9UNP1678HD_Sherrie_Gruder_WordPress

- Our panel on solar energy financing will be moderated by Sherrie Gruder. Sherrie is the sustainable design specialist and distinguished lecturer and energy program manager of Energy on Wisconsin program at the University of Wisconsin-Extension. She provides statewide education and technical assistance on sustainable community development, energy strategies, and green building to Wisconsin communities, local and state governments and businesses. And Sherrie will introduce the panelists.

- Thank you Jane and thank you to the Academy. This is always a wonderful gathering and I'm so glad to see so many people here not only from this region but actually from around the state, so thank you for driving all this distance and I hope you carpooled. Okay well, we are gonna talk about solar energy financing and I have a wonderful panel. I'm gonna start off to give you an update on solar energy financing in Wisconsin. And then we're gonna have Erika Kluetmeier. 

Erika was the sustainability coordinator for the city of Fitchburg, Wisconsin in Dane County. And she just recently took a job with the Wisconsin Department of Natural Resources with the Green Tier Legacy Program. And Erika is going to be providing technical assistance to businesses in local communities who wanna find innovative solutions to create more sustainable organizations in her new role. But luckily we'll tell you about what she did at Fitchburg with their solar. 

And then she's gonna be followed by Kurt Reinhold from Legacy Solar Cooperative. Kurt is the founder and president of Legacy Solar and his company Solar Connections put together the first municipal tax financing project for solar in Wisconsin in 2013. 

And Kurt works with faith-based organizations and schools and now municipalities and other businesses to find financers whether they're third-party business financers or just people like you and me who wanna buy bonds in solar projects to help finance solar projects. And then our fourth speaker this morning is Jason Stringer from WEC, Wisconsin Energy Conservation Corporation. 

He's the senior manager of Clean Energy Finance and Jason is a project finance expert with a successful track record of creating value in the clean energy finance and commercial real estate industries and he's gonna talk to us about PACE. So to start, a year ago at this summit I published a guide and presented it, Solar Energy Financing Guide, Empowering Wisconsin Local Governments. And there has been so much going on that in May we're gonna have volume two. 

And it's not gonna be very different in terms of how it's laid out but it goes into what has changed and we'll use it because some of our laws and financing things have changed a bit. The guide talks about, first of all financing municipal, tribal, and school solar projects either through direct buy or through public/private partnerships which could include third-party financing. 

But then also the other role of local governments is that they can help their businesses and their residents to install solar and they do that in many ways to facilitate solar group purchasing, community solar gardens, Legacy Solar Coop model, they can use PACE financing, and Green Power purchase. There's also a rule that local governments can play in microgrids and we have one that's being developed up in Madeline Island. 

They're putting solar on different facilities and in different land and eventually we'll put in the storage component of that. And so being an island, that's a great place to work on that. And then there's another important part and we heard a little bit about that today and that's government actions that facilitate solar. 

And actually Eau Claire won a SolSmart award partly because one of the things they did was to facilitate solar by helping with zoning and codes and permitting and that's a cost. That's a cost to the solar installers and to people putting on the systems in both time and money. And so there-- Please read that section of the guide because that's another role that you can play not just putting the solar on. Okay. So here's the update. 

Right now in Wisconsin local governments, tribes and schools have 187 solar projects up through direct buy, solar gardens, and solar group buys. This map is a GIS map that shows each of those by size, location, and type. And that equals 7.8 megawatts of solar just through government operations and that's an increase from 6.2 megawatts just a year ago. In addition we have 30 counties now that have adopted PACE. Which we had 18 in 2017. 

And that means that right now of the 80 megawatts of solar generation in our state which is up from 53 megawatts just a year ago, think about that, that's huge increase. We have a little bit less than 10% of it now comes from municipal-owned solar. It was higher before and that's because there're a lot more utilities putting in large renewable energy generation. 

And then a final point here is that even though as John said in his economic development recap from yesterday, that we are, Wisconsin unfortunately is 12th in the mid-west in terms of clean energy jobs. We have 26,400 clean energy jobs and that's up from 25,000 a year ago, so it is a growing sector for us. Just real quickly 'cause we've had questions on his before. This is a study from the Institute of Local Self Reliance. 

