1. Third Party Ownership of PV for Affordable Housing DeWitt Jones Boston Community Capital Green Homes and Sustainable Communities 2008 August 7, 2008

2. BCC Energy Advantage Program Goals Materially improve net operating income of financially at-risk affordable housing developments through renewable energy and energy conservation Create market-based financing system for renewable energy and energy conservation in affordable housing developments Connect low income communities to emerging green trends

3. Project Impacts for Affordable Housing Reduce increases and volatility of utility expenses (fix utility costs) Stabilize properties financial structure Improve current financing and re-financing options Improve building performance and comfort Lower current utility costs ?

4. Target Benchmarks Replace 30-40% of current electricity load with RE Reduce 33% of current electricity load through conservation and efficiency Reduce 25% of current heat/DHW load through conservation and efficiency Reduce 33% of current water use through conservation

5. Challenges for Existing Properties to Make Capital Investments Dont have sufficient capital Cannot take on additional debt Little confidence that savings will be achieved Who maintains system? First cost limitations High transaction costs Dont attract best partners

6. PV realities Not Economic Affordable housing cannot pay above market Requires significant subsidies Small systemslittle impact Hard to capture tax credits and environmental attributes revenue Limited aggregation opportunities Better economic alternatives

7. Third Party Ownership Benefits Simple, inexpensive for hosts Creates opportunity for market not served Non profit, fragmented market Captures tax benefits Monetizes attributes Sustainable, scalable business Each party does its own thing Market pricing for all parties Incents long term performance

8. Third Party Ownership Selects, designs, installs and owns PV panels on hosts property Sells solar electricity to host through PPA Services and maintains system Provides all financing Captures tax and attributes benefits Benefits from aggregation and volume

9. Third Party Ownership Parties PPA Developerfinds projects & partners Solar Contractorinstalls system Properties/Hosts-purchases electricity Finance/Lessorfinances system, tax O&M Providerservices & guarantees PV PV or RE incentivesubsidies Attributes marketsadditional revenue

10. Third Party Barriers for Affordable Housing Current PPA providers too busy with better dealssize, multiple owners, sites, states Solar and energy finance companies dont trust affordable housing or PBI Housing owners dont trust technology Tax and legal structure barriers for non- profits Complex Better alternatives

11. Current Mass Affordable Housing PV 100% capital subsidy Approximate $9/watt Small systemsunder 50 kW (often 10-20) Marginal impact on operating budget Expensive servicing and DAS Program ended Different results for some new construction

12. Third Party Ownership for PV Solar ITC and Bonus depreciation Benefits from aggregation Optimizes property selection Aligns performance and economics Minimizes two-tiered subsidy for affordable housing Discrete and detachable system Allows unfamiliar parties to work together

13. BCC Solar Energy Advantage Design third party financing system for affordable housing $3.5-4 million PV incentive funds from MTC Signed 5 PPAs with one in process 1 Megawatt of Capacity20% of Mass Solar Approximate $4 watt incentive 16% to 64% of load Largest (380kW) roof top PV in Mass

14. BCC SEA Phase I Projects PropertyLocationUnits Size kW % of load MishawumCharlestown337 392.015% Washington ElmsCambridge145 92.130% North VillageWebster132 156.444% RiverviewPittsfield120 198.734% Walden Square*Cambridge244 76.964% Crossway*Lee38 110.550% TOTAL1016 1,026.726%**

15. Third Party OwnershipBCC SEA PPA Developer & Provider Built legal structure Selected projects and partners Received PV incentive and structured as production incentive Provide credit support for properties to investor Eliminated capital & technical risks for hosts Eliminated payment risk for investor

16. Financing Structure BCC SEA Capitalize with $3.5-4 million from incentive funds Released as PBI per kWh $2 million in additional credit support for PPA Profitable over 20 years Revenue PPA$.16/kWh PBI--$.65/kWh (7 years) REC & FCM--$.05/kWh

17. Finance Partner Investment & Structure Sale/leaseback at placed-in-service 7 year lease with buyout in year 7 Market return, tax credit compliant Risks covered PBI revenue covered by incentive funds PPA revenue covered by BCC SEA credit support Trusts technology and O&M guarantee

18. Benefits for Host Properties Pays for electricity at or below todays cost for 20 years with 1.25% escalator Only pays for electricity generated Fixes 40% of electric costs No capital or balance sheet impact Minimal transaction and operating costs Option to purchase system at years 8, 14, 20

19. Impact on PV Incentive Programs Approximately $3.50/ watt or less Should go down with second round Half of typical cost for housing projects Serves market otherwise unserved Close to cost for large commercial projects Supports generation, not installation All parties make moneysustainable model

20. Benefits to other parties PV Installer volume lower marketing costs O&M provider Volume and concentration incentive to exceed targets Others Lawyers Accountants

21. Estimated Pricing Impacts Capital Savings Tax advantages-more than 30% savings Aggregation10% Correct building selection10% Revenue increases System performancebetter than 10% Correct building and system design10% Attributes market7% Monitoring costs5%

22. Mishawum Park Charlestown neighborhood of Boston 337 unit resident-owned facility Rescued and redeveloped by residents No syndication 100% low income Very high utility costs with owner paying all utility costs 392 kW

23. Mishawum Park, Boston, MA

25. Mishawum Park 392 kW system largest rooftop solar installation in MA third largest PV system in all of New York and New England largest PPA ever signed in New England for any type of facility. largest PPA signed for an affordable housing development in country

26. Impacts for Mishawum Reduced volatility in electric costs Covers at least 16% of very high load Saves $1 million if electricity prices double over 20 years (have doubled in last 5 years) Current savings if prices doubled equal to resident services budget Receives future benefits from time-of-use or demand pricing Not otherwise available

27. Challenges ITC Incentivesnot sustainable or reliable Getting owners to say yes Net metering and interconnection Long term operating risks Regulatory rulesoffsite, utility companies Best use of subsidies?

28. Why do solar Offers hedge for future, reduces volatility Improving economics Shift towards time-of-use pricing Expanding subsidy and environmental attributes for solar Gateway to other investments/systems Innovation and market participation will leave low income communities behind

29. DeWitt Jones BCC Solar Energy Advantage Boston Community Capital 56 Warren Street, Boston, MA 02119 617-427-8600 djones@bostoncommunitycapital.org www.bostoncommunitycapital.org djones@bostoncommunitycapital.org www.bostoncommunitycapital.org