Community Solar –A New Dimension in Solar MarketsOctober 1, 2015

Copyright 2015 Ballard Spahr LLP. All rights reserved.

Moderator R. Thomas HoffmannPractice Leader - Energy & Project FinanceBallard Spahr LLP

Panelists Martin MobleyCEOUnited States Solar Corporation

John MiDirector of Structured FinanceNRG Energy Inc.

Marie SteeleManager of Electric Vehicles & Renewable EnergyNV Energy Inc.

Amir YazdiAssistant General CounselSolar Energy Industries Association (SEIA)

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Ballard Solar Map

Ballard Spahr OfficesSolar Experience

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Moderator – R. Thomas Hoffmann

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Panelist – Martin Mobley

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Panelist – John Mi

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Panelist – Marie Steele

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Panelist – Amir Yazdi

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Community Solar Structures and Community Solar in Minnesota

Martin Mobley

EVOLUTION OF SOLAR STRUCTURES

Traditional Net Metering requires physical coupling of siting, offtake•Physical limitations mean some willing offtakers can’t participate•Portability limitations means some willing offtakers don’t participate

Virtual Net Metering•Divorces siting from offtake•Still one to one contracting

Community/Shared/Offsite Solar expands market potential•Multiple off‐takers “subscribe” to an offsite solar project•Greatly expands addressable market

MINNESOTA ‘SOLAR REWARDS COMMUNITY’ PROGRAM

2013 statute led to 2014‐15 program launch by Xcel Energy/NSP•Uncapped in the aggregate but ‘gardens’ are limited to 1 MW•Co‐location of 5 gardens possible before September 25, 2015

Program Economics•Bill credits reset annually based on average utility revenue/kWh•Utility buys RECs for $20/MWh with ‘enhanced’ rate•Market sets subscription price and terms

OFFSITE SOLAR CONTRACT STRUCTURE

S u n s c r i p t i o n S M

P a y m e n t s  t o U S  S o l a r

S o l a r  E n e r g y

a n d  R E C sTo  U t i l i t y

Continue full deliveries

Gross bill reduced by:B i l l  C r e d i t s  t o  S u b s c r 

i b e r

A D V A N T A G E SO F O F F S I T E S O L A R

Market•Addressable market nearly doubles•Diversity of offtake ‐ Resi, Muni, C&I•Additional offtaker credit flexibility

Subscribers• Solar access not limited to onsite capacity• No onsite logistical work• Market sets subscription price and terms – flexibility• Subscriptions are portable – assign to different facility after a move

Siting•Minimize unit cost with generally larger projects•Maximize production with ideal siting, azimuth, tilt•Seek parcels that are underutilized and near utility infrastructure

N R E L , E I A

OT H E R M N P R O G R A M D E TA I L S

Project and Subscriber Requirements•Minimum 5 Subscribers per garden; no more than 40% of capacity to one Subscriber•Subscribers can subscribe to multiple projects•Subscriber and project must be located in same or contiguous county•Can comingle different customer classes (e.g. Residential and Commercial)

Subscriber receives Bill Credits•Subscriber does not receive physical solar energy•Subscriber does not receive RECs (unless operator elects otherwise)

Developer contracts directly with Subscriber•Challenging in a regulated market where Subscribers have never had options•Flexible pricing and terms•25 year contract

T H E F U T U R E O F O F F S I T E S O L A R

In NREL “High” scenario, shared solar demand nearly equals onsite solar by 2020

N  R  E  L  , V  O  T  E     S  O  L  A  R

N R  E  L

This presentation material was prepared by sales personnel of United States Solar Corporation (together with its affiliates, “US Solar”). Unless otherwise indicated, the views herein (if any) are the author’s and may differ from those of the US Solar. This information should be treated as confidential and is being delivered to prospective counterparties in order to assist them in determining whether they have an interest in the type of transactions described herein and is presented solely for discussion purposes. This presentation material does not provide investment advice or offer tax, regulatory, accounting or legal advice. By submitting this presentation material to you, US Solar is not advising you to take any particular action based on the information, opinions or views contained in this document, and acceptance of such material will be deemed acceptance by its recipient of these conclusions. Recipients of this material should consult with their own municipal, financial, accounting and legal advisors regarding the information, opinions or views contained in this document. Unless stated otherwise, the material contained herein has not been based on a consideration of any individual counterparty circumstances and as such should not be considered to be an individual recommendation. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. This presentation material has been prepared for information purposes only and is not a solicitation of any offer to buy or sell any security, commodity, futures contract or instrument or related derivative instrument. Unless otherwise specifically indicated, all information in these materials with respect to any third party entity not affiliated with US Solar has been provided by, and is the sole responsibility of, such third party and has not been independently verified by US Solar or its affiliates or any other independent third party. US Solar has no obligation to notify any recipient of these materials when information herein is stale or may change and makes no express or implied representation or warranty with respect to the accuracy or completeness of this material. US Solar disclaims any and all liability relating to this presentation material. To the extent any prices are noted, they are for informational purposes only and are not intended for use by third parties, and are not a commitment by US Solar to transact at any price.