Their energy self-reliance state study, second edition 2010, and it shows that Wisconsin can meet all of its electricity needs from renewable energy generated in our state. So the green states are ones that can do that and we are one of them. And they point out that self-reliance is almost always cheaper than imported energy. And then also if we were to just get our electricity from solar it would only take up .27% of our land area in our state. 

Of course we have very expensive farm land so that's not something that we might want to do. And then finally it's really important that we do planning as you've heard at this conference to get to that state and you've seen how Madison and Eau Claire are doing that and just the components to get to those higher renewable energy goals or energy efficiency, renewable energy, electric vehicles and a progressive grid. 

So with that I'm gonna turn it over to Erika and she's gonna talk about how Fitchburg did a direct buy program.

- Thanks Sherrie while you're getting set up I know time is limited and I have a lot of slides. Just wanted to say thank you to the academy for having me. Thank you to Eau Claire for hosting us. I just want to say we all aspire to achieve what Ned Noel has done in the city of Eau Claire. 

(laughs)

 You're too modest, Ned. At any rate, so consider myself, the hat I'm wearing right now as the City of Fitchburg's sustainability specialist emeritus. I did move over to DNR about a week ago but it was a great path because part of how we got this solar project done in Fitchburg is through our connections with Green Tier Legacy community. 

For those who don't know about it, it's a consortium of local governments, counties, municipalities, towns, villages around the state who are working together to get sustainability work done, innovate, and help each other with sharing of knowledge, best practices, templates, and it makes our lives so much easier and gives us the ability to get stuff done. So a shout out to Monona who really helped blaze the trail with third-party financing. 

First municipality in the state and we learned a lot from them along the way. I wanted to do a couple more thank yous 'cause I'm gonna forget 

(laughs)

 in the middle of my presentation 'cause there's a lot of people in this room who helped us get this project done. First and foremost I want to thank-- It always takes a champion, Tony Hartmann, an alder from Fitchburg's in the back of the room and he was our biggest champion who really sold this project to council and helped them see the value and the benefits. Focus on Energy is here, we got a RECIP grant. 

Megan Levy, Office of Energy Innovation also provided some funding for us and I think I'm probably forgetting somebody else 

(laughs)

 as well. But anyways you can see from my title our project didn't go exactly as we had planned so I'm gonna tell you our story as quickly as I can. I'm gonna give you a little snapshot, tell you what our plans were, tell you how our plans changed and tell you how we ended up. Little snapshot, again we had unanimous council support to install up to 375 kilowatts of photovoltaics on municipal properties. And we ended up with four different buildings. Cost of the project was roughly $600,000. 

We came in a little under budget. This was helping us meet some of the goals and pledges that we had made as an energy independent community. 2025 X 2025. Also we signed on to the U.S. Conference of Mayors Climate Protection Agreement. So this was gonna get us about 10% of the way there. A little bit about Fitchburg. We're a fast-growing community in Dane County. First municipality to the south of Madison, so very similar demographics to Madison. 

We have a population of about 29,000 currently and we're adding about 500 people every year. We're also a new city. We in fact tonight are celebrating our 35th birthday. We have a large land area which makes us a little bit unique because we're about two thirds rural, ag land. We also have a green ethos like a lot of communities here and we have a very engaged population who expect leadership from the city. 

So just really quickly wanted to let you know, going back to 2015 is when we first got serious about solar. We have a LEED Gold library. I think I have a picture here. And it was built solar ready and as prices were coming down and the federal tax credits were available, we kind of made a mad push to try and get some panels on the library. We thought those federal tax credits might expire in 2015, which ended up not happening, but we went before our library board to try to make the case. 

It was too complicated, too much information, but it helped us really set up a good framework. We created an internal solar team, our mayor was on it, facilities manager, public works, myself. We had a really good group who was really motivated to work on this project. In the end it kind of demonstrated that when you're dealing with libraries they have a little bit of a different model in that they have a state statutory authority to control their building. 

