REFF West Report

2
University of California, Berkeley School of Law Center for Law, Energy & the Environment
Table of Contents
About REFF-West, ACORE, and
Berkeley Law’s Center for Law,
Energy & the Environment
Opening Keynote: Mary Nichols
Setting the Scene: Understanding the
Context of Renewable Energy
Financing Smaller Deals
The Military:A Major New Customer
for Renewable Energy
Emerging CommercialTechnologies
Second Day Keynotes: Michael Peevey
&YiawayYeh
East Meets West: Investment Banking
Perspectives
Renewable Energy Project Finance
Developers’Viewpoints:What’s
Happening on the Ground?
Broadening the Debate: New
Financial Structures for the Future
Acknowledgments
.............................................................................3
.............................................................................4
.............................................................................5
.............................................................................7
.............................................................................9
...........................................................................12
...........................................................................14
...........................................................................16
...........................................................................18
...........................................................................20
...........................................................................22
...........................................................................24

3
About
REFF-West
REFF-West has been uniting senior financiers, investors, and clean en-
ergy executives from across the U.S. since 2008. Topics at REFF-West
include project finance, venture capital, renewable power generation,
emerging commercial technologies, financing smaller projects, equity
financing, and established technologies. The conference also offers an
unparalleled networking opportunity, allowing senior representatives
from across the energy and financial sectors to meet. REFF-West is co-
organized by the American Council On Renewable Energy (ACORE)
and Euromoney Energy Events.
ACORE
ACORE, a 501(c)(3) non-profit membership organization, is dedicat-
ed to building a secure and prosperous America with clean, renew-
able energy. ACORE provides a common educational platform for a
wide range of interests in the renewable energy community, focusing
on technology,finance and policy. ACORE convenes thought leadership
forums and creates energy industry partnerships to communicate the
economic, security and environmental benefits of renewable energy.
CLEE
The U.C. Berkeley School of Law’s Center for Law, Energy & the Envi-
ronment (CLEE) works with government, business, and the nonprofit
sector to help solve urgent environmental and energy problems.Draw-
ing on the combined expertise of faculty and students across U.C.
Berkeley,CLEE conducts influential research and provides public access
to reliable data on such complex issues as climate change, conversion
to clean energy, and water scarcity. Berkeley Law’s Energy and Clean
Technology Law Program prepares the next generation of renewable
energy leaders by offering courses and research opportunities in en-
ergy project finance, regulation, economics, and policy.
EUROMONEY ENERGY EVENTS
Euromoney Energy Events produces high-profile events for energy pro-
fessionals worldwide. Euromoney’s diverse range of conferences ad-
dress topical issues in the energy sector, with a focus on financial and
commercial aspects,in a portfolio that ranges across Renewable Energy,
Waste, Power and Carbon Finance.

Opening Keynote 4
In opening the REFF-
West conference, Mary
Nichols delivered a key-
note speech establish-
ing the renewable en-
ergy policy backdrop in
California.
“This is truly a pivotal
time.” In the past ten years,
the renewable energy
industry has made great
technological and financial
innovations. The next
two to three years will be
the time to fully harness
innovation for greater
environmental good.
California’s cap and trade
program (AB32) builds
upon the success of exist-
ing policies that promote
increased air quality. These policies include
energy efficiency standards in appliances and
building codes, the renewable portfolio stan-
dard (RPS), the low-carbon fuel standard, ac-
counting for carbon emissions in land-use and
transportation planning, and distributed gen-
eration mandates.
AB32 will achieve the lowest-cost emission
reductions of all considered alternatives. The
program is set to begin on January 1, 2013,
with the first phase covering 600 facilities and
85 percent of California’s emissions. The sec-
ond phase, which will begin in 2015, will cover
the transportation sector. Although the pro-
gram was originally expected to link to other
jurisdictions in the Western Climate Initiative,
presently Quebec is the only other participant
ready to follow. The program will initially give
away 90 percent of allowances while gradually
phasing in an auction. By studying other mar-
kets and building in safeguards against carbon
leakages into other regions, California aims to
achieve the lowest-cost emissions reductions
possible through its landmark program.
Full realization of environmental goals will re-
quire further private sector investment in ad-
dition to public sector mandates and support.
The Golden State’s cap and trade program is
only one step toward mitigating climate change.
Reducing California’s carbon footprint will re-
quire accelerating energy efficiency retrofits,
lowering the cost of renewable energy, com-
mercializing fossil fuel alternatives in transpor-
tation, and developing new technologies. The
private sector has a critically important role to
play in this transformation.
Opening Keynote
Mary Nichols, Chairman of CARB, opens REFF-West
with a review of California’s renewable energy leadership.

