RE:NEW Fall 2020 - old

This issue of RE:NEW - solar insights from industry experts - nhfdahfadjkfhdjk lubvrut

ISSUE 08

FALL 2020

Solar insights from industry experts RE:NEW

PARTNER Q&A Family Farm Finds Financial Stability with Solar

ASK THE EXPERTS Overcoming Regional Project Completion Issues

EDITORIAL FEATURE Exploring Solar Financing and Interconnection

Editor's Note

Partner Q&A 03 By the Numbers 04 Ask the Experts 05 Editorial Feature 07

RE:NEW ISSUE 08 / FALL 2020

FROM THE TOP

Partnerships Offer Powerful Possibilities

Goldman Sachs Research estimates that more than 200 GW of renewable energy projects will be installed between 2017 and 2030, which will require $360 billion of capital expenditures. And the Solar Energy Industries Association (SEIA) predicts there will be $7.4 trillion in clean energy investment by 2040. While the opportunities in the industry are vast, moving a project along can be daunting. That’s where knowledge, deep expertise and the right partnership can make a real difference. In this issue of RE:NEW , our own experts Peter Coleman and C.J. Colavito , explore the daunting challenges of financing and interconnection on projects in multiple states. They explain how to tailor your projects properly to operate within your specific state

and discuss why partnering with the right people can push your project across the finish line (pages 7 and 8). But who knows more about challenges at the state level than the local state solar associations? That’s why we reached out to the experts at the California Solar + Storage Association , the Maryland- DC-Delaware-Virginia Solar Energy Industries Association , the Minnesota Solar Energy Industries Association and the New York Solar Energy Industries Association to get their input on what the biggest challenges are to getting commercial and community solar projects completed in their states. (pages 5 and 6). And, better than knowing the challenges is overcoming them and succeeding. Learn from Fritz Family Farm in New Windsor, Maryland and how adding solar to their 100-year-old property helped them achieve something they couldn’t count on in the up-and-down

commodity market that is modern farming: a steady income stream from a well-funded offtaker. As a leader in this industry, it’s our job to not just identify some of our industries challenges but to also bring you actionable data and content, so together we can create partnerships to promote economic development and deliver enduring benefits. We hope you enjoy this issue of RE:NEW in its new electronic format! Sincerely, SCOTT WIATER President & CEO, Standard Solar

WE’D LOVE YOUR FEEDBACK!

Tell us how we’re doing or suggest topics/ideas of what you think we should cover in our next issue at info@renewpub.com .

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PARTNER Q&A

megawatt (MW) solar array 2.7 of 400-acre grain, hay and cattle farm 12 ACRES 7,336 PANELS 4,000 mw HOURS ( mwh ) ANNUALLY

Agricultural Solar Project Provides Farms With Long-Term Financial Stability

The Fritz Family Farm has existed for more than three generations and more than 100 years. Currently co-owned by brother and sister Jeffery Fritz and Jessica Fritz Little, the farm, which produces barley, wheat, soybeans, alfalfa, grass hay and corn, has sought to build an environmentally sustainable ethos. Now, with its latest foray into adding solar power to the farm’s “crop” portfolio, Jeffery and Jessica are carrying on that tradition handed down from generations before. Here’s how the Fritz Family Farm solar project came to be. What first got you interested in solar energy? We’ve always been interested in using solar energy to power the farm, including installing an array on the property that supplies most of the electricity. It’s in keeping with our long-standing commitment to run our property in an environmentally sensitive manner. Solar energy is just another way for us to prove our commitment. What made you decide to build a solar array and sell the power to an offtaker? First of all, we were inspired by the success of our onsite generation.

