SOLAR GIANT BUYS WIND DEVELOPER; BUSINESS TO MAKE IT BIG IN SMART CITIES
  • AND THE DAY BEFORE THAT

  • THE STUDY: THE NEW ENERGY LIFE-CYCLE CUTS EMISSIONS
  • QUICK NEWS, November 18: U.S. TAKES WORLD LEAD IN WIND; SOLAR TO SHOW MISSOURI JOBS; WAVE ENERGY ROLLING SLOWLY IN
  • THE LAST DAY UP HERE

  • THE STUDY: A NEW TAKE ON THE COSTS AND BENEFITS OF SOLAR
  • QUICK NEWS, November 17: BIG TEST FOR SOLAR ROADS KICKS OFF; FORD TURNS TO NEW ENERGY; ADVANCED BATTERY SUPPLY CHAIN TO TRIPLE
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    Anne B. Butterfield of Daily Camera and Huffington Post, is a biweekly contributor to NewEnergyNews

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT)

    November 26, 2013 (Huffington Post via NewEnergyNews)

    Everywhere we turn, environmental news is filled with horrid developments and glimpses of irreversible tipping points.

    Just a handful of examples are breathtaking: Scientists have dared to pinpoint the years at which locations around the world may reach runaway heat, and in the northern hemisphere it's well in sight for our children: 2047. Survivors of Superstorm Sandy are packing up as costs of repair and insurance go out of reach, one threat that climate science has long predicted. Or we could simply talk about the plight of bees and the potential impact on food supplies. Surprising no one who explores the Pacific Ocean, sailor Ivan MacFadyen described long a journey dubbed The Ocean is Broken, in which he saw vast expanses of trash and almost no wildlife save for a whale struggling a with giant tumor on its head, evoking the tons of radioactive water coming daily from Fukushima's lamed nuclear power center. Rampaging fishing methods and ocean acidification are now reported as causing the overpopulation of jellyfish that have jammed the intakes of nuclear plants around the world. Yet the shutting down of nuclear plants is a trifling setback compared with the doom that can result in coming days at Fukushima in the delicate job to extract bent and spent fuel rods from a ruined storage tank, a project dubbed "radioactive pick up sticks."

    With all these horrors to ponder you wouldn't expect to hear that you should also worry about the United States running out of coal. But you would be wrong, says Leslie Glustrom, founder and research director for Clean Energy Action. Her contention is that we've passed the peak in our nation's legendary supply of coal that powers over one-third of our grid capacity. This grim news is faithfully spelled out in three reports, with the complete story told in Warning: Faulty Reporting of US Coal Reserves (pdf). (Disclosure: I serve on CEA's board and have known the author for years.)

    Glustrom's research presents a sea change in how we should understand our energy challenges, or experience grim consequences. It's not only about toxic and heat-trapping emissions anymore; it's also about having enough energy generation to run big cities and regions that now rely on coal. Glustrom worries openly about how commerce will go on in many regions in 2025 if they don't plan their energy futures right.

    2013-11-05-FigureES4_FULL.jpgclick to enlarge

    Scrutinizing data for prices on delivered coal nationwide, Glustrom's new report establishes that coal's price has risen nearly 8 percent annually for eight years, roughly doubling, due mostly to thinner, deeper coal seams plus costlier diesel transport expenses. Higher coal prices in a time of "cheap" natural gas and affordable renewables means coal companies are lamed by low or no profits, as they hold debt levels that dwarf their market value and carry very high interest rates.

    2013-11-05-Table_ES2_FULL.jpgclick to enlarge

    2013-11-05-Figure_ES2_FULL.jpg

    One leading coal company, Patriot, filed for bankruptcy last year; many others are also struggling under bankruptcy watch and not eager to upgrade equipment for the tougher mining ahead. Add to this the bizarre event this fall of a coal lease failing to sell in Wyoming's Powder River Basin, the "Fort Knox" of the nation's coal supply, with some pundits agreeing this portends a tightening of the nation's coal supply, not to mention the array of researchers cited in the report. Indeed, at the mid point of 2013, only 488 millions tons of coal were produced in the U.S.; unless a major catch up happens by year-end, 2013 may be as low in production as 1993.

