View
35
Download
1
Category
Tags:
Preview:
DESCRIPTION
Profiting from Connecticut’s C-PACE Financing Program Presented by: Brian McCarter CEO March 19, 2013. Overview. Connecticut Commercial Property Assessed Clean Energy (C-PACE) Program Background Power of C-PACE in Commercial Real Estate (CRE) - PowerPoint PPT Presentation
Citation preview
Profiting from Connecticut’s C-PACE Financing Program
Presented by:
Brian McCarterCEO
March 19, 2013
Connecticut Commercial Property Assessed Clean Energy (C-PACE) Program Background
Power of C-PACE in Commercial Real Estate (CRE)
Benefits to ESCOs, Energy Auditors, Project Developers, Contractors
Underwriting Energy Efficiency Financing
Financial
Technical
Conclusion
Overview
July 2011 – CT passed statewide enabling C-PACE legislation
Clean Energy Finance & Investment Authority (CEFIA) directed to establish & administer the program
Municipalities that “opt-in” are authorized to place a benefit assessment on a property whose owner has secured financing through C-PACE
Program Background
Nov 2012 – CEFIA selected 3rd party program administration team tosupport technical underwriting process
Buonicore Partners (BP): energy & CRE advisory firm provides C-PACE project management & technical oversight for CEFIA
Celtic Energy: energy engineering consultancy provides BP team’s 3rd party technical reviews
Sustainable Real Estate Solutions (SRS): software firm powers CEFIA Data Management Platform providing all stakeholders transparent access to technical & financial underwriting data
Program Background
C-PACE provides an innovative financing structure enabling commercial, industrial, & multi-family property owners to access financing for qualified energy upgrades and repay through a benefit assessment on their property.
Private capital provides 100%
long-term funding
Repayment through property taxes
A senior PACE lien is put on the property
and stays regardless of ownership
Program Background
Taxes, to repay assessment, collected in normal course by municipality
Process is entirely consistent with other benefit assessments
The PACE assessment has priority over existing mortgages
The owner must secure written consent from the mortgage holder prior to project approval
Program Background
The goal: Attract private capital to fund EE & RE initiatives
Owners may recruit their own capital providers
8 capital providers have been pre-approved to fund projects
Program Background
Anything that saves from baseline
High efficiency lighting
HVAC upgrades
New automated building and HVAC
controls
Variable speed drives (VSDs) on
motors fans and pumps
High efficiency chillers, boilers, and
furnaces
High efficiency hot water heating
systems
ECM Upgrades: What’s Eligible?
… as long as it isn’t going anywhere
Combustion and burner
upgrades
Fuel switching (e.g., oil to gas)
Water conservation
Heat recovery and steam traps
Building enclosure/envelope
improvements
BMS
Renewable energy systems
Appliances, e.g., refrigerators,
dishwashers, etc.
Plug load devices
Vending machine controls
Any package of measures with a
weighted average effective
useful life (EUL) that does not
meet or exceed life of the loan
Any package of measures that
does not achieve an energy
savings to investment ratio > 1
ECM Upgrades: What’s Not Eligible?
Any measure that is easily
removed/not permanently
installed
Any measure that does not
result in improved energy
efficiency
Extending natural gas lines to
a property line to enable a
PACE-eligible gas conversion
project.
Capital improvements without capital expense
100% of project cost covered Engineering and construction costs
Energy audits
Renewable energy feasibility studies
Post-construction measurement & verification of energy savings
PACE assessment is an obligation of the property, not the owner
Repayment made through property tax bill
The Power of C-PACE Financing
Property tax payments may qualify as an operating expense
Obligation not accelerated at the time of sale
Tax payments may be passed through to tenants who enjoy the benefits
Long-term financing
Energy savings will exceed investment cost
Well-developed projects can achieve positive cash flow from day one
Increases building value
Enhances building’s competitive position in the marketplace
The Power of C-PACE Financing
CEFIA:
Acts as a conduit for private investment
Encourages CRE owners to arrange their own financing
Can connect owners to capital providers
CRE owners:
Negotiate rate, terms, conditions & schedules with capital provider
Can undertake deeper more capital intensive retrofits with greater savings potential & longer payback periods
The Power of C-PACE Financing
Deeper energy retrofits with longer payback times can be pursued
Facilitates new energy efficiency projects or re-activates projects that had been put on hold due to the “Great Recession”
Market expansion beyond MUSH market to the much larger multi-tenant CRE market where turnover is more frequent and property owner credit quality may not be investment grade (single purpose LLCs)
Whole building or targeted ECM retrofits (“pent-up demand”)
Cost of up-front energy audits, renewable energy feasibility studies and M&V costs can be bundled into the financing
Win-win for everyone!