We saw the financial savings to our business and realized we could bring those savings to a wider audience with another solar array dedicated to selling the power to an outside source. Then it just became a matter of finding the expert partners to work with, and Standard Solar and WSSC Water fit the bill perfectly. How does the solar array affect your farm's finances? We’ve been farming for more than 100 years, and we’ve been able to weather the natural ebbs and flows of the market. But solar power provides us the opportunity to earn a steady income based on our own electricity- generating capabilities. It offers us an opportunity to do long-term planning in a way no other “crop” would do, so it provides stability in an industry that is often subject to the whims of Mother Nature. What other advantages does this solar array bring to the community? The benefits of this project are far- reaching. WSSC is located about 30 miles from our site. Our favorite part of this project is that this was low impact to the land. If the time ever comes to decommission the site in the future the land will be returned to its original state for other uses (including agricultural). ❂

Developer/Contractor Partners: Air Technologies LLC and Ogos Energy LLC

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BY THE NUMBERS

The 14-year opportunity for renewable energy equates to a $26 Billion annual capital spending opportunity split between wind, utility scale solar, and distributed generation solar.

An estimated 26 GW of solar will be installed in the next two years: the same amount that has been installed in the entire history of the industry.

The first quarter of 2020 was the country’s largest ever, with 3.6GW of new solar capacity added.

There will be an estimated $7.4 Trillion in clean energy investment by 2040.

There are nearly 2 Gigawatts of community solar installed across the United States.

—Solar Energy Industries Association (SEIA)

10 STATES

in 2019, with the highest percentage of solar penetration generated at least 4.5% of their energy from solar.

—U.S. Energy Information Administration

COMMUNITY SOLAR PROJECTS Located in 39 states, plus Washington, D.C.

Research estimates that

MORE THAN 200 GIGAWATTS OF RENEWABLE ENERGY PROJECTS

REQUIRING $ 360 BILLION OF CAPITAL EXPENDITURES.

WILL BE INSTALLED BETWEEN 2017 AND 2030,

have policies that support COMMUNITY SOLAR 20 STATES +WASHINGTON, D.C.

15 STATES & W ashington , D.C.

Community solar projects represent megawatts alternating - current ( mw - ac ) 2,625 of total installed capacity

have a policy or program supporting some type of

—Goldman Sachs

LMI COMMUNITY SOLAR PROGRAM

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ASK THE EXPERTS

the upgrade cost up-front and hope for pro rate reimbursement down the line from subsequent projects. The fix is an improved mechanism that removes this first-mover barrier by only requiring each project to pay its pro rata share. New York Solar Energy Industries Association (NYSEIA) is leading on this front and will be filing a regulatory proposal in conjunction with the Joint Utilities of New York as part the state-level Interconnection Policy Working Group for consideration by the Public Service Commission of New York. Secondly, the current process for property tax determination is a significant pain point for development of solar projects. New York State Real Property Tax Law 487 by default provides a 15 year exemption from Real Property Taxes for solar in all jurisdictions (except Special Districts). Each taxing jurisdiction is left to determine its own ad hoc approach with no standard assessment methodology. The lack of standardization and predictability can severely threaten and disrupt larger project development, and create unnecessary friction between developer and local communities. The fix here, which NYSEIA is also spearheading, is to standardize the methodology for assessment of property taxes for solar and storage projects—ideally legislatively—so there is a uniform approach to valuing projects across jurisdictions, and greater certainty and predictability regarding property tax and Payment in Lieu of Taxes (“PILOT”) payments. Standardizing the assessment methodology will also result in less time spent on PILOT negotiations and thus faster deployment of projects across the state, which will also bring in significantly greater tax revenue for taxing jurisdictions as we build out these projects to comply with NY's Climate Legislation and Community Act (CLCPA)-mandated goal.

What is the number one issue in getting projects completed in your region—for example, financing, siting, permitting, etc. And what does the industry need to do to help solve these challenges?

David Murray EXECUTIVE DIRECTOR MARYLAND-DC-DELAWARE- VIRGINIA SOLAR ENERGY INDUSTRIES ASSOCIATION

After passing transformative legislation in Virginia, Maryland and DC over the last two years, the solar industry cannot rest on our laurels. We continue to face challenges around implementation: some at the Utility Commissions, some at the local level and some at the legislature as we clarify laws governing solar, such as tax liability and how to permit storage. But if we at the Maryland-DC-Delaware- Virginia Solar Energy Industries Association (MDV-SEIA) could organize the industry around one issue, it would be permitting. No matter the segment, counties are grappling with the permitting and inspection process of solar power. The volume of utility-scale and commercial projects being built in our region has skyrocketed, and localities are struggling to keep up in a way that keeps projects moving. Streamlining or standardizing the process takes time—and initiative—and it's difficult for the industry to do this county by county. If we are truly going to make Virginia, DC, and Maryland solar-friendly, the industry needs to work with counties to enact solar- friendly ordinances, ensure the permitting and inspection process is straight-forward and efficient for both the locality and the developer and take advantage of cost-saving programs like the National Renewable Energy Laboratory's SolarApp.