Setting the Scene
The opening panel at REFF-West allowed
a variety of speakers to lay out their view
of the renewable energy landscape in
2012. The audience heard the perspec-
tives of a federal policymaker, a state
regulator, a natural gas industry repre-
sentative, a solar project developer, and
a financier.
The Obama Administration believes in—and
is implementing—an “all of the above” energy
strategy. President Obama is
simultaneously developing do-
mestic oil reserves and investing
in clean energy technologies, all
with the goal of creating jobs for
the middle class. The Obama Ad-
ministration has approved the sit-
ing of seventeen utility-scale solar
projects, six onshore wind proj-
ects, and eight geothermal proj-
ects on federal lands. Through
the Federal Leadership in Envi-
ronmental, Energy, and Economic
Performance Order (Executive
Order No. 13514), the president
has called for the federal government to reduce
its greenhouse gas emissions by 28 percent by
2020. Lastly, the Department of Defense has
initiated an unprecedented shift toward renew-
able energy generation, with over
seven billion dollars planned for
renewable energy power pur-
chase agreements (PPAs).
The natural gas, renewable en-
ergy, and energy efficiency indus-
tries can partner to form a “radi-
cal center,” creating a renaissance
in U.S. manufacturing. Technology
changes have enabled access to
abundant natural gas resources
in the United States. Low gas
prices are being projected into
the future, yet two things remain
critical to the natural gas indus-
try’s future: (1) creating and re-
habilitating infrastructure and (2)
forming local partnerships.
In California, utilities are on their
way to complying with the Re-
newable Portfolio Standard (RPS)
of 33% renewables by 2020—
with solar technologies in the
lead. In the past, utilities were
meeting their RPS obligations pri-
marily by procuring solar thermal
and wind power, but recently so-
lar photovoltaic (PV) projects have dominated
Setting the Scene:
Understanding the Context of
Renewable Energy
5
MODERATOR
• Nancy Floyd, Managing Director, Nth Power
PANELISTS
• Jonathan Powers, Federal Environmental Executive,White House Council on
Environmental Quality
• Paula Gant, SeniorVice President, Policy & Planning,American Gas Association
• Nancy Ryan, Deputy Executive Director, California Public Utilities Commission
• Paul Detering, CEO,Tioga Energy
• Nat Kreamer, CEO, Clean Power Finance Photo: Jean-Max Chu
Nancy Ryan, Deputy
Executive Director, California
Public Utilities Commission
Paula Gant,
Vice President of Policy,
American Gas Association
Jonathan Powers, Federal
Environmental Executive,
White House Council on
Environmental Quality

Setting the Scene 6
the California RPS procurement pro-
cess. PV’s relative increase is supported
by the expansion and development of
California’s distributed generation poli-
cies, such as the California Solar Initia-
tive and the new feed-in-tariff (SB32).As
new projects come online and mature,
the California Public Utilities Commis-
sion (CPUC) must ensure the reliabil-
ity of the overall system, weighing the
costs,risks, and benefits of bringing new
projects to the grid. Decarbonizing the
transportation sector is the next step
to meeting California’s environmental
goals.
Distributed generation
solar is poised to reach
grid parity as federal and
state incentives expire in
2016. The investment tax credit
(ITC) for solar projects will ex-
pire in 2016, and the American
Recovery and Reinvestment Act’s
(ARRA) Section 1603 Cash Grant
Program has already ceased ac-
cepting new applicants. Not only
is a renewal of the ITC before
2016 uncertain, but Section 1603 grantees are
facing the threat of receiving less
of an incentive than expected be-
cause of the potential 2013 fed-
eral budget sequester.
To date, state-level policies for
solar PV have been uneven. While
New Jersey’s SREC program cre-
ated a PV oversupply, California’s
Solar Initiative has worked better
due to its performance-based in-
centive design. Solar panel pric-
es are currently 70 to 90 cents
per watt, and system costs are in the $2.00-
3.00 range, while prices continue to fall. At this
rate, solar PV will reach grid parity soon. Non-
traditional sources of capital have noted this
opportunity and are interested in working with
developers who are involved in commercial and
residential markets.
As the solar industry matures, firms are re-
thinking the role that debt and other sources of
financing play in their businesses. Downstream
solar entities conduct four main activities: sales,
installation, procurement, and finance. As the
marketplace becomes more volatile, firms will
need to focus on their core businesses. The
renewable energy industry presents an op-
portunity to utilize structured debt, owing to
projects’ low capital expenditures and high cash
flow. The industry is therefore currently reas-
sessing the role of debt and addressing its inter-
action with tax equity.
“What we see is a tremendous opportunity—
building on natural gas, renewables, and energy efficiency.”
-Paula Gant, SeniorVice President, Policy & Planning,American Gas Association
Paul Detering,
CEO, Tioga Energy
Nat Kreamer,
CEO, Clean Power Finance