Benefits to Auditors, ESCOs & Prj Developers
Financial
Technical
C-PACE Underwriting Standards
Benefit assessment holds a senior (priority) position
Consent of property mortgage holder required
Total savings over the financing term must exceed the total project investment (SIR > 1)
C-PACE may not be ideal for highly leveraged properties where existing debt plus a C-PACE assessment is greater than the property value
CEFIA conducts review, including building’s debt, equity, income, & occupancy
C-PACE Financial Underwriting
Property must have clear title with no encumbrances
Property taxes should be current
There should be no outstanding tax liens or notices of default
Mortgage payments must be current
No easements or subordination agreements that would conflict with PACE assessment
Project useful life must be longer than the financing term
C-PACE Financial Underwriting
Key challenge: “Will the projected energy savings be realized?”
Problem #1: Energy savings can’t be measured directly
Problem #2: No standard methodology to underwrite energy efficiency
Problem #3: Without a solution to #1 & #2, EE Financing cannot become a mainstream financial asset class with a high degree of standardization, predictability and scale that attracts capital providers
No longer true today!
C-PACE Technical Underwriting
Nationally recognized technical standards define the process from data collection to energy savings measurement and verification
Energy savings can be forecast with a high degree of confidence
Actual energy savings performance can be measured and verified in a
reliable, consistent and fully-transparent manner
Risk of underperformance is low
C-PACE Technical Underwriting
Rely on three established industry protocols:
ASTM Building Energy Performance Assessment Standard E2797-11
Methodology for collecting & analyzing baseline energy data
ASHRAE Level I, II, III Energy Audit Guidelines
Methodology to identify energy conservation measures (ECMs) & project energy savings with high degree of confidence
International Performance Measurement & Verification Protocol (IPMVP)
Methodology for energy savings measurement & verification
Underwriting methodology is technically sound, standardized, reliable & fully-transparent
C-PACE Technical Underwriting
Project data are entered & tracked in CDMP for use by all deal stakeholders across the entire project life cycle
Project development through M&V
Powered by SRS’s cloud-based software platform
Facilitates consistency & transparency
Compliance with 3 industry protocols
CEFIA Data Management Platform (CDMP)
All deal stakeholders have access to CDMP CEFIA
Building owner
Capital provider
Auditor, ESCO, Project Developer, Contractors
Insurer (where Energy Savings Insurance is used)
CDMP follows the project post-installation through M&V
CDMP meets reporting needs of multiple interdependent stakeholders
CEFIA Data Management Platform (CDMP)
Calculate Baseline Performance
CDMP enables auditor upload of utility bill data in excel format Normalize for calendar month, weather, occupancy, etc.
Recommend ECMs
CDMP enables auditor upload of ECM data in excel format
Create scenarios to determine optimized bundle of ECMs
Project Energy Savings Scenarios
Calculate Key Financial Metrics CDMP enables capital provider financial underwriting
Project Cash Flows over C-PACE Term CDMP enables capital provider financial underwriting
Financials establish loan amount & term
CEFIA facilitates interest from capital providers, where needed Provide CDMP technical & financial underwriting data access Include credit enhancements (performance guarantees, insurance)
Owner secures most “commercially-attractive” financing Existing mortgage holder 3rd party capital provider ESCO arranged
Secure “Commercially-Attractive” Financing
Measure & Verify Energy Savings
Beacon Falls
Bridgeport
Durham
Hartford
Middletown
Norwalk
Old Saybrook
Southbury
Coming soon: Waterbury, East Granby, Fairfield, Manchester, Wethersfield, New Haven, Meriden, Plymouth, Cheshire, Putnam
Simsbury
Stamford
Stratford
West Hartford
Westport
Wilton
Windham
Municipalities Opting in to C-PACE (as of Mar 2013)
C-PACE technical underwriting enables energy savings to be forecast with a high degree of confidence resulting in a low risk of underperformance
Actual energy savings performance can be measured and verified in a reliable, consistent and fully-transparent manner
C-PACE is enabling EE financing to become a mainstream financial asset class with high degree of standardization, predictability & scale
C-PACE financing structure is very attractive to CRE owners and provides “an offer that is very difficult to refuse”
C-PACE represents a significant opportunity for ESCOs, auditors, project developers, consultants and contractors to increase their CRE business
Summary
First round of training sessions:
March 22, 2013 Berlin, CT March 26, 2013 Norwalk, CT April 1, 2013 Berlin, CT
Registration link and application on www.c-pace.com/application/contractor
Auditor, Contractor & ESCO C-PACE Training
Understanding Connecticut’s C-PACE Technical Requirements
Presented by:
Paul PopinchalkDirector of Engineering
March 19, 2013
C-PACE Program Industry Protocols
ASTM Building Energy Performance Assessment Standard E2797-11
Methodology for collecting & analyzing baseline energy data
ASHRAE Level I, II, III Energy Audit Guidelines
Methodology to identify energy conservation measures (ECMs) & project energy savings with high degree of confidence
International Performance Measurement & Verification Protocol (IPMVP)
Methodology for energy savings measurement & verification
ASTM BEPA Standard to Establish Energy Use Baseline
What was the Problem?