ShyamMehta EXECUTIVE DIRECTOR NEW YORK SOLAR ENERGY INDUSTRIES ASSOCIATION

The first challenge is distribution grid upgrade costs associated with interconnection of projects—we are at a point where for the majority of new projects, there is insufficient hosting capacity to accommodate them without upgrades, and these upgrade costs can be significant (in the high five or six figure range). Compounding this, these upgrades generally benefit multiple interconnection projects at a location, but the burden of payment is on the project triggering the upgrade, which must pay 100% of

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Bernadette Del Chiaro EXECUTIVE DIRECTOR CALIFORNIA SOLAR & STORAGE ASSOCIATION The number one issue facing the C&I market in California are the changes to commercial rate structures that have made standalone solar tough to pencil for many customers. Energy storage is the answer. Developers need to gain experience with available energy storage options, and ongoing incentives will be needed. C&I companies should join California Solar & Storage Association (CALSSA) in pushing for ESS incentives in California.

David Shaffer, Esq. EXECUTIVE DIRECTOR MINNESOTA SOLAR ENERGY INDUSTRIES ASSOCIATION

Despite being the 22 nd most populated state, Minnesota is a top 5 state for distributed solar deployment on a per/MW basis. With so much distributed solar distribution system impacts are becoming more frequent. This requires more utility study time and more mitigation measures. So it should be no surprise that Minnesota's number one problem right now is utility interconnection. There are actual engineering challenges with high penetration rates, but also utility choices seem to be resulting in failure to comply with their own tariffed timelines. Minnesota's solar industry must figure out an approach to deal with both issues. So what we're working now is to improve upon our relatively new interconnection rules and to put penalties into place to make sure the revised rules are followed. At Minnesota Solar Energy Industries Association (MnSEIA) , we're optimistic the state can break the log-jam and start putting steel in the ground faster. ❂

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EDITORIAL FEATURE

C.J. Colavito VP of Engineering, Standard Solar

Every solar project is different, and nowhere is that truer than when it comes to developing and financing commercial and community solar projects in different states. Solar companies must tailor their projects according to the regulations set in each state’s solar policies, what investors are looking for and the utility where the project will be interconnected. Navigating states’ regulatory and utility environments poses some of the largest challenges to solar companies in successfully constructing and financing projects on time and on budget. When it comes to finance, tax equity drives the industry. Whether investors see solar projects as a safe bet, however, is often determined by regulations set in each state. Take community solar projects, for instance. In Minnesota, state regulations allow community solar projects to allocate capacity to large commercial off-takers. This allows project owners to allocate a material portion of the project capacity to investment grade qualify off-takers at fixed rates. Other states, such as New York, require certain percentages to be allocated to residential subscribers, making it more challenging for investors to fully grasp the risk. Illinois’ community solar regulations, on the other hand, heavily compensate investors for the value of Renewable Energy Credits (RECs) in the first four years, making it an attractive state to focus on. “Any time you’re participating in a market we must carefully understand and evaluate the rules of the program and the NAVIGATING SOLAR FINANCE AND INTERCONNECTION: How A Patchwork of State Policies and Utilities Post Challenges to Solar Projects

Peter Coleman Senior Vice President of Structured Finance, Standard Solar

associated risks,” said Peter Coleman, Senior Vice President of Structured Finance at Standard Solar. Project financiers and investors will look closely at the compensation structure and risk, which in large part is determined by the state regulatory bodies. It’s not enough that a state is generally supportive of solar

energy—the specific details of the state regulations can make or break solar investments. The role of the off-takers (the purchaser of credits generated by a solar project) in a community solar program, for instance, is particularly important. “If the off- takers are credit-worthy, and will be around for the next 20 years, that’s very attractive