Financing Smaller Deals 7
While developers are
bringing an increasing num-
ber of 5 MW and smaller
projects before finance
providers, these projects
often need significant work
before they can be consid-
ered bankable.
Many developers are doing small projects, but
only a minority of the projects are “bankable.”
There is a large volume of small projects seek-
ing funding in the market, particularly in solar.
However,according to DarrenVan’t Hof,for ev-
ery one hundred deals, only five are bankable.
Often it is the PPA that is not completely vet-
ted. For some developers, it is their very first
deal. Chris Diaz recommended picking part-
ners and sticking with them to gain efficiencies
down the road.Choosing competent and expe-
rienced partners might mean a more expensive
first deal, but later deals will benefit from the
inter-team relationship and ability to avoid sig-
nificantly changing project documents. Accord-
ing to Tony Grappone, cost reductions of 33 to
66 percent are possible with repeat business,as
his firm spends a lot of time educating develop-
ers up-front.
While panelists agreed that previous project
development experience and strong sponsor
balance sheets are important considerations
for lenders to smaller projects, their views var-
ied on the relative significance of other factors
in determining the bankability of a project. The
speakers noted that decisions regarding smaller
deals are often relationship-oriented. Even if it
is a developer’s first deal, if they are honest and
open to suggestions, a lender may work with
them to make the deal financeable. The credit-
worthiness of the offtaker is naturally another
important consideration. The panelists noted
the following considerations about a developer
with varying levels of emphasis:
• Have they built infrastructure?
• Have they tried to raise capital?
• Do they have insurance and letters of cred-
it?
• Do they have a website?
• Where is the deal located?
• Who is the EPC contractor? Do they have
Financing Smaller Deals
MODERATORS
• Ed Feo, Managing Director, US Renewables Group (USRG)
• Edward W. Zaelke, Partner,Akin Gump Straus Hauer & Feld LLP
PANELISTS
• Chris Diaz, SeniorVice President, Seminole Financial Services
• Dick Rai, Manager, PNC Energy Capital
• Rodney Eckhardt, Managing Partner, RoundRock Partners
• Tony Grappone, Partner, Novogradac & Company LLP
• DarrenVan’t Hof, Director of Renewable Energy Investment, US Bank

Financing Smaller Deals 8
experience? Is there a payment and perfor-
mance bond?
• What solar panels and inverters are being
used?
Smaller players can succeed in this market, but
they need to clearly demonstrate what skills
they bring to the table. Dick Rai stated that he
seeks developers with experience and $10-15
million in liquidity. As a result, smaller players
may need to team up with larger companies
to merit consideration. In
such a case, the smaller player
would need to be clear on
what value they add to the
deal, whether it is hardware
supply, PPA origination, EPC,
or another role. Smaller play-
ers need to identify where
they fit in this segmentation
and team up with players that
have complementary skills.
“No-cash” deals do not exist.
Some inexperienced smaller
players hold misconceptions
of how much equity the spon-
sor should invest in a deal,not
recognizing that “no-cash”
deals are not a possibility.
Smaller players need to first
raise sponsor equity, con-
struction financing, and term
debt. Bringing in the tax eq-
uity is the final piece.
Deals requiring fancy financial
engineering are unlikely to do
well. The panelists discussed in detail the im-
plications of the Third Circuit’s recent ruling in
Historic Boardwalk Hall, LLC v. Commissioner.
Tony Grappone explained the “sandwich lease”
structure involved in the case. A lease pass-
through employed two special purpose vehicle
(SPV) partnerships: one to own real estate and
a separate one to operate the project. The
minimal economic commitment from the tax
equity investor led the Third Circuit to hold
that it was not a bona fide partner to the proj-
ect. In light of the ruling, Mr. Grappone advised
developers to make sure tax equity investors
hold a perceived upside or downside risk in a
project.
“Time is your enemy.
The more organized you are, the more you save money.”
-Christopher Diaz, SeniorVice President, Seminole Financial Services
Panelists engage with conference-goers after the
discussion of smaller renewable energy projects.