So it's really up to the library board to make that decision and our library board wasn't ready then but they were excited about it. So as we stepped back we knew that we needed to get more people to the table. So our finance director joined us, our city attorney joined us. We had been consulting with him on the library project but it was clear that they were critical to the success of our project. 

I'm not gonna spend a lot of time on the planning process because Kurt who helped us as our consultant on this project is gonna talk about this in more detail. But just other than letting you know we really-- We needed to have a few more people at the table. The site selection project was critical looking at energy loads, the age of roofs and that really helped us hone in on what we wanted to do. 

The other factor since we had our city attorney at the table was that he felt very strongly that we needed to follow state guidelines for publicly bidding public works projects. So we actually did the bidding, which is an option of course. We had intended to work with the third-party finance, that's how our project was designed, that's what council approved, so we ended up doing the bidding and then our intention was to present that bid to an investment partner. 

Which never came to pass but we'll get to that point. So this was our intention as I mentioned. This was our mix of funding as it started out. Third-party financing, some operating funds, some CIP funds, some grants, we went after four grants were successful with two of 'em and that meant we had some skin in the game. So we were looking at about 25% ownership, 75% ownership share with a third-party investor. We hit some roadblocks. 

Again our finance director was advising us, and she was doing her due diligence behind the scenes and checked in with our bond council and she came to find out that there's some rules governing how much private entities can benefit from our buildings and since we're a new city with a lot of debt that was something that we had to take a step back and in the end it was gonna take time and it was gonna take more resources. 

So serendipitously we come to our final financing arrangement where our bids came in much lower than expected. Thank goodness, whew! Yeah, the timing couldn't have been more perfect because with the solar tariff case we just slid in right before that whole hubbub happened. We came in at $1.60 a watt, we'd expected $2 a watt, so we decided that we're just gonna scrape together enough money to own it directly. 

So out with the third-party financing, we still had our city funds, we still had our grants. We found some surplus money from a tax incremental district that was expiring. We rolled that over. The library had some capital campaign funds and the friends of the library kicked in the kiosk at the end. So here you can see our four sites. We have about 43 1/2 kilowatts on City Hall, 92 on West Fire Station, 112 on Public Works Garage, and about 114 on our library. 

And again all this is behind the meter. So you can see some of the impacts of our projects, some of the metrics, really I'd say you can look at a nine-year payback, but given that our finance director was very conservative she said let's calculate this as if there were no utility rate increases, so that would be on the 11-year side. I'm more optimistic, so I'm saying nine years. 

(laughs)

 At any rate we will find out what happens on that but not as quick a payback as if we had done third-party financing, but still really solid. Just wanted to mention there's a little screen shot of our online solar monitoring. You can go to our website, see what we're producing, but looks like our estimates are pretty much spot on so far. 

Finally, I just wanna say that the future is bright, there's more plans for solar and renewables in Fitchburg and we're looking at putting solar thermal, solar PV geothermal on our East Fire Station. That's gonna be under construction early next year. But more importantly we've created that dialog and we have come together to understand that we need to take advantage of all the opportunities we can. So when new buildings are being built solar is gonna be included in the construction cost. 

It's not gonna be, "We're building solar ready. "This is an afterthought." We're gonna integrate it into projects and when we put new roofs on buildings, that's the time to put the solar on. So, thank you. 

(applauding)

- Thanks to the Wisconsin Academy, thanks to Sherrie. Rode up here with Jason, so I learned a lot about PACE financing. I knew a lot about-- Well, I knew probably more than the average individual, but I hope you all will learn soon. And thank you Erika for the kind words about my involvement with the City of Fitchburg project. So we're Legacy Solar Co-op. We've worked with a number of community institutions. 

Some of them are municipalities but most of them are either libraries, churches, schools, non-profits, also for-profit entities that are really just looking to crack that initial nut which is the upfront cost of a very top-heavy technology that 95% of the cost of solar is in that first year. But the Legacy in our co-op is that it's gonna survive into the next generation. And most likely those solar panels will still be producing electricity at more than half of their rating: 30 plus years. 