    Coal may exist in large quantities geologically, but economically, it's getting out of reach, as confirmed by US Geological Survey in studies indicating that less than 20 percent of US coal formations are economically recoverable, as explored in the CEA report. To Glustrom, that number plus others translate to 10 to 20 years more of burning coal in the US. It takes capital, accessible coal with good heat content and favorable market conditions to assure that mining companies will stay in business. She has observed a classic disconnect between camps of professionals in which geologists tend to assume money is "infinite" and financial analysts tend to assume that available coal is "infinite." Both biases are faulty and together they court disaster, and "it is only by combining thoughtful estimates of available coal and available money that our country can come to a realistic estimate of the amount of US coal that can be mined at a profit." This brings us back to her main and rather simple point: "If the companies cannot make a profit by mining coal they won't be mining for long."

    No one is more emphatic than Glustrom herself that she cannot predict the future, but she presents trend lines that are robust and confirmed assertively by the editorial board at West Virginia Gazette:

    Although Clean Energy Action is a "green" nonprofit opposed to fossil fuels, this study contains many hard economic facts. As we've said before, West Virginia's leaders should lower their protests about pollution controls, and instead launch intelligent planning for the profound shift that is occurring in the Mountain State's economy.

    The report "Warning, Faulty Reporting of US Coal Reserves" and its companion reports belong in the hands of energy and climate policy makers, investors, bankers, and rate payer watchdog groups, so that states can plan for, rather than react to, a future with sea change risk factors.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    It bears mentioning that even China is enacting a "peak coal" mentality, with Shanghai declaring that it will completely ban coal burning in 2017 with intent to close down hundreds of coal burning boilers and industrial furnaces, or shifting them to clean energy by 2015. And Citi Research, in "The Unimaginable: Peak Coal in China," took a look at all forms of energy production in China and figured that demand for coal will flatten or peak by 2020 and those "coal exporting countries that have been counting on strong future coal demand could be most at risk." Include US coal producers in that group of exporters.

    Our world is undergoing many sorts of change and upheaval. We in the industrialized world have spent about a century dismissing ocean trash, overfishing, pesticides, nuclear hazard, and oil and coal burning with a shrug of, "Hey it's fine, nature can manage it." Now we're surrounded by impacts of industrial-grade consumption, including depletion of critical resources and tipping points of many kinds. It is not enough to think of only ourselves and plan for strictly our own survival or convenience. The threat to animals everywhere, indeed to whole systems of the living, is the grief-filled backdrop of our times. It's "all hands on deck" at this point of human voyaging, and in our nation's capital, we certainly don't have that. Towns, states and regions need to plan fiercely and follow through. And a fine example is Boulder Colorado's recent victory to keep on track for clean energy by separating from its electric utility that makes 59 percent of its power from coal.

    Clean Energy Action is disseminating "Warning: Faulty Reporting of US Coal Reserves" for free to all manner of relevant professionals who should be concerned about long range trends which now include the supply risks of coal, and is supporting that outreach through a fundraising campaign.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    Author's note: Want to support my work? Please "fan" me at Huffpost Denver, here (http://www.huffingtonpost.com/anne-butterfield). Thanks.

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    Anne's previous NewEnergyNews columns:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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    Your intrepid reporter

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  • Wednesday, January 30, 2013

    Borrego Solar on SREC Funding and Tips for Talking With Banks; Borrego Solar’s CFO explains SRECs and the many ways of financing solar.

    Borrego Solar on SREC Funding and Tips for Talking With Banks; Borrego Solar’s CFO explains SRECs and the many ways of financing solar.

    Herman K. Trabish, August 20, 2012 (Greentech Media)

    Two things distinguish the just-announced $64.4 million funding from U.S. Bancorp (USB) and National Consumer Cooperative Bank (NCCB) for Borrego Solar's commercial-scale installations.

    “It is one of the biggest funds ever closed in Massachusetts,” said Borrego CFO Bill Bush, “and, because Massachusetts is a Solar Renewable Energy Credit [SREC] state, it is a vote of confidence for this relatively new SREC market.” The fund will support the construction of eighteen megawatts of solar across eight sites.