The Military 9
The U.S. military aims to procure one gigawatt
of renewable energy each for the Army, the
Navy, and the Air Force by 2020. The Army is
currently lining up developers of future projects
through a Multiple AwardTask Order Contract
(MATOC). It has also established a centralized
task force to meet with industry representa-
tives and hear their concerns regarding state
and local regulations, Department of Defense
bureaucracy, and federal contracting issues. In
pursuing the tremendous opportunity present-
ed by military procurement of renewable en-
ergy, developers and lenders need to be mind-
ful of unique benefits and risks associated with
contracting with the armed forces.
The military is procuring renewable energy to
improve combat effectiveness and operational
efficiency. As ACORE President—and retired
Vice Admiral—Dennis McGinn stated, the mili-
tary is not pursuing renewable energy proj-
ects to win an “EPA green technology award,”
but rather to improve its bottom line. In the
armed forces, the bottom
line means combat effec-
tiveness and operational
efficiency. David Belote,
former commander of
the Nellis Air Force Base,
reinforced this sentiment,
stating that renewable energy gives base com-
manders energy security—the ability to keep
operations going “no matter what.” Kathy Ahs-
ing stressed that the entire senior leadership
of the armed forces is behind these efforts, as
demonstrated by the Department of Defense’s
goal of procuring three gigawatts of renew-
able energy for the Navy, the Army, and the Air
Force by 2020.
The military presents unique advantages as an
off-taker of renewable energy. First, the U.S.
military presents a lower credit risk than other
off-takers, which means a lower cost of capital
for developers. Second, the Army is seeking to
limit risk by reducing project interference and
ensuring that projects are completed. As Stan
Lee with the Army Corps of Engineers stated,
theArmy is“going to make sure that the project
gets built,” and “will only do inspections to the
extent that it safeguards theArmy’s liability [for]
safety violations.” Third, military installments
have the authority to sign 20 to 30-year power
The Military:A Major New
Customer For Renewable Energy
MODERATOR
• Vice Adm. DennisV. McGinn (USN, Retired), President,ACORE
PANELISTS
• David Belote,Vice President for Federal Business,ApexWind Energy,Inc.
• Lawson (Stan) Lee, P.E., Senior Program Manager, Energy Division, U.S.
Army Engineering Center, Huntsville,AL
• Karen Butterfield, Director of Federal Programs, SunPower
• Kathleen Ahsing, Director of Federal Programs, U.S.Army Energy Initia-
tives Task Force

The Military 10
purchase agreements
(PPAs),providing a long
term revenue stream
to project owners and
lenders. Fourth, on a
case-by-case basis, the
military is willing to al-
low multiple off-takers
if a project generates
more electricity than
the military installa-
tion requires. Lastly,
the Army is seeking
to standardize project
documents and work
with other services
to streamline the pro-
curement process and
achieve greater conti-
nuity throughout the
armed forces.
Developers must be
mindful of the unique
contracting needs of
the U.S.military. Karen
Butterfield outlined
several contracting issues SunPower overcame
to develop solar projects at military sites. First,
military bases require a termination-for-con-
venience clause to allow for the possibility of
a base closure or a national security exigency.
Kathy Ahsing noted that the Army will agree
to make a company whole for losses resulting
from a termination for convenience or a base
closure, yet it remains unclear if these contrac-
tual assurances will ease the concerns of po-
tential lenders. Second, the military may not
be comfortable with allowing assignment or
novation of a project owner’s rights and obli-
gations under a PPA. As Butterfield explained,
the military generally does not want a bidder to
sell a project after winning a contract. The EITF
and the Army Corps of Engineers recognize
this issue, however, and they are taking steps
to accommodate traditional project financing
structures. Third, the military retains the right
to restrict site access. Similar to its treatment
of losses from a base closure, the military will
agree to make a company whole for losses re-
sulting from restricted site access. Fourth, the
government does not sign take-or-pay agree-
ments. In an effort to replicate the certainty
that a project owner obtains through a take-or-
pay arrangement, SunPower has required that a
military base off-taker guarantee that it will take
a certain amount of energy from the project.
“The Department of Defense and all the military services said
‘We want to diversify our energy portfolio’... not to win an EPA ‘green technol-
ogy award’... but rather because it is all about improving the bottom line...”
-Vice Adm. DennisV. McGinn (USN, Retired), President,ACORE
Stan Lee and Kathy Ahsing discussed
the Army’s renewable energy procurement
efforts prior to their panel discussion.