So it might feasibly be a 40-year horizon that you get to benefit from. So many private companies look at investing in retrofit energy projects and they require a two- to five-year payback. Solar for investment, for commercial firms that can use the tax benefits, maybe you could do that in five years. Maybe six years. But you'll find with PACE financing that can be cut down, but also with public/private partnerships. 

The good news for municipalities and for non-tax-paying entities is that you may be able to partner with an entity that could use those tax credits and still be able to navigate those difficult waters of utility regulations, IRS regulations and in some cases, if you're offering community solar, securities registrations. So I'm just gonna do three slides that's just a real quick overview. Most of this is intuitive to you. 

Some of you know how you can reduce your bottom line, but if we're going from 100% utility dependent power to something like 50% or 100% renewable at someday. One of the first measures you can take is going from full dependency. And it's not by accident, and it's not too much of an exaggeration, but the amount of coal that it takes to run a building could be the size of the building each year. 

I mean, it's really hard for us to quantify pounds of CO2, because it's invisible, but it's incredible the amount of waste and the amount of effect that our current energy use can be on the environment. So to go from let's say using an average U.S. home of approximately 10,000 kilowatt hours of electricity per year. Adding in some energy efficiency you might be able to bring that down, if you have some low hanging fruit or an older home, an older building. 

You might be able to bring it down by 30%, so now your coal pile is getting smaller. And then if you add on some solar on-site, this is behind the meter, we call it distributed generation. If you're able to use most of that power on-site, you can basically get down to, in some cases, net zero for your energy use. 

But you see the arrows going both directions, so in some cases you will be exporting some of your electricity if in that moment that the sun is shining your loads are not sufficient enough to meet the supply of the solar. Don't let that scare you. 

In a lot of cases, especially if you're under 20 kw in Alliant territory and some other, but under 100 kw in Xcel territory and MGE, you can share those electrons with your utility, export them back, and still get the retail rate or credit on that net metering. Okay. So how do we figure into this? How does Legacy Solar Co-op help municipalities? Well one way we help is just by being an independent third-party. 

We say that we are installer agnostic, so even though we tend to do projects with a handful of installers around the state, if you want help with an RFP in your municipality to comply with bidding requirements, we can help you set up and figure out the engineering requirements for your project. Even before that we'll do the site assessment, narrow down your sites that you may want to contemplate putting solar on. 

And then we'll provide some of the engineering specs so that you can have an apples-to-apples comparison on the respondents to your RFP. So we can do some of that type of work but we can also come in and provide some tax equity financing. And to be honest and to be comprehensive our model does differ from a lot of models outside of Wisconsin. Outside of Wisconsin you usually have one big financee, financer that comes in and does a lot of projects. We call 'em power purchase agreements. 

You call 'em solar leases. You can't do that in Wisconsin. You really have to be careful on complying with and not becoming, having that third-party become an unregulated public utility. So we work closely with the rate payer. In fact, it's a co-ownership. So the municipality can use some RECIP funds. Everybody here know what RECIP is? Okay so, RECIP is one competitive bidding program, maybe it will be coming up again soon. 

But whatever kind of source of bond-- Oh three minutes, two minutes? Whatever source of bond financing, excuse me, grant financing that you might have or donations or even out of your city budget, that can be your equity ownership share in that solar project. The rest of it can qualify for tax investment financing. So that's what we do. The number of people around that circle that just is supposed to indicate that we've got some members. We have over 100 members in our co-op now. 

But what we do is we help provide some structure for this Tax Sponsor LLC to rent the roof space and we can provide some financing. The one opportunity that we actually have not taken advantage of yet on the municipal level, but if you wanted to have residence in your community go ahead and buy shares, they can buy solar panels or sponsor solar panels. It ends up being about two of our solar bonds per solar panel. We sell solar bonds to our members for $250 increments. 