What is the “building’s energy consumption? Sounds simple, but “the devil is in the details” Lack of standardization to collect and analyze
building
energy use ■ No consistent and transparent methodology existed for building energy use data collection to establish baseline conditions!
What does the ASTM BEPA “Standardize” in the Baseline?
The time frame over which data needs to be collected 3 years or back to last “major renovation” if less than 3 years, with a minimum of 1 year of
data meeting reliability criteria
What constitutes a “major renovation” ■ A renovation involving expansion (or reduction) of a building’s gross floor area by 10% or more, or any renovation impacting total building energy use by more than 10%)
What weather data needs to be collected, from where and how it is to be statistically analyzed to establish baseline conditions
(minimum 10 years HDD & CDD data from nearest weather station with historical data)
How the building energy use equation is developed (relating energy use to the independent variables that impact energy use)
What does the ASTM BEPA “Standardize” in the Baseline?
What constitutes an appropriate range for building energy use ■ An upper limit with independent variables at the 75th percentile ■ A lower limit with independent variables at the 25th percentile
What constitutes the most representative value for building energy use (for benchmarking purposes)
■ Pro forma building energy use (based on mean values for independent variables)
Identifies criteria for collecting reliable building energy use
data…
Criteria for Collecting Reliable Energy Use Data
No “major renovations” in time period
A minimum of 10 years of weather data from the nearest weather station (with historical data) to the building
Special criteria if only 12 months of energy use data is collected (non-weather independent variables must be within 15% of the monthly average determined over the previous 3 years)
Qualified professionals used for data verification (such as for gross
floor area calculation, definition of vacant space, identification of pertinent building
characteristics, electric meter box coverage, energy use in parking areas, major
building energy use systems, independent variables impacting building energy use,
etc.)
ASTM BEPA Standard Components
Complements the ASHRAE Energy Audit:
Site Visit & Building “walk-through” (already part of the
energy audit scope of work)
Interviews (already part of the energy audit scope of work)
Records Collection & Compilation (already part of the energy
audit scope of work)
Records Review & Analysis (already part of the energy audit
scope of work)
Summary of ASTM BEPA Methodology
Develops building energy use baseline (energy use (total, fuel,
electricity) as a function of independent variables impacting energy
use)
Can be used to project building energy use without ECMs
installed
Uncertainty analysis can be incorporated (by evaluating the
standard deviation comparing actual energy use against projected
energy use and selecting a confidence level)
Determines normalized building energy use
metrics (such as EUI, kBTU/SF-yr) for benchmarking
Benchmarking
■ Select one or more benchmarking models/databases as
appropriate
CBECS (2003)
State-developed Benchmarking Initiatives (e.g., CA)
Energy Star (derived from CBECS)
Consultant’s Internal Benchmarking Data
Building Owner’s Internal Benchmarking Data Commercial benchmarking services ← Selected by C-PACE
■ Benchmark against “peer” buildings
Building Total EUI
Building Fuel EUI
Building Electricity EUI
Energy Audit
What’s done in an energy audit?