The Military 11
“One of the real upsides to the financier in a federal contract is
that the credit risk is quite good.”
-Karen Butterfield, Director of Federal Programs, SunPower
Lastly, the military is
uncomfortable with
solar easements
because base com-
manders want to
retain the right to
build structures on
the base as needs
arise. As an alterna-
tive, Butterfield said
that a project owner
may agree to forgo a
solar easement yet
require that the mili-
tary make the proj-
ect owner whole if
it prevents access to
sunlight.
The Army has estab-
lished a centralized
taskforce to evalu-
ate and work with
firms boasting solid
construction, devel-
opment, and project
operations and maintenance (O&M) experi-
ence. Recognizing that contracting with the
federal government is complicated, the Secre-
tary of the Army established the Energy Initia-
tives Task Force (EITF) to streamline the bid-
ding process. EITF is responsible for executing
large-scale (10 MW and greater) energy proj-
ects across the country. Exercising its authority
to reach all the way down to the local project
level, EITF is helping developers navigate mili-
tary, state, and local bureaucracy. The taskforce
is also able to affect higher-level DoD policies
that might pose a barrier to project execution.
To better understand private industry concerns,
EITF meets with industry weekly.
David Belote, Vice President for Federal Business,
Apex Wind Energy, Inc.

Emerging CommercialTechnologies 12
The commercialization
of a new energy tech-
nology requires a strong
and diverse team focus-
ing on breakthrough
technology development rather than manufac-
turing capacity. Once a breakthrough technol-
ogy is in hand,start-ups can partner with estab-
lished corporate leaders to commercialize and
deploy technology. Government investment
throughout the research, development, dem-
onstration, and deployment (RDD&D) process
is critical to sustaining American innovation in
energy technology.
The technology itself, as opposed to the ability
to manufacture it, is the key to commercializ-
ing new energy technologies. Bill Watkins of
Bridgelux warned that too many start-ups are
overeager to build manufacturing capacity. This
inclination is intensified by investors who like to
invest in things—machines, widgets, warehous-
es, etc.—rather than in innovation. The key to
success, Watkins argued, is to focus squarely
on developing the technology. Once a start-
up has developed game-changing technology,
it may work with a larger entity with existing
manufacturing capacity and expertise to com-
mercialize the start-up’s innovation. Watkins
offered Toshiba and Chevron as examples of
major companies he had worked with to com-
mercialize a start-up’s technology. Eric McAffee
also emphasized the importance of a corporate
“big brother” to help younger technology com-
panies through the “valley of death.”
The national laboratories offer start-ups an af-
fordable way to develop and test energy tech-
nologies. Paul Alivisatos, Director of the Law-
rence Berkeley National Laboratory (LBNL),
explained that if a firm agrees to keep its tech-
nology open to the public, there is no charge
for use of the national labs. If, on the other
hand, a firm wishes to keep the technology it
develops proprietary, then the labs charge a fee
that Alivisatos emphasized the labs work hard
to keep low. Alivisatos shared that LBNL is de-
veloping a new facility with controlled lighting
and HVAC to allow for the testing of windows
and other technologies. LBNL is also working
with U.C. Berkeley, Stanford, the National Re-
newable Energy Laboratory (NREL), and a con-
sortium of 40 solar companies to try to solve
technological challenges that are common to
many players in the solar industry. Alivisatos
Emerging
CommercialTechnologies
MODERATOR
• Ira Ehrenpreis, General Partner,Technology Partners
PANELISTS
• Arun Majumdar, First Head of ARPA-E, U.S. Department of Energy
• BillWatkins,CEO,Bridgelux,Board Member at Flextronics and Maxim Semi
• Eric McAfee, Chairman, McAfee Capital
• Paul Alivisatos, Director, Lawrence Berkeley National Laboratory
Photo:Arne Krueger
“The key to this is not the manufacturing.
The key is the technology.”
-Bill Watkins, CEO, Bridgelux

