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Game-changer Solar Business Model Innovation
DAVID ARFIN
April 12, 2016 Lyon, France
An Unlikely Innovator
I never cared about a kilowatt or kwh rates, corporate tax credits, accelerated depreciation, utility meters
Nor had I heard about ITC, RECs or partnership flips
“Inconvenient Truth” got this entrepreneur thinking – driven to both do good and do well
Middle of home roof replacement. Received 3 Quotes for solar; best was a 33-year “simple payback”
($15k to help the environment?)
Researched: why anyone went solar?
Policy/ Investment/ Innovation
Nascent industry. Been around 30+ years.
Unknown consumer technology. Expensive. Un-
aesthetic
Immature industry - lack of investment downstream.
Policy environment – generally positive*
Core economics were sound, but not a no-brainer.
Thinking inside industry was “stale”.
In addition to lower priced panels – we needed a
“game changer”.
And – it’s only the beginning…
Residential “Solar as a Service”
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1. Qualified homeowner signs lease
Residential “Solar as a Service”
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2. Qualified installers design and complete project
Residential “Solar as a Service”
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3. Lessor receives benefit streams (ITC, rebates, SRECs, lease/ppa payments,
depreciation, etc.) & allocates efficiently among financing partners
Residential “Solar as a Service”
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Residential Solar Lease – A Game Changer
3rd Party System Ownership by Region
Sources: CSI Database, accessed 03/13/13; MA SREC Program, accessed 03/13/13; Arizona Public Services, & Salt River Project accessed 12/12/12 (APS), 03/25/13 (SRP); Maryland Energy Administration (03/12/13)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015
% o
f In
stal
led
Cap
acit
y
AZ
CA
MA
MD
NJ
NY
Consequence : Staggering Growth Rates
April 22, 2016 9
Energy Technologies for “As a Service”
Lighting – improvement - Enlighted
Building efficiency – Carbon LightHouse
United Wind – solarlease for wind
Micro CHP – in NYC
Phoebus (heat exchange)
Energy Storage as a Service
Global phenomenon
It’s all About Risk
Why Does Solar Leasing* work?
Morphs the “selling process” from overcoming barrier of up-
front capital cost to offering a low-cost substitute for grid
electricity
Shifts risk / responsibility from homeowner to responsible
third-party service provider
Aligns solar electricity with traditional utility payment
lease/PPA payments structures (i.e. heat, electricity, phone,
cable)
Often a Immediate, visible reduction in bills
Lock-in rates and/or guaranteed production**
Allows homeowners to “do the right thing” without having to
write a large (or any) check upfront 14
Ener-Pacte – Shifts Risks from Farmers to Investors
Reduce Investor Risk
Ener-Pacte
Holdings
Project
SPV 2
Project
SPV 1
Senior
Debt
Project
SPV n
Junior
Debt
Diversification & Aggregation
Since we manage PV assets all over Europe, we diversify risk. There is one credit line for several projects, the default of one project doesn’t impact the payback
Process
Coverage Ratio
Since we increase the debt periods until the end of the Feed-in-tariff (typically by 5 additional years) the Coverage Ratio for Senior Debt is > 150 % and for Junior debt > 200 %
We install clear and transparent processes for the management of assets. OPEX are payed directly by holding so there is no risk of not being covered
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1995 2000 2005 2010 2015 2020 2025
elec
tric
ity p
rice
(cen
ts/k
Wh)
Rates Profile and Uncertainty
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residential tier 1
historical training data simulations
rate risk
CONFIDENTIAL
Type of Risk
Typically borne by ...
Managed by ...
Performance Risk
Will the promised amount of electricity
be delivered?
EPC
Technology, maintenance
Credit Risk
Will customer pay?
Investor Developer
Credit screen
Goal: Put risks in the hands of those most able to deal with them
5
Measuring and Reducing Risks
Rate Risk
How will future electricity rates
change?
Customer
Contract
Investor
Transfer Risk
What happens if the customer moves?
Customer
Contract
CONFIDENTIAL
THANK YOU!