Establish baseline building energy use
Quantify energy use according to major building
function
Benchmark against peer buildings
Recommend ECMs, project energy savings, estimate
project cost and determine key financial metrics
Energy Audit cont’d
ASHRAE provides guidelines for 3 types of energy audits:
Level I – “Walk-through Analysis” or “Preliminary Audit”
Level II – “Energy Survey and Analysis” or
“Comprehensive Audit”
Level III – “Detailed Analysis of Capital-Intensive
Modifications” or “Investment Grade Audit”
ASHRAE Level I Energy Audit
Building description
On-site walk-through (typically one day)
Collect historic building energy use and cost data
Benchmarking analysis
Identify potential ECMs and typical energy savings
Prioritize energy savings opportunities for further
investigation (Level II Audit)
ASHRAE Level II Energy Audit
More comprehensive on-site survey (up to 1 week)
In depth analysis of historic building energy use and
cost data (interval data, if available)
Identify energy savings opportunities (ECMs)
Identify ECM EULs and degradation factors
Project energy savings (building modeling)
Estimate costs (including incentives/rebates)
Recommend ECMs meeting criteria
Investment and cost savings analysis
ASHRAE Level III Energy Audit (IGA)
More comprehensive than Level II audit to bring a
highest level of confidence
Generally for very capital intensive projects
More detailed field data gathering and more
rigorous engineering analysis over a longer period
of time (typically up to a month)
M&V Plan (C-PACE Requires Upfront)
Goal and objectives
ECM description and operation
Recommended M&V approach (IPMVP?)
Data analysis procedures and algorithms
Field monitoring (data points)
Reporting (CDMP)
IPMVP for M&V: Four Options
(1) Option A: Retrofit Isolation - Key Parameter Measurement (e.g., a lighting retrofit
where power draw is the key performance parameter measured, but where
interactive impacts, to heating and cooling loads, can be calculated)
(2) Option B: Retrofit Isolation - All Parameter Measurement in the field (e.g., install
variable speed drive and controls to a motor, and measure electric power with a kW
meter installed on the electrical supply to the motor)
(3) Option C: Whole Facility - when a multifaceted energy management
program affecting many interrelated systems is installed, and gas &
electric utility meters exist to measure energy use at the facility
(4) Option D: Calibrated Simulation (e.g., a multifaceted energy management
program affecting many interrelated systems is installed, but no meters exist and
building simulation model must be developed – such as for a new building or a
college campus with central utility metering and no metering at individual buildings)
Option C-Usually Best for Commercial Whole Building Energy Retrofits
Multiple ECMs retrofitted in a commercial building (such as an
office building, a hotel or a retail building)
ECMs involve activities whose individual energy use is difficult to
separately measure (e.g., window upgrades)
Interactive effects or interactions between ECMs can be substantial
Historic energy use data exists (to establish the baseline)
Reasonable correlations can be developed relating building energy
use to independent variables
IPMVP General Framework for Commercial Buildings: Pre-ECM Installation
Use energy audit to establish baseline energy use profile
prior to installation of ECMs
Use baseline to project energy use into the future (over
the “reporting period”) had the ECMs not been installed
Use baseline to project energy use into the future (over
the “reporting period”) with the ECMs installed
Projected savings (“avoided energy use”) is difference
between expected energy used assuming ECMs not
installed and expected energy use assuming the ECMs
installed (with both calculated under the same conditions)
IPMVP General Framework for Commercial Buildings: Post-ECM Installation
Determine actual energy use in the “reporting period”
with the ECMs installed
Use baseline to project energy use in the “reporting
period” had the ECMs not been installed (calculated
under the same conditions experienced while collecting
actual energy use data)
Savings (“avoided energy use” in the “reporting
period”) is difference between projected energy use
had ECMs not been installed and the actual energy use
after ECMs installed
ECM Performance Verification
Visit C-PACE program website: www.c-pace.com
Genevieve Sherman: CEFIA Manager, C&I Property Assessed Clean Energy
Email: genevieve.sherman@ctcleanenergy.com
Direct phone: 860.257.2897
Brian Burstiner: SRS Director of Sales
Email: bburstiner@srmnetwork.com
Direct phone: 203.880.9622
Paul Popinchalk: Celtic Energy, Director of Engineering
Email: paul@celticenergy.com
Direct phone: 860-882-1515
Additional Information & Contacts
Recommended