Two of those are about $500. This is about the long-term cost of a solar panel. So that would be something that you can say, hey, I helped put that solar panel on City Hall, or I helped put 10 solar panels on the library. That can be part of what you're offering. You can't as a municipality solicit investments, but you can say we're working, we're partnering with Legacy Solar Co-op. 

Legacy Solar Co-op can do that kind of bond financing within the umbrella of our co-op we can solicit investments because the co-op members own the co-op. So this is a model. If you have any more questions that you're not able to answer during the question and answer session catch me at lunch. Otherwise go to LegacySolarCoop.org and thank you for your time. 

(applauding)

- Hi I'm Jason Stringer from the Wisconsin Energy Conservation Corporation and PACE Wisconsin. Thank you very much to the Academy and Sherrie and Extension for inviting us to come and update everyone on the progress we've made with PACE Wisconsin. What I'm gonna try to do is pack a bunch of stuff in to the next 10 minutes. 

I'll try to cover, what is PACE financing or property assessed clean energy? Why it's important? Do a little update on the program and the progress we've made with PACE Wisconsin and try to wrap up with some case studies. The story, PACE Wisconsin, is really about local government partnerships. This is kind of the founding partnership that helped bring PACE Wisconsin to fruition. And incidentally, I think we launched PACE Wisconsin about three years ago here or about the time of this conference. 

So the program, the governance structure of PACE Wisconsin was developed by von Breisen & Roper on a pro bono basis. That structure's been endorsed and supported by the legal Wisconsin municipalities and the Wisconsin Counties Association. Green Tier Legacy community and their memberships have been early adopters of the PACE Wisconsin program. State Office of Energy Innovation has helped us do outreach. 

City of Milwaukee's program was a trailblazer for us in a lot of respects, we learned a lot of lessons from them. And Wisconsin Energy Corporation now serves as the program administrator for PACE Wisconsin. This partnership started there and has grown to now include 30 member counties. 

Three years ago honestly the goal within WEC was to have two or three counties participating in PACE Wisconsin but the partnership with the Wisconsin Counties Association and Jon Hochkammer involvement in particular really helped us, make that goal and beat it 10 fold. So these counties collectively represent over 60% of the state's population. That means the commercial property owners in these jurisdictions have access to PACE financing. 

We continue to grow that membership and are working in a number of counties today. Just very briefly this is a perspective on PACE financing nationally and the hockey stick here is what we really want to focus on. This product is scaling in terms of the amount of volume that it's doing. The amount of clean energy we're generating with this product, it's very exciting to be a part of it. 

What is PACE financing? What does it do? PACE financing is financing for renewable energy, clean energy projects on commercial properties. What's unique about it and why the counties are involved is because these financings are secured by a tax assessment. Because of that security mechanism, property owners are able to realize some very unique business cases that we think unlock a lot of clean energy potential. Within PACE Wisconsin, PACE financing is available to commercial property owners. 

That is a pretty broad array of property owners. That can be traditional real estate buildings, but it can also expand into institutional buildings, such as a private school, potentially places of worship, but also agricultural entities. There's isn't a local government that we work with that doesn't have an agricultural component. And those businesses use a lot of energy and there's opportunity there as well. So I'm gonna briefly talk about why PACE. 

I'll do kind of a CliffsNotes version of this and tailor it to why we think PACE is a very effective tool for helping businesses install solar on their businesses. And generally as Kurt started to talk about a business, when they talk about investing their capital in a project, they typically have a return or a performance objective for their capital of a two- to three-year return on their investment. We all know clean energy investments just don't perform that well. 

There are five-, seven-, 10-year paybacks. So with PACE we can really change the equation and turn that clean energy project into a very exciting business case. Doing that by financing 100% of the installation. So in a case with solar project a business can use PACE financing with no cash out of their pocket. They can leverage non-recourse financing, which in the finance world is very attractive to kind of mitigate personal risk and tie the project and the financing to the property. 

So no cash out of pocket. The other benefit is we can match those longer-term paybacks that we derive from the clean energy investments with long-term financing. So for a solar installation right now today we can offer 20-, 25-, 30-year fully amortized money for a solar installation here in PACE Wisconsin. That's very attractive. 'Cause what we can do is match the repayments of that financing with the benefit stream that comes off of those solar installations. 