“We have to recognize...
that at the end of the day it’s [about] carbon.”
-Arun Majumdar, First Head of ARPA-E, U.S. Department of Energy
explained that different compa-
nies can take advantage of the
national labs in different ways,
and he encouraged entrepre-
neurs to reach out to him.
Energy innovation must be sus-
tained by an increasing budget
for RDD&D at the federal level.
Moderator Ira Ehrenpreis di-
rected the audience to a recent
report by the Breakthrough
Institute that detailed the De-
partment of Energy’s long term
support for hydraulic fracturing
natural gas drilling technologies.
This type of support helped facil-
itate the recent boom in Ameri-
can natural gas production and
illustrates the level of sustained
commitment from the U.S. gov-
ernment that is necessary for energy innova-
tion. Arun Majumdar extolled the examples of
American innovation he witnessed while lead-
ing ARPA-E. Majumdar emphasized there were
significantly more projects that deserved in-
vestment than ARPA-E had dollars to allocate.
Other federal policy changes would foster en-
ergy innovation, but they have varying or un-
clear levels of political support. Arun Majum-
dar described a bipartisan bill currently in the
legislative process that would allow renewable
energy and other clean technology firms to
form master limited partnerships (MLPs) for
RDD&D purposes. The MLP structure is cur-
rently only available to players in the oil, gas,
and coal industries, and it allows considerable
tax benefits. Making the MLP structure avail-
able to renewable energy and clean technol-
ogy firms would afford lower costs of capital
for technology development. Bill Watkins ar-
gued that adjustments to immigration policy
that would facilitate the employment of for-
eign PhD holders would also foster innovation.
Majumdar stressed that ultimately our nation
needs to again recognize that the rationale
for renewable energy and clean technologies
ultimately comes down to carbon. Majumdar
agreed with Bill Gates’ analysis that the United
States does not need to put a carbon price in
place today;merely the establishment of a pric-
ing system that would take effect in the future
would be enough to start driving investment.
On a positive note, Alivisatos reminded the
audience that California’s carbon market will
open in November 2012. Revenue from the ini-
tial auctions,Alivisatos argued, could be a great
source of support for the energy technology
industry in California.

Second Day Keynotes
MICHAEL PEEVEY
Michael Peevey opened the second day of
the conference by discussing the California
Public Utilities Commission’s (CPUC) efforts
to support the state’s statutory RPS goals.
The CPUC is working with investor-owned
utilities (IOUs) to ensure they generate 33
percent of their electricity from renewable
sources by 2020.
The RPS program supports the state’s goal
of reducing greenhouse gas emissions to
combat climate change. Peevey expressed
confidence that the state would meet its
RPS goals, remarking that progress has been
rapid. In 2011, the IOUs—including South-
ern California Edison, San Diego Gas & Elec-
tric, and Pacific Gas & Electric—collectively
obtained 21 percent of their electricity from
renewable sources, a sharp increase from
just 13 percent in 2008. The RPS program
is divided into three compliance periods; the
second compliance period from 2014-2016
is already over-procured.
The CPUC is driving a number of regulatory
efforts to support small renewable energy
projects. The California Solar Initiative is a
customer-side solar rebate program that has
resulted in 1,000 MW of installed solar in
IOU territories by reducing the upfront cost of
projects. As the program funding winds down,
the private sector will need to step in and bring
costs down.
The CPUC also has utility-side programs to
support the RPS program. One program called
the Renewable Auction Mechanism (RAM) is
tailored to projects that are less than 20 MW
and greater than 3 MW. The program reduces
the transaction cost of negotiating contracts
by setting up a reverse auction for RPS-eligi-
ble technologies. RAM also recognizes the
strengths of different technology types by cat-
egorizing projects as baseload, peaking as avail-
able, and non-peaking as available. The latest
RAM auction in May of 2012 proved successful
at obtaining competitive prices as developers
bid in ten times the amount of capacity that
would ultimately be procured through the auc-
tion.
Michael Peevey andYiawayYeh

