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Team iRISE: INCORPORATING RENEWABLES INTO SUSTAINABLE ENTERPRISES
Document prepared for:
The leading integrated power company in the United States of America.
Document prepared by:
Edgar Virgüez, Ph.D. Candidate Colin Walker, MEM Candidate
Jenna Weiner, MEM & MBA Candidate
Economist Energy Case Study
Nicholas School of the Environment Duke University
March 8th, 2017
Durham, North Carolina The United States of America
ABSTRACT
As the United States energy infrastructure ages and climate disruption threatens the
integrity of the grid, new, cleaner technologies can provide resiliency and reliability. However,
creating a clean and resilient energy system for a residential neighborhood, such as a 40 MW
New York community, is not feasible with traditional financing strategies.
In this case study, we developed an innovative financial model to economically
implement a distributed energy system consisting of rooftop photovoltaic (PV) panels, fuel cells,
and battery storage. Our model creates a partnership between NRG and the community. The
partnership structure reduces NRG’s risk, while giving the community energy independence.
The community’s and NRG’s incentives are aligned to conserve energy, reduce costs, and
generate revenue through selling excess energy and ancillary services to NYISO. Our financing
strategy enables NRG to invest in clean distributed energy systems and reshape the energy
industry for a sustainable future.
2
Contents 1. INTRODUCTION .................................................................................................................. 3
2. COMMUNITY PARAMETERS ........................................................................................... 4
3. DISTRIBUTED ENERGY TECHNOLOGIES ................................................................... 4
4. BUSINESS MODEL ............................................................................................................... 6
4.1. Partnership Model ......................................................................................................................... 6
4.2. Monthly Billing ............................................................................................................................. 6
4.3. NRG Management ......................................................................................................................... 7
4.4. Consumer Experience .................................................................................................................... 8
5. INCENTIVES .......................................................................................................................... 8
5.1. NRG .............................................................................................................................................. 8
5.2. Consumers ..................................................................................................................................... 9
5.3. Government ................................................................................................................................. 10
6. FINANCIAL MODEL .......................................................................................................... 11
7. ANALYSIS ............................................................................................................................ 12
8. REFERENCES ...................................................................................................................... 13
APPENDIX ................................................................................................................................... 16
3
1. INTRODUCTION
In 2005, Hurricane Wilma hit South Florida and caused Susan Baker to lose power in her
Miami Beach home for four days. The meat in the freezer turned rancid and became a breeding
ground for deadly bacteria. When cleaning out the contents of the fridge, Susan contracted
pseudomonas, an extremely dangerous strain of pneumonia. She became severely ill and nearly
died. Shortly after recovering, she purchased a 40kW diesel generator to ensure her and her
family’s safety. Reliable energy can be a matter of life or death, and during nearly every
hurricane season, South Floridians are reminded of this.
Increasingly extreme weather is becoming a concern in not only South Florida due to
anthropogenic global climate disruption, largely caused by the burning of fossil fuels for
electricity. In 2012 Hurricane Sandy devastated the Northeast, and communities on Long Island
were without power for over two weeks.
The interconnectedness of the U.S. electricity grid makes it difficult to quickly restore
power after a catastrophic event. Distributed energy could offer a solution by allowing
communities to island. By islanding, communities can use their generation sources to supply their
electricity needs without having to depend on outside power lines to be fixed or the necessary
generators to come online. Clean distributed energy has the potential to mitigate the effects of
global warming and save lives in a world where the consequences of climate change are forcing
us to rethink the structure of our grid.
Although distributed energy has many obvious benefits, there are also numerous
significant hurdles that must be addressed before distributed energy can be a viable option. Team
iRISE developed a financial model to implement a distributed energy system in a 40 MW
community on Long Island, New York.
4
2. COMMUNITY PARAMETERS
Using information from the Energy Information Administration (EIA) and peer review
articles, Team iRISE calculated that a 40 MW community in New York represents about 54,000
households and serves 160,000 residents. Using the same values, iRISE assumes the average
New York household is 1,832ft2 and consumes 6,500 kWh per year. If the community pays an
average of $0.169 per kWh, then average household currently pays $92 per month, totaling $60
million per year for the whole community.
3. DISTRIBUTED ENERGY TECHNOLOGIES
The community modeled by iRISE is fueled by rooftop photovoltaic (PV) panels, battery
storage, and fuel cells. The PV panels have an installed capacity of 56.19 MW, the fuel cells have
a nameplate capacity of 29.08 MW, and the battery storage has a maximum capacity of 2,165.073
kWh. Team iRISE selected the capacity levels of the three technologies by formulating an
optimization problem that minimized operational costs. The model included constraints that
accounted for demand, reliability, and available rooftop area for PV installation.
The generation mix was chosen to address resiliency, reliability, and pollution concerns.