    NCCB will provide debt funding. U.S. Bancorp and Borrego Solar, as equity partners, will own the projects and share the 30 percent investment tax credit (ITC) and accelerated depreciation. Municipalities, a school district, and other participants will get reduced electricity prices.

    In Massachusetts’ SREC market, unlike in a production-based per-kilowatt-hour rebate incentive system, Bush said, solar systems’ kilowatt-hours earn SRECs which are auctioned to utilities and others in need of satisfying renewables, solar and emissions mandates.

    NCCB’s participation, Bush said, “relies primarily on the sale of these certificates and demonstrates,” he explained, that “a bank took a look at the market and said they believe in it and they believe the projects will be able to generate adequate cash flow to pay back what they underwrote.”

    Borrego Solar, in residential rooftop solar since 1980, began undertaking third-party-financed commercial-scale projects of up to ten megawatts in 2009 when the firm realized, Bush said, “the commercial-scale power purchase agreement (PPA) was significantly more financeable and opened up avenues of financing” with solar customers “that didn’t have the capital or didn’t want to deploy capital in that way.”

    Borrego has now done third-party-funded solar projects worth $225 million. U.S. Bancorp, not the first bank that the firm approached, Bush said, “was the bank which seemed to be the best partner for us” and has developed, he said, “respect for PPAs as a reasonable method of financing.”

    Bush led Borrego’s first PPA financing, three megawatts across nine different sites for the San Diego Community College District. “It was a partnership-flip structure,” he explained. “You create a Special Purpose Entity with two partners in the ownership of the solar system. That entity contracts with the host, in that case San Diego Community College, to sell the electricity through a service contract called a PPA."

    Borrego and U.S. Bank owned the solar. “Because of MACRS [Modified Accelerated Cost Recovery System], often referred to as accelerated depreciation,” Bush said, "the financial partner, in this case U.S. Bank, was able to depreciate the cost over the first five years of operation.”

    In those five years, he went on, even if there are gains from selling electricity, depreciation creates losses. “If you have gains in another part of your business, they are offset. That is how banks monetize the solar systems. That’s why they invest in these structures.” When the bank exited the partnership, Bush said, Borrego continued to benefit from the solar system’s revenue stream. “A solar system is going to work for 25 years, minimum,” he said.

    Having an investment-grade credit rating of triple B or better is one way that municipalities can make institutional investors comfortable with a solar PPA, Bush said. Borrego’s eight 2011 deals, he said, came with A or better ratings.

    In the first meeting with the bank, Bush said, “You describe to them your track record.” Credentials like the Borrego team’s ten-plus years in solar and five-plus years of stability matter to investors.

    The balance sheet comes next. “They are going to look at your ability to backstop the system, should something go wrong. The strength of your balance sheet determines your ability to recover.”

    Finally, Bush explained, “Deals are expensive, and there are opportunity costs. The bank wants to know what the company’s ability to do another job is.” If a solar company can’t follow up, Bush said, the bank incurs the cost of finding a new partner.

    “If you can check those three boxes -- team, pipeline, and balance sheet -- you make an attractive partner," he said. And, he added, “you never want just one partner. Certain types of projects appeal to certain types of investors. If you only have one partner, you can only develop one type of project.”

    Currently, municipalities and public agencies are considering another funding source. “Interest rates being as low as they are, bonds are becoming much more popular,” Bush said. “We’ve done several projects that were financed via voter-approved bonds.”

    But, he said, some public entities still simply want “contracts to buy electricity at a discounted rate. They acknowledge they could float a bond. But if Borrego finances the system, the cost doesn’t affect their balance sheet.” Or, he noted, “They might have just passed a bond issue and don’t want to go back to the voters.”

    Both PPAs and bonds are acceptable methods of solar finance, Bush said. “Ultimately, it comes down to what the cost of capital is. In certain cases, it is more lucrative to go to the voters with a bond issue, and in other cases it might not be.”

    No capital investment is really necessary, Bush said. “The asset municipalities and agencies have is purchasing power. They can monetize that purchasing power. Through entering an agreement with us, they get cheaper power, and it is a way for them to make money on the first day.”

    1 Comments:

    At 7:27 PM, Anonymous resumesplanet said...

    d they believe the projects will be able to generate adequate cash flow to pay back what they underwrote.

     

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