The states that are most attractive to financing are where the utilities drive the regulations and support the programs to be successful.

to investors,” said Coleman, “and even better if the rate that the customer is going to pay will not change over the term of the agreement.” Coleman says that the states that are most attractive to financing are where the utilities drive the regulations and support the programs to be successful. Fundamentally, it “gets down to how a program is structured and how projects are compensated under a program,” says Coleman. “The best states

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for solar are where the utilities are supportive of the regulations that ultimately make projects successful.” Utilities’ supportiveness of solar also determines how successful interconnection will be. “Interconnection is essential to any solar project and the first thing we tackle,” said C.J. Colavito, Vice President of Engineering at Standard Solar. Colavito says the biggest challenges to interconnection are cost and timing, both of which can be determined by

Another challenge to interconnection is that some states and utilities are starting to approach maximum capacity for solar permitted on some distribution circuits in their current system to ensure reliability. Colavito points to examples of New Jersey in particular, and some areas of Massachusetts and Maryland. “That’s why you want to hustle on interconnection,” As solar projects with storage continue to grow, some of the utilities’ concerns might be alleviated. As states move toward 100% clean energy, storage will eventually be inexpensive enough to mitigate this challenge in some situations, Colavito says. Already, New York and Massachusetts offer incentives for solar storage projects, which can be used to ensure reliability. Behind-the-meter storage can be used for resilient (backup) power and demand-charge reduction, as well as load shifting—shifting energy purchases from high-cost times to lower-cost times. Federal and state policy will in large part determine the ease of solar financing and interconnection moving forward, as well as the enormous potential role for solar and storage to disrupt the way utilities do business. says Colavito—the first projects to get in the interconnection queue will be successful.

the utility’s desire to see the program succeed. Utilities will conduct— or use a third-party company to conduct—a study as a first step on interconnection, which

Interconnection is essential to any solar project and the first thing we tackle.

can take up to six months. These studies determine how potential projects can be added to the grid and whether additional infrastructure or upgrades would be needed for the energy to be added to the grid. Many utilities are reluctant to connect solar systems, as some are concerned it threatens the traditional utility business model, while others claim that solar might affect reliability. As a result, they may have limited staff to support interconnection, conduct the study slowly, or charge high costs, all of which can affect a project’s ability to get off the ground. This is particularly true for large, investor-owned utilities that can be conservative about the solar energy on the grid, whether their concerns are justified or not. On the other hand, smaller municipalities and co- ops can be easier to work with, says Colavito, where “the interconnection costs for the same type of work can be 30 percent of what you would pay with some investor-owned utilities.” Colavito says that good relationships with the utilities—something Standard Solar strives to forge— and knowing the right questions to ask can help move the interconnection process along. “We see how they’re managing solar in different places and we bring the strategies and solutions from one place to another to maximize its likelihood of success and reduce costs,” says Colavito.

Right now, the project financing landscape is uncertain, because as Coleman notes, many companies are dropping out of the tax equity market amid uncertainty in the political landscape and the COVID-19 recession. The upcoming federal government and state elections will also be closely watched by investors and utilities and will determine the way solar projects move forward in the future. As an increasing number

We see how they’re managing solar in different places and we bring the strategies and solutions from one place to another to maximize its likelihood of success and reduce costs.

of states set clean energy targets, stimulus packages are under consideration and climate change has become a key issue in the presidential election, utilities and investors may treat solar differently, and solar companies will continue to have to be nimble in their approach. ❂

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FINANCING SOLAR PROJECTS NATIONWIDE, BUILDING PARTNERSHIPS FOR LONG-TERM SUCCESS

At Standard Solar, we’re investing in partnerships. We’re a vertically integrated, financing and co-development partner with the expertise in finance and engineering to capitalize on efficiencies. In every partnership, we are focused on using what we know and our vast resources to build something together that will stand the test of time and maximize returns for the duration. Let’s build a partnership today.

STANDARDSOLAR.COM | 888.474.3843 | SALES@STANDARDSOLAR.COM

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