A resilient energy system can recover quickly from a major shock, such as damage from extreme
weather, whereas a reliable system can perform the work necessary when called upon.
The distributed nature of the proposed system makes it is easier for the system to recover
from damage. For example, in 2003 a transmission line overheated in Ohio and caused adjacent
lines to overload and overheat as well. This caused a cascading effect, and the power outage
spread throughout the entire Northeast and parts of the Midwest. Most generators are not black
start, meaning they need power from the grid to restart. This means that when there is a massive
power outage, such as the incident in 2003, it can take days, or even weeks, for there to be
enough power on the grid to restart all of the necessary generators. iRISE’s proposed energy
5
system is islanded so it will not rely on the grid. Also, PV and some types of fuels cells are black
start generators, which makes the system resilient.
Reliability is an equally important concern when building an energy system. Frequency is
maintained by exactly matching the supply and demand of energy. Maintaining frequency is
essential for protecting all of the appliances and electronics connected to the system. Therefore,
generators that are dispatchable and have fast ramp rates are imperative for ensuring reliability.
Fuel cells and batteries are dispatchable, which means they can provide power at any time, and
they also have fast ramp rates, meaning they can adjust their power output instantaneously. In
addition, this generation mix can also accommodate the community’s needs when one of the
three technologies is offline due to fuel shortages or routine maintenance. The fuel cells and
batteries have enough capacity to meet peak load when the sun is not shining, and the PV panels
plus batteries can service the community if the fuel cells malfunction or need maintenance.
By deploying these three technologies, the carbon equivalent (CO2E) emissions released
to the atmosphere to supply electricity would be reduced by an average of 52% when compared
to emissions generated by natural gas, and 72% in relation to emissions generated by coal. The
estimated annual emissions of the new system would be 103,000 tons of CO2E, with an average
emissions rate of 0.58 pounds of CO2E per kWh. This value is significantly lower when
compared to the reported values for fuels like coal (2.07 to 2.17 pounds CO2E per kWh) or
natural gas (1.22 pounds CO2E per kWh).
Although these relatively newer technologies have larger upfront costs, they hedge
against a carbon tax that will inevitably be implemented in the next decade. Fuel cells can run on
various types of fuel such as biogas and hydrogen. Although cheap natural gas is currently the
most economical fuel, the use of fuel cells does not perpetuate the carbon lock-in dilemma.
6
Unlike most other fossil fuel powered generators, as the market for cleaner types of fuel matures
it will be easy to convert the fuel cells.
4. BUSINESS MODEL
4.1. Partnership Model
iRISE developed a business model to support an innovative financing strategy. In the
iRISE model NRG forms a partnership with the community. In this partnership there is a
managing partner and an equity partner. Throughout the life of the technologies NRG makes up
100% of the managing partner. In the beginning, NRG also makes up 100% of the equity partner.
However, over time the community’s share of the equity partnership increases as NRG’s
decreases. The community will pay back the capital costs invested by NRG via monthly billing
revenue, eventually making the community 100% of the equity partner.
4.2. Monthly Billing
The monthly bill that the community receives will consist of four line items. Each
homeowner’s portion of the community’s bill is determined by the square footage of their house.
First, there will be a $0.0819 per square foot capital cost recovery fee that is used to purchase the
community’s portion of the equity partnership. Second, there will be a $0.003 per square foot
management fee that NRG will receive. Third, there will be a variable operating, maintenance,
and fuel cost passed through NRG to consumers that will amount approximately to $0.0226 per
square foot. Fourth, there will be a distribution credit or debit, in dollars per square foot, based on
the community’s equity ownership level. The profit or loss reflects (1) NRG’s performance
selling excess electricity and ancillary services in the wholesale market and (2) a consumer’s
decision to participate in an optional demand response program, as described in section 4.4.
iRISE constructed a sample monthly bill using a Monte Carlo simulation of 100,000 trials. The
expected monthly bill for a 1,650 ft2 house can be seen below in Figure 1.
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Figure 1. Sample bill.
4.3. NRG Management
As managing partner, NRG is paid a management fee for performing various
responsibilities such as billing, system management, and participating in the wholesale market.
iRISE has built an energy system where the community is independent and will rarely need to
purchase energy on the wholesale market unless market prices are below the marginal cost of the
community’s technologies. Presumably, there will be instances where the community can sell
energy and other ancillary services, such as grid frequency regulation using the battery storage or
ramping capability. iRISE believes this could potentially be a large source of revenue. If there are
profits earned through NRG’s effective management, then the distributions will be paid out
according to the partners’ ownership level.
8
The novel bill structure proposed is also important in helping shape consumers’
perception of a utility’s role and responsibilities. Instead of paying only for the actual energy
supplied per month, the management fee helps consumers realize that a utility does much more
than simply send electricity when requested.