We turn that project into a cash flow positive project from day one. So business owner has no cash out of pocket and they're boosting their profitability from the energy benefits they're deriving from the system. Truly groundbreaking in terms of how this product can unlock clean energy benefits. Back to PACE Wisconsin. PACE Wisconsin is an open market program. Any lender can utilize this security mechanism and make the PACE financing to their customers. 

Currently we have 12 financial institutions participating in PACE Wisconsin. Collectively this group makes available well over 100 million dollars' worth of capital to fund clean energy projects. To date we've funded five projects in PACE Wisconsin. We have a growing pipeline and we're excited about what's gonna happen over the next few years. I wanna switch to a couple of case studies. These are from one of our lenders, Green Works Lending. 

They work across the country like a lot of our lenders we have both local lenders like McFarland State Bank and Farmers Savings Bank, but we also have national lenders. I'm gonna use a couple of case studies from solar installations that were done in other parts of the country. But I just tell the audience I think by the summer we'll have our first couple of solar PACE financings done in PACE Wisconsin. Up till now they've all been efficiency projects, which is fine. 

So this is an office building that has about 126 kilowatts of solar installed on it and the clear takeaway here is the net benefits that accrued to the building owner is a million dollars over the lifetime of that system. So net of all of the payments the energy benefits produce a million dollars worth of increased value in incremental revenue to this business. Very similar case study here. 

This is another office building on the East coast where I think they put about a thousand panels, not sure how many kilowatts that is. And again business owner has a tremendous amount of cash coming back year one. In the lifetime of the system again a high-million-dollar net cash flow benefit to the business. 

So clearly other businesses have recognized that this tool can be an effective tool to help them not only achieve their clean energy goals but also boost their profitability of the underlying business. More information about PACE Wisconsin is available on our website, we use the website, I rely on it quite a bit to really interface with the market, that's PACEWI.org. And I look forward to your questions and discussion that follows. Thanks. 

(applauding)

- Thank you. Now you've seen what a community had to go through and a couple of funding opportunities of how to help your businesses and residence and also property assessed clean energy for energy efficiency to help your commercial sector as well as your residential, or no, just your commercial sector. And I want to say that if you're a municipality in a county that hasn't adopted PACE, go lobby your county officials to do so. Okay, so. Let's see. 

Oh, someone, a question is, what did the Legacy Co-op bonds pay in interest rate to their bond purchasers?

- I'm sorry I didn't get a chance to get into all of that but the bonds are in $250 increments. Two requirements: you have to be a member of the co-op-- it's not a high barrier-- and a resident of the state of Wisconsin. So satisfy those two conditions you can buy bonds and help support solar growth. They pay between 4 and 6% interest. And it's a 12-year note. We pay principal and interest. 

So, by the time you get year six, year seven you've already got half your money back but that's how-- That's just the most responsible way we could figure out to run that program.

- Thank you. I just wanted to say I brought some hard copies of the Solar Energy Financing Guide. They're on the registration table in the back. It's also available digitally right now on the-- On ERC's website at the university, but it's usually on the Energy on Wisconsin website. Right now the links broken but it will be up there. So we have a question. How do you see the new administration's solar tariff affecting installations of new projects?

- 

[Jason]

 Trade tariffs.

- Oh, the trade tariff.

- Oh, trade tariff. Yeah, we've seen a 5% increase. Probably not more than 10% increase in module prices. And that makes up about 40% of the overall cost. But installers kind of saw the writing on the wall a year ago so they prepared and so it's negligible. I'd say less than 5% affect.

- It's really gonna affect the larger utility scale solar more than the individual ones, and a lot of the people who did know that this-- A lot of our installers obviously knew what was coming and they ordered Canadian panels to kind of avoid that, 'cause it's not on every solar panel that's manufactured. Well thank you so much. 

We're gonna move on to the next panel and there is no break, so I want to invite the panel on energy systems of the future to come up please and thank you again for being part today. 

(applauding)