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Community Solar Financing and NRG’s Role in Community Solar Projects

John Mi

March 25, 2016 17

Community Solar explained

CONFIDENTIAL AND PROPRIETARY

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Subscriber enters into a 20-25 yr PPA with a Community Solar Garden developer

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Community Solar Garden

Subscriber

Utility

Subscriber can be substituted if in default

during contract

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Key benefits from financing perspective• Long-term and fixed price power off-take agreements with creditworthy residential, C&I,

and municipality customers

• Provides a diversified blend for each 1-2 MW system and the entire portfolio

• Substitution of customers: the virtual net metering approach separates the site andcustomer, allowing for a seamless exchange of customers to protect against interruption inoperation and revenues

Ability to remotely terminate service, which provides an incentive for customers to staycurrent

In the event of customer default, ability to access NRG’s pool of potential customers

Priced at a saving against the expected retail rate over the life of the contract, allowingeasy acquisition of new customer

• Ground-mount sites allow:

Lowered title risk (usually has no mortgage lender issues as for residential rooftop)

Centralized maintenance with protected access rights

high success rate for renewal of lease to capture residual value post contractedperiod

Result: Superior diversification and reduced cash flow risk

CONFIDENTIAL AND PROPRIETARY March 25, 2016

March 25, 2016 19

NRG now owns and operates 8.2 MW of Community Solar in CO

March 25, 2016 20

In Massachusetts, we built our first Community Solar projects in August 2015

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Key complexity from owner perspective1. Program administrations are at a nascent stage. Collaboration with utility, and a

partnership mentality is key.

2. Requires strong regulatory understanding of state by state rules. Projects needto meet various program requirements to ensure compliance and eligibility.

3. Development and permitting in local jurisdictions unfamiliar with solar projects, createsbarrier and long lead time for inexperience developers

4. Large single offtaker PPA model does not apply, requires strong retail powermarketing engine for both C&I and Residential segment to fill the subscription

5. Consumer protection and retail billing management capability, as well as the know-howto maintain ground-mount centralized systems efficiently are key to delivering the longterm value of community solar projects

Increased barrier to entry for developers and operators

CONFIDENTIAL AND PROPRIETARY March 25, 2016

March 25, 2016 22

Sponsor capability needed to succeed: Strong in Retail Management and Plant Operation

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Community Solar from an Investor-Owned Utility Perspective and NV Energy’s Unique Subscription Solar Program

Marie Steele

NV EnergySubscription Solar

October 1, 2015

NV Energy’s support of 235 megawatts of rooftop solar energy – coupled with 1,200 MWs of utility‐scale renewable energy – has made Nevada a national leader in renewable energy.

The company has provided more than $230 million in incentives for rooftop solar, solar water heating, small hydro and wind projects in Nevada.

NV Energy exceeded the state’s renewable portfolio standard in 2014 at more than 20 percent, and it is on track to achieve 25 percent by 2025. 

NV Energy and Nevada's renewable energy projects have created thousands of jobs and helped convince companies like Tesla and Apple to locate significant operations in the state. 

NV Solar Facts : A National Leader

NV Energy, The Past 10 Years…

*The program was created by the Nevada Legislature and is regulated by the Public Utilities Commission of Nevada, defined in Nevada Revised Statutes and Nevada Administrative Code Chapter 701B. The program is subject to changes made by the Nevada Legislature, the Public Utilities Commission of Nevada, and NV Energy.

• Stakeholder Engagement – Key Findings– NV Energy’s Subscription Solar program is expected to expand the market, allowing all 

customers to participate in solar.– Subscription Solar should result in the construction of new projects.– The most critical driver is price; visibility of the resource is secondary.– The general customer perception of solar energy is that it will reduce the customer’s bill; thus 

the customer is extremely price sensitive to a premium charged for the program.

• Program Development Considerations– Alternative to On‐Site Solar– Minimizing Costs to Subscribing Customers– No Program Subsidization by Non‐Participating Customers

• Subscription Solar Customer Survey– 19% chose reasons other than “lower my electric bill” as primary reason for going solar (lower 

carbon footprint, acquire/retire portfolio energy credits, participate in Nevada’s green economy)

– 16% would still consider subscribing if monthly energy costs were higher or about the same.

The Development of Subscription Solar

Subscription Solar NV Energy has proposed to the Public Utilities Commission of Nevada a

Subscription Solar pilot program as an additional renewable energy option for its customers.

The program is part of a growing trend called “community solar” that makes renewable energy options available to everyone. The White House estimates that close to 50 percent of U.S. homes and businesses are either renters or lack the adequate roof space to install solar systems.

The program is contingent upon regulatory approval.