4.4. Consumer Experience
iRISE also proposes enhancing the consumer experience through an interactive
smartphone app that promotes transparency. All consumers will have access to an app that will
track real-time energy use and compare their energy use intensity to their neighbors. The real-
time feedback allows the consumers to keep track of their energy consumption and improves the
relationship between the partners by establishing trust through transparency.
From this app, consumers can opt into a demand response program that utilizes smart
plugs. NRG may choose to request demand response in order to avoid turning on the fuel cells or
to be able to sell energy or other ancillary services on the spot market when prices are high. Both
the community and NRG will benefit from the demand response program because it would
increase profit distributions. However, consumers who choose to participate in the demand
response program will benefit two-fold. These consumers will receive a larger percentage per
square foot of the profit distributions owed to the community, or if there is a debit, they will be
responsible for a smaller proportion of the loss.
5. INCENTIVES
5.1. NRG
iRISE prioritized aligning incentives for the major stakeholders in the development of this
proposal. Although capital costs are relatively high, this model enables NRG to invest in newer
technology with substantially less risk. NRG will earn 7% on their capital and they will earn this
regardless of the amount of energy produced or price fluctuations in the market. NRG’s equity
9
ownership will decrease. However, their risk will decrease as the managing and equity partners
share in the losses or profits and the capital cost recovery reduces NRG's cumulative cash
invested.
Currently, utility companies generate revenue by selling energy on a per kWh basis.
Therefore, utilities have less of an incentive to conserve energy. In addition, utilities do not have
an incentive to reduce costs since the public utility commission sets rates and lower costs lead to
lower rates in their next rate case. In the iRISE model, revenue is not based on how much energy
is sold. Thus NRG has an incentive to conserve energy and reduce costs. NRG also has an
incentive to perform well in the market, which benefits both the equity and managing partners.
5.2. Consumers
Consumers can decrease their monthly bill through energy conservation on two parts of
their bill. First, if they conserve energy the fuel cell will not need to be deployed as often and
consumers will save on operating, maintenance, and fuel costs. Second, energy conserved can
also free up the technologies to generate revenue on the wholesale market, and consumers will
profit from increased distributions. The smartphone app provides an additional incentive to
conserve energy through behavioral feedback and modification. The app makes community
members hold their neighbors accountable and encourages teamwork towards a mutual goal of
profitability.
With increasing extreme weather patterns, energy independence, increased resiliency, and
reliability are additional benefits and incentivize the community to participate in this model. With
the iRISE energy system, individual community members do not have a need to purchase
generators to keep their families safe during extreme weather, like Susan Baker decided to do
after Hurricane Wilma. Therefore, consumers are receiving an additional service from having this
energy system.
10
In developing this model, team iRISE was dedicated to aligning both party’s incentives.
The end goal was to build an affordable, profitable, resilient, and reliable, energy system. The
financial model incentivizes NRG and the community to act in a way that works towards the
common goal with minimal opposition.
5.3. Government
The energy industry is highly regulated and any change needs government cooperation.
New York State has a culture of originality and is aggressively pursuing ways to make their grid
more resilient, affordable, and clean. Reforming Energy Vision (REV) is New York’s plan to
attain these goals. The iRISE model fits well with the REV framework by working towards the
same goals and using similar methods, such as paying for market and grid management rather
than paying for electricity on a per kWh basis.
New York State not only has an incentive to cooperate with NRG and the community in
employing the iRISE model, but team iRISE foresees ways that New York may provide
additional incentives to implement the model. Long Island specifically has major transmission
congestion issues. The generation mix proposed by iRISE can provide significant relief from
transmission congestion. In addition, most clean energy is characterized as a variable energy
resource. These resources can cause major problems for the grid. However, the community’s
solar energy will not add to the stress on the grid because of the additional battery storage. As
New York pushes for more clean energy, the unique features of the iRISE generation mix may
help New York in reaching their renewable target. As a result, New York may provide additional
incentives such as a congestion relief subsidy or a distributed energy investment tax credit. These
are not included in the financial model. However, they are important considerations for NRG’s
long-term planning.
11
6. FINANCIAL MODEL
Using levelized cost of electricity data from the EIA, iRISE prepared a financial model
for the first five years as shown in Figure 2. A complete description of the model for the 30 year
period is presented in the Appendix.
Figure 2. Financial model constructed by iRISE.
Year 1 2 3 4 5Cumulative Capital Cost Balance ($) 909,387,614 903,269,186 896,538,915 889,135,618 880,991,990Cost of Capital ($) 90,938,761 90,326,919 89,653,892 88,913,562 88,099,199Cumulative Total Capital Costs ($) 1,000,326,375 993,596,104 986,192,807 978,049,179 969,091,189
Total Operational Costs ($) 26,725,549 27,126,433 27,533,329 27,946,329 28,365,524
NRG Equity (% ) 100% 99% 99% 98% 97%Community Equity (% ) 0.00% 0.67% 1.41% 2.23% 3.12%
NRG Distribution Share (% ) 100% 98% 97% 95% 93%Community Distribution Share (% ) 0% 2% 3% 5% 7%
Cost parameters per area ($ ft-2) 1 2 3 4 5Capital Cost Recovery 0.0819 0.0819 0.0819 0.0819 0.0819Management Fee 0.0030 0.0031 0.0032 0.0033 0.0034Operation and Maintenance 0.0226 0.0229 0.0232 0.0236 0.0239Distributions -0.0050 -0.0050 -0.0050 -0.0050 -0.0050
Monthly Bill ($ house-1 month-1) 1 2 3 4 5Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $5.50 $5.66 $5.83 $6.01 $6.19Operation and Maintenance Fee $41.31 $41.93 $42.56 $43.20 $43.85Distributions $0.00 -$0.16 -$0.32 -$0.47 -$0.63Total Monthly Bill $197 $197 $198 $199 $199
Annual Bill ($ house-1 year-1) 1 2 3 4 5Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $66 $68 $70 $72 $74Operation and Maintenance Fee $496 $503 $511 $518 $526Distributions $0 -$2 -$4 -$6 -$8Total Annual Bill $2,362 $2,370 $2,377 $2,385 $2,393
Community Cash Flow ($ year-1) 1 2 3 4 5Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544Operation and Maintenance Fee $26,725,549 $27,126,433 $27,533,329 $27,946,329 $28,365,524Distributions $0 -$687 -$2,887 -$6,826 -$12,760Cash Flow $127,338,059 $127,844,914 $128,359,470 $128,881,687 $129,411,497
NRG Cash Flow ($ year-1) 1 2 3 4 5Cost of Capital $90,938,761 $90,326,919 $89,653,892 $88,913,562 $88,099,199Management Income $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544Distributions Income $493,794 $485,281 $476,767 $468,253 $459,740Total Income $94,987,876 $94,474,179 $93,902,498 $93,266,809 $92,560,483
Capital Investment $909,387,614 $0 $0 $0 $0Cash Flow -$814,399,738 $94,474,179 $93,902,498 $93,266,809 $92,560,483
12
7. ANALYSIS
The estimated capital cost of the three technologies is $909,387,614. With a 7% discount
rate, the community will be 100% of the equity partner by year 30, and NRG will have an
internal rate of return of 9.41%.
The three technologies chosen require substantial capital costs. Although the generation
mix is insulated from carbon taxes, iRISE had to choose expensive and young technology to
achieve this. As with all technology, costs will decrease over time with improvements and
learned best practices.
The large capital cost has a significant effect on the community’s monthly bill. Although
the customer’s bill increases from the current rates, the customer is receiving additional valuable
services. The community is not only purchasing electricity, they are buying energy independence
and resiliency. Efficient and reliable distributed energy systems will become more valuable as
climate change continues to threaten the integrity of the grid.
13
8. REFERENCES
1. Andrews, Kirk. (2015). Finance Overview, Investor Meeting. NRG.
2. Annamaria Buonomano, Francesco Calise, Massimo Dentice d’Accadia, Adolfo Palombo,
Maria Vicidomini, Hybrid solid oxide fuel cells–gas turbine systems for combined heat
and power: A review, Applied Energy, Volume 156, 15 October 2015, Pages 32-85, ISSN
0306-2619, http://dx.doi.org/10.1016/j.apenergy.2015.06.027.
3. Carnegie Mellon University Green Design Institute. (2017) Economic Input-Output Life
Cycle Assessment (EIO-LCA) US 2002 (428 sectors) Retrieved March 08, 2017, from
http://www.eiolca.net/.
4. Chun Sing Lai, Malcolm D. McCulloch, Levelized cost of electricity for solar
photovoltaic and electrical energy storage, Applied Energy, Volume 190, 15 March 2017,
Pages 191-203, ISSN 0306-2619.
5. DiSavino, S. (2012, November 14). LIPA restores power to most Sandy outages on Long
Island, NY. Retrieved March 08, 2017, from http://www.reuters.com/article/us-storm-
sandy-lipa-idUSBRE8AD0VI20121114.
6. J. Hernández-Moro, J.M. Martínez-Duart, Analytical model for solar PV and CSP
electricity costs: Present LCOE values and their future evolution, Renewable and
Sustainable Energy Reviews, Volume 20, April 2013, Pages 119-132, ISSN 1364-0321.
7. Manasseh Obi, S.M. Jensen, Jennifer B. Ferris, Robert B. Bass, Calculation of levelized
costs of electricity for various electrical energy storage systems, Renewable and
Sustainable Energy Reviews, Volume 67, January 2017, Pages 908-920, ISSN 1364-
0321, http://dx.doi.org/10.1016/j.rser.2016.09.043.