How does it work? (if approved by Public Utilities Commission of Nevada)•Customers will be able to subscribe to 100 kilowatt hour 'blocks' of solar energy and in return will receive a solar production credit for each block. This will show up as two line items on a customer's monthly energy bill.•An up to 5‐megawatt solar facility will be constructed in both northern and southern Nevada specifically to meet the energy needs of participating customers, reducing their carbon footprint. •Portfolio energy credits generated from the subscription solar resource will be retired on behalf of subscribing customers, and will not be used by NV Energy to meet Nevada's Renewable Portfolio Standard compliance.

Why should I participate in the Subscription Solar Pilot Program?•The Subscription Solar pilot program provides an opportunity for NV Energy customers who are either unable or unwilling to participate in existing rooftop renewable energy products, but are interested in expanding Nevada's renewable energy economy while meeting their individual sustainability goals.•NV Energy's Subscription Solar pilot program provides an alternative solar product that does not require on‐site customer installation, involves no up‐front investment, and is managed through simple line‐items on the customer's ordinary utility bill.

Subscription Solar Pilot ProgramFrequently Asked Questions

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Will the program reduce my electric bill?•No, as filed with the PUCN, the program will charge a small premium to customers. •This monthly premium reflects the cost of the solar energy and a small program administration fee. The production credit that a customer receives for each block will be calculated based on NV Energy's long‐term avoided cost of energy. If approved, the exact program costs will not be determined until after NV Energy has issued the RFP, defined its subscriber base, and negotiated a power purchase agreement for the appropriately‐sized pilot resource.

Who is eligible to participate in the Subscription Solar Pilot Program?•The program will be initially offered only to residential and small commercial customers, but will be expanded to all customer classes if necessary to ensure full subscription of the program.

When does the Subscription Solar Pilot Program start?•If NV Energy receives PUCN approval for its Subscription Solar pilot program at the end of 2015, the program is scheduled to be in place for customers in January of 2017. If approved, NV Energy will begin taking customer subscriptions early 2016.

Subscription Solar Pilot ProgramFrequently Asked Questions

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Community Solar from a State and Federal Regulatory Perspective

Amir Yazdi

Checklist of Legal Issues

• Net Metering Policy• Interconnection• Permitting• Tax Credits• Securities Laws

Net-Metering Policies

• Traditionally, to take advantage of net-metering, a PV system needed to be on the ratepayer’s property

• Today, can use off-site system to net-meter– Virtual Net Metering (VNM) laws– Community Solar or Solar Gardens laws

• 13 states and Washington D.C. have policies in place for community solar

• 25 states and Washington D.C. have community solar opportunities

Interconnection

• State law for Community Solar interconnection process, not FERC– Know how VNM/Community Solar laws work with

interconnection rules• Some states looking at FERC’s Small Generator

Interconnection Procedures as a model for their own interconnection standards– More consistency for developers operating in multiple

states– Streamlined process available for smaller projects

• Sample factors that can affect interconnection decisions– System size

Tax and Incentive Considerations

• Who owns the project?– If developer owned, developer receives tax credit– What about ratepayer owned community solar projects?

• IRS PLR-111860-15– Residential ratepayer invested in a community solar

project– Project was in ratepayer’s utility service territory– Generated power would be used to offset electricity bill– IRS held that ratepayer qualified for the 30% tax credit

because his interest was “a ‘qualified solar electricity property expenditure’ under 25(d)(2)

Federal Securities Laws

• Interests in Community Solar may be treated as securities– “[A]ny note, stock, … bond,… certificate of interest or participation

in any profit-sharing agreement,… put, call, straddle, option…” [‘33 Act, 2(a)(1)]

• Securities Act of 1933 (‘33 Act) covers offers and sales of securities– Either register with the SEC or seek an exemption– Exemptions or Safe Harbors have restrictions on advertising,

eligible investors, amount raised, etc.

• 4-part test to determine whether something is a security– Investment of money– Common Enterprise– Expectation of Profits– Profits depend solely on the efforts of others

• May have to deal with State Securities laws (“Blue Sky” laws)

CommunitySun No-Action Letter

• Can ask the SEC for a “no-action letter”– Based on facts presented, SEC determines if a

proposed action would or would not violate federal securities law

• Facts– “SolarCondos” sold to ratepayers– Purchasers only received a bill-credit each month– Purchasers’ interests were limited– CommunitySun stressed that marketing materials and

sales pitches made no mention of potential profits, only offset in electricity usage

• SEC held interests in the community solar project were not securities

Personal consumption motive not profit motive

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Questions

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Thank you for joining us!

Moderator R. Thomas HoffmannPractice Leader - Energy & Project FinanceBallard Spahr LLP

Panelists Martin MobleyCEOUnited States Solar Corporation

John MiDirector of Structured FinanceNRG Energy Inc.

Marie SteeleManager of Electric Vehicles & Renewable EnergyNV Energy Inc.

Amir YazdiAssistant General CounselSolar Energy Industries Association (SEIA)