14
8. New York Average household size, 2009-2013 by County. Retrieved March 08, 2017,
from http://www.indexmundi.com/facts/united-states/quick-facts/new-york/average-
household-size#map.
9. Peter Kästel, Bryce Gilroy-Scott, Economics of pooling small local electricity
prosumers—LCOE & self-consumption, Renewable and Sustainable Energy
Reviews, Volume 51, November 2015, Pages 718-729, ISSN 1364-0321.
10. Rebecca E. Ciez, J.F. Whitacre, Comparative techno-economic analysis of hybrid micro-
grid systems utilizing different battery types, Energy Conversion and Management,
Volume 112, 15 March 2016, Pages 435-444, ISSN 0196-8904.
11. U.S. Energy Information Administration. Electric Power Monthly. (2017). Retrieved
March 08, 2017, from https://www.eia.gov/electricity/monthly/pdf/epm.pdf.
12. U.S. Energy Information Administration. (2016). Levelized Cost and Levelized Avoided
Cost of New Generation Resources in the Annual Energy Outlook 2016. Retrieved March
08, 2017, from https://www.eia.gov/outlooks/aeo/electricity_generation.cfm.
13. U.S. Energy Information Administration. (2015). Photovoltaic industry overview and
shipments. Retrieved March 08, 2017, from
https://www.eia.gov/renewable/data.php#solar
14. U.S. Energy Information Administration. (2017). Residential Energy Consumption
Survey (RECS). Retrieved March 08, 2017, from
https://www.eia.gov/consumption/residential/
15. U.S. Energy Information Administration. (2017). State Electricity Profiles. Retrieved
March 08, 2017, from https://www.eia.gov/electricity/state/.
15
16. Understanding the Link Between Climate Change and Extreme Weather. (2016, October
19). Retrieved March 08, 2017, from https://www.epa.gov/climate-change-
science/understanding-link-between-climate-change-and-extreme-weather.
16
APPENDIX Table 1A. Parameters used in the model describing the analyzed community.
Table 2A. Parameters used in the model for the community electricity consumption.
Table 3A. Parameters used in the model describing the potential available area for rooftop installation.
Table 4A. Capital costs factors used in the optimization model for each of the three analyzed technologies.
Table 5A. Capacity factors used in the optimization model for each of the three analyzed technologies.
Table 6A. Levelized Cost of Electricity (LCOE) factors used in the optimization model for each of the three analyzed technologies (excludes capital cost of technologies).
Number of Households 53,908 householdsResidents per Households 2.95 persons household-1
Number of People Served 159,028 persons
Capacity 40 MWAnnual Energy Consumption 350,400,000 kWh y-1
Household Average Consumption 6,500.0 kWh y-1 household-1
Per Capita Electricy Consumption 2,203.4 kWh y-1 person-1
Electricity Tariff 0.169 $ kWh-1
Household Annual Electricity Expenditure $1,099 $ y-1 household-1
Household Monthly Electricity Expenditure $92 $ month-1 household-1
Total Annual Electricity Expenditure $59,217,600 $ y-1
Service Area per Household 1,832 ft2 household-1
Total Community Area 98,758,892 ft2
Total Community Area 3.54 miles2
Number of floors per Household 2.5 floor household-1
Total Available Rooftop Area per Household 733 ft2 household-1
Total Available Rooftop Area 39,503,557 ft2
Total Available Rooftop Area 1.42 miles2
Total Available Area 15,801,423 ft2 household-1
Average Roof Pitch 5.5 inchRoof Pitch Factor 1.5Roof Square Footage 57,843,796.7 ft2
Maximum Available Installation 578.4 MW
Unitary Capital Costs (PV) 3,705,000 $ MW-1
Unitary Capital Costs (Fuel Cells) 5,500,000 $ MW-1
Unitary Capital Costs (Batteries) 250 $ kWh-1
Capacity Factor (PV) 27.2% %Capacity Factor (Fuel Cells) 85.0% %Battery Efficiency 85.0% %
17
Table 7A. Optimal capacity (minimizing operational costs while complying with restrictions) resulting from the optimization model.
Table 8A. Energy generation for the first year used the installed capacity resulting from the optimization model.
Table 9A. Capital and operational costs resulting from the installation of 85.27 MW in the community and its operation during a year.
LCOE (PV) - Excluding Capital Costs 13.00 $ MWh-1
LCOE (Fuel Cells) - Excluding Capital Costs 65.40 $ MWh-1
LCOE (Batteries) - Excluding Capital Costs 5.00 $ kWh-1
Installed Capacity PV 56.19 MWInstalled Capacity Fuel Cells 29.08 MWInstalled Capacity Batteries 2,165,073 kWh
Annual Energy Generation (PV) 133,892,683 kWh y-1
Annual Energy Generation (Fuel Cells) 216,507,317 kWh y-1
Installed Generation Capacity 350,400,000 kWh y-1
Installed Storage Capacity 1,840,312 kWh
Total Capital Costs 909,387,614 $Total Operational Costs 26,725,549 $ y-1
18
Table 10A. Expected values of the results from the model (cost parameters, equity and management distribution).
Year 1 2 3 4 5 6 7 8 9 10Cumulative Capital Cost Balance ($) 909,387,614 903,269,186 896,538,915 889,135,618 880,991,990 872,034,000 862,180,211 851,341,043 839,417,958 826,302,564Cost of Capital ($) 90,938,761 90,326,919 89,653,892 88,913,562 88,099,199 87,203,400 86,218,021 85,134,104 83,941,796 82,630,256Cumulative Total Capital Costs ($) 1,000,326,375 993,596,104 986,192,807 978,049,179 969,091,189 959,237,400 948,398,232 936,475,147 923,359,754 908,932,821
Total Operational Costs ($) 26,725,549 27,126,433 27,533,329 27,946,329 28,365,524 28,791,007 29,222,872 29,661,215 30,106,133 30,557,725
NRG Equity (% ) 100% 99% 99% 98% 97% 96% 95% 94% 92% 91%Community Equity (% ) 0.00% 0.67% 1.41% 2.23% 3.12% 4.11% 5.19% 6.38% 7.69% 9.14%
NRG Distribution Share (% ) 100% 98% 97% 95% 93% 91% 90% 88% 86% 84%Community Distribution Share (% ) 0% 2% 3% 5% 7% 9% 10% 12% 14% 16%
Cost parameters per area ($ ft-2) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819Management Fee 0.0030 0.0031 0.0032 0.0033 0.0034 0.0035 0.0036 0.0037 0.0038 0.0039Operation and Maintenance 0.0226 0.0229 0.0232 0.0236 0.0239 0.0243 0.0247 0.0250 0.0254 0.0258Distributions -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050
Year 11 12 13 14 15 16 17 18 19 20Cumulative Capital Cost Balance ($) 811,875,632 796,006,006 778,549,417 759,347,170 738,224,697 714,989,978 689,431,787 661,317,776 630,392,365 596,374,412Cost of Capital ($) 81,187,563 79,600,601 77,854,942 75,934,717 73,822,470 71,498,998 68,943,179 66,131,778 63,039,236 59,637,441Cumulative Total Capital Costs ($) 893,063,195 875,606,606 856,404,359 835,281,887 812,047,167 786,488,976 758,374,965 727,449,554 693,431,601 656,011,853
Total Operational Costs ($) 31,016,091 31,481,332 31,953,552 32,432,856 32,919,348 33,413,139 33,914,336 34,423,051 34,939,397 35,463,488
NRG Equity (% ) 89% 88% 86% 84% 81% 79% 76% 73% 69% 66%Community Equity (% ) 10.72% 12.47% 14.39% 16.50% 18.82% 21.38% 24.19% 27.28% 30.68% 34.42%
NRG Distribution Share (% ) 83% 81% 79% 78% 76% 74% 72% 71% 69% 67%Community Distribution Share (% ) 17% 19% 21% 22% 24% 26% 28% 29% 31% 33%
Cost parameters per area ($ ft-2) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819Management Fee 0.0040 0.0042 0.0043 0.0044 0.0045 0.0047 0.0048 0.0050 0.0051 0.0053Operation and Maintenance 0.0262 0.0266 0.0270 0.0274 0.0278 0.0282 0.0286 0.0290 0.0295 0.0299Distributions -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050
Year 21 22 23 24 25 26 27 28 29 30Cumulative Capital Cost Balance ($) 558,954,664 517,792,941 472,515,046 422,709,362 367,923,109 307,658,230 241,366,864 168,446,361 88,233,808 0Cost of Capital ($) 55,895,466 51,779,294 47,251,505 42,270,936 36,792,311 30,765,823 24,136,686 16,844,636 8,823,381 0Cumulative Total Capital Costs ($) 614,850,130 569,572,235 519,766,551 464,980,298 404,715,419 338,424,053 265,503,551 185,290,998 97,057,189 0
Total Operational Costs ($) 35,995,440 36,535,371 37,083,402 37,639,653 38,204,248 38,777,312 39,358,971 39,949,356 40,548,596 41,156,825
NRG Equity (% ) 61% 57% 52% 46% 40% 34% 27% 19% 10% 0%Community Equity (% ) 38.54% 43.06% 48.04% 53.52% 59.54% 66.17% 73.46% 81.48% 90.30% 100.00%
NRG Distribution Share (% ) 66% 64% 62% 60% 59% 57% 55% 53% 52% 50%Community Distribution Share (% ) 34% 36% 38% 40% 41% 43% 45% 47% 48% 50%
Cost parameters per area ($ ft-2) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819 0.0819Management Fee 0.0054 0.0056 0.0057 0.0059 0.0061 0.0063 0.0065 0.0067 0.0069 0.0071Operation and Maintenance 0.0304 0.0308 0.0313 0.0318 0.0322 0.0327 0.0332 0.0337 0.0342 0.0347Distributions -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050 -0.0050
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Table 11A. Expected values of monthly and annual bill the results from the model.
Monthly Bill ($ house-1 month-1) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $5.50 $5.66 $5.83 $6.01 $6.19 $6.37 $6.56 $6.76 $6.96 $7.17Operation and Maintenance Fee $41.31 $41.93 $42.56 $43.20 $43.85 $44.51 $45.17 $45.85 $46.54 $47.24Distributions $0.00 -$0.16 -$0.32 -$0.47 -$0.63 -$0.79 -$0.95 -$1.11 -$1.26 -$1.42Total Monthly Bill $197 $197 $198 $199 $199 $200 $201 $202 $202 $203
Annual Bill ($ house-1 year-1) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $66 $68 $70 $72 $74 $76 $79 $81 $84 $86Operation and Maintenance Fee $496 $503 $511 $518 $526 $534 $542 $550 $558 $567Distributions $0 -$2 -$4 -$6 -$8 -$9 -$11 -$13 -$15 -$17Total Annual Bill $2,362 $2,370 $2,377 $2,385 $2,393 $2,401 $2,410 $2,419 $2,427 $2,436
Monthly Bill ($ house-1 month-1) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $7.39 $7.61 $7.84 $8.07 $8.31 $8.56 $8.82 $9.08 $9.36 $9.64Operation and Maintenance Fee $47.95 $48.67 $49.40 $50.14 $50.89 $51.65 $52.43 $53.21 $54.01 $54.82Distributions -$1.58 -$1.74 -$1.90 -$2.05 -$2.21 -$2.37 -$2.53 -$2.68 -$2.84 -$3.00Total Monthly Bill $204 $205 $205 $206 $207 $208 $209 $210 $211 $211
Annual Bill ($ house-1 year-1) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $89 $91 $94 $97 $100 $103 $106 $109 $112 $116Operation and Maintenance Fee $575 $584 $593 $602 $611 $620 $629 $639 $648 $658Distributions -$19 -$21 -$23 -$25 -$27 -$28 -$30 -$32 -$34 -$36Total Annual Bill $2,445 $2,455 $2,464 $2,474 $2,484 $2,495 $2,505 $2,516 $2,527 $2,538
Monthly Bill ($ house-1 month-1) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery Fee $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04 $150.04Management Fee $9.93 $10.22 $10.53 $10.85 $11.17 $11.51 $11.85 $12.21 $12.57 $12.95Operation and Maintenance Fee $55.64 $56.48 $57.33 $58.19 $59.06 $59.94 $60.84 $61.76 $62.68 $63.62Distributions -$3.16 -$3.32 -$3.47 -$3.63 -$3.79 -$3.95 -$4.11 -$4.26 -$4.42 -$4.58Total Monthly Bill $212 $213 $214 $215 $216 $218 $219 $220 $221 $222
Annual Bill ($ house-1 year-1) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery Fee $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800 $1,800Management Fee $119 $123 $126 $130 $134 $138 $142 $146 $151 $155Operation and Maintenance Fee $668 $678 $688 $698 $709 $719 $730 $741 $752 $763Distributions -$38 -$40 -$42 -$44 -$45 -$47 -$49 -$51 -$53 -$55Total Annual Bill $2,549 $2,561 $2,573 $2,585 $2,598 $2,610 $2,624 $2,637 $2,650 $2,664
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Table 12A. Expected values of the community and NRG cash flows.
Table 13A. Expected values of the Net Present Value and IRR from the model.
Community Cash Flow ($ year-1) 1 2 3 4 5 6 7 8 9 10Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544 $4,121,590 $4,245,238 $4,372,595 $4,503,773 $4,638,886Operation and Maintenance Fee $26,725,549 $27,126,433 $27,533,329 $27,946,329 $28,365,524 $28,791,007 $29,222,872 $29,661,215 $30,106,133 $30,557,725Distributions $0 -$687 -$2,887 -$6,826 -$12,760 -$20,982 -$31,821 -$45,648 -$62,885 -$84,007Cash Flow $127,338,059 $127,844,914 $128,359,470 $128,881,687 $129,411,497 $129,948,804 $130,493,478 $131,045,351 $131,604,210 $132,169,794
NRG Cash Flow ($ year-1) 1 2 3 4 5 6 7 8 9 10Cost of Capital $90,938,761 $90,326,919 $89,653,892 $88,913,562 $88,099,199 $87,203,400 $86,218,021 $85,134,104 $83,941,796 $82,630,256Management Income $3,555,320 $3,661,980 $3,771,839 $3,884,994 $4,001,544 $4,121,590 $4,245,238 $4,372,595 $4,503,773 $4,638,886Distributions Income $493,794 $485,281 $476,767 $468,253 $459,740 $451,226 $442,712 $434,199 $425,685 $417,171Total Income $94,987,876 $94,474,179 $93,902,498 $93,266,809 $92,560,483 $91,776,216 $90,905,972 $89,940,898 $88,871,254 $87,686,314
Capital Investment $909,387,614 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash Flow -$814,399,738 $94,474,179 $93,902,498 $93,266,809 $92,560,483 $91,776,216 $90,905,972 $89,940,898 $88,871,254 $87,686,314
Community Cash Flow ($ year-1) 11 12 13 14 15 16 17 18 19 20Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $4,778,053 $4,921,395 $5,069,036 $5,221,107 $5,377,741 $5,539,073 $5,705,245 $5,876,402 $6,052,695 $6,234,275Operation and Maintenance Fee $31,016,091 $31,481,332 $31,953,552 $32,432,856 $32,919,348 $33,413,139 $33,914,336 $34,423,051 $34,939,397 $35,463,488Distributions -$109,549 -$140,115 -$176,387 -$219,130 -$269,208 -$327,592 -$395,372 -$473,776 -$564,183 -$668,139Cash Flow $132,741,784 $133,319,801 $133,903,391 $134,492,022 $135,085,070 $135,681,809 $136,281,398 $136,882,866 $137,485,098 $138,086,813
NRG Cash Flow ($ year-1) 11 12 13 14 15 16 17 18 19 20Cost of Capital $81,187,563 $79,600,601 $77,854,942 $75,934,717 $73,822,470 $71,498,998 $68,943,179 $66,131,778 $63,039,236 $59,637,441Management Income $4,778,053 $4,921,395 $5,069,036 $5,221,107 $5,377,741 $5,539,073 $5,705,245 $5,876,402 $6,052,695 $6,234,275Distributions Income $408,657 $400,144 $391,630 $383,116 $374,603 $366,089 $357,575 $349,062 $340,548 $332,034Total Income $86,374,274 $84,922,139 $83,315,608 $81,538,941 $79,574,813 $77,404,160 $75,005,999 $72,357,242 $69,432,479 $66,203,751
Capital Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash Flow $86,374,274 $84,922,139 $83,315,608 $81,538,941 $79,574,813 $77,404,160 $75,005,999 $72,357,242 $69,432,479 $66,203,751
Community Cash Flow ($ year-1) 21 22 23 24 25 26 27 28 29 30Capital Cost Recovery Fee $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189 $97,057,189Management Fee $6,421,304 $6,613,943 $6,812,361 $7,016,732 $7,227,234 $7,444,051 $7,667,372 $7,897,394 $8,134,315 $8,378,345Operation and Maintenance Fee $35,995,440 $36,535,371 $37,083,402 $37,639,653 $38,204,248 $38,777,312 $39,358,971 $39,949,356 $40,548,596 $41,156,825Distributions -$787,382 -$923,861 -$1,079,762 -$1,257,535 -$1,459,929 -$1,690,019 -$1,951,254 -$2,247,491 -$2,583,051 -$2,962,767Cash Flow $138,686,551 $139,282,643 $139,873,191 $140,456,039 $141,028,742 $141,588,532 $142,132,279 $142,656,447 $143,157,050 $143,629,592
NRG Cash Flow ($ year-1) 21 22 23 24 25 26 27 28 29 30Cost of Capital $55,895,466 $51,779,294 $47,251,505 $42,270,936 $36,792,311 $30,765,823 $24,136,686 $16,844,636 $8,823,381 $0Management Income $6,421,304 $6,613,943 $6,812,361 $7,016,732 $7,227,234 $7,444,051 $7,667,372 $7,897,394 $8,134,315 $8,378,345Distributions Income $323,521 $315,007 $306,493 $297,979 $289,466 $280,952 $272,438 $263,925 $255,411 $246,897Total Income $62,640,291 $58,708,244 $54,370,359 $49,585,647 $44,309,010 $38,490,826 $32,076,497 $25,005,954 $17,213,107 $8,625,242
Capital Investment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Cash Flow $62,640,291 $58,708,244 $54,370,359 $49,585,647 $44,309,010 $38,490,826 $32,076,497 $25,005,954 $17,213,107 $8,625,242
Net Present Value NRG $156,573,917Internal Rate of Return 9.41%
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Figure 1A. Probability density function of the Net Present Value of the investment for NRG after 100,000 trials of the Monte Carlo simulation.