Lastly, Peevey noted that California’s Feed-in-
Tariff (FiT) is available for renewable energy
projects up to 3 MW in capacity. Unlike FiTs
in other countries and states, the California
program relies on the competitive market. The
program features a self-adjusting tariff. It starts
with prices drawn from RAM results, but the
FiT adjusts those prices automatically in re-
sponse to demand. Utilities establish a queue
on a first-come, first-served basis, and the price
may increase or decrease depending on wheth-
er projects accept the FiT price or not.
YIAWAYYEH
Mayor Yiaway Yeh followed President Peevey
with an introduction to the Palo Alto municipal
utility, Palo Alto Electric, which serves 65,000
residents and businesses. Mayor Yeh described
Palo Alto’s multi-faceted efforts to provide re-
newable energy to consumers at low prices.
In 2007, Palo Alto adopted an aggressive goal
of obtaining 33 percent of its electricity from
renewable resources by 2015 with no greater
than half a cent per kilowatt hour rate impact.
The city has additionally created a solar rebate
program that has led to installation of 3.5 MW
from 435 systems.
Palo Alto also experimented with a FiT pro-
gram by offering an avoided-cost rate of 14
cents per kilowatt hour to commercial custom-
ers for solar energy. The new program did not
have any subscribers. This was a hard lesson to
learn, Mayor Yeh lamented, but the city council
continues to learn from and build upon these
attempts. Palo Alto is pioneering another pro-
gram labeled “Palo Alto Green,” which is a vol-
untary program offering an electricity mix from
wind and solar energy. So far, 21 percent of
ratepayers are participating,which makes it one
of the most highly-subscribed and most active
voluntary programs in the country.
MayorYeh lastly discussed funding choices from
the perspective of a municipality. He noted that
cities currently have the ability to issue tax-ex-
empt bonds,but congressional efforts to reduce
the budget deficit threaten the future existence
of the tax-exempt municipal bond structure—a
prospect that concerns many mayors.

Investment Banking Perspectives
In this session, a panel of investment bankers
from JP Morgan, Wells Fargo, Morgan Stanley,
and Credit Suisse discussed the current finan-
cial landscape for renewable energy projects
and companies and their banks’ recent areas of
focus and deal flow.
“It was the best of times, and the worst of
times.” Julia Pettit of Stoel Rives opened with
this famous quote from A Tale of Two Cities to
describe the current state of renewable energy
finance. While costs continue to become more
and more competitive in many markets, all the
panelists agreed that a number of critical fac-
tors are poised to alter the financing environ-
ment going forward, including:
• Expiration of the Section 1603 Cash Grant
Program and imminent sunset of the Pro-
duction Tax Credit;
• Conclusion of the Department of Energy’s
Loan Guarantee Program; and
• Continued shakeout and consolidation in
the renewable energy industry.
Characteristics of attractive deals that each of
the panelists’ institu-
tions sought were con-
sistent across the banks,
including:
• A sponsor with a track record in the space.
Panelists agreed that a developer with “skin
in the game” and the potential for repeat
business were ideal characteristics. As Ka-
minsky noted,if it’s going to be a 20-year re-
lationship, it very much matters who you’re
doing business with.
• A 15-20 year PPA with an investment-grade
counterparty. As of today, there has been
virtually no appetite for non-recourse fi-
nancing of merchant projects.
• A pro-forma demonstrating that flip terms
and coverage ratios can survive stress test-
ing and sensitivities. Several panelists noted
the different traits of solar and wind proj-
ects. Where solar production is less vari-
able and thus enables more stable cover-
age ratios, wind is more amenable to flip
structures that allow the parties to respond
to low output by simply extending the flip
term.
• Size. The representatives of these large fi-
nancial institutions agreed that they are ide-
ally looking for scale—meaning preference
for the opportunity to get $50-60 million
East Meets West:
Investment Banking Perspectives
MODERATORS
• Conor McKenna, CFA,Vice President, Reznick Capital Markets, LLC
• Julia R. Pettit, Of Counsel, Stoel Rives LLP
SPEAKERS
• Paul Leggett, Executive Director, Morgan Stanley
• Christopher Radtke, Director, Credit Suisse
• Jason Kaminsky, Vice President, Environmental Finance,Wells Fargo
• Mit Buchanan, Managing Director, Energy Investments, JP Morgan
Photo: J. Pellgen
16

Investment Banking Perspectives 17
out of the door at one time, rather than
funding a series of smaller projects.
The IPO market is closed, but M&A oppor-
tunities exist. Panelists agreed that the IPO
market was effectively closed at this point for
clean tech companies. They drew attention to
the current “risk off” environment in the pub-
lic capital market with an empha-
sis on valuing yield and certainty
versus risk and reward. However,
the panelists agreed that the IPO
market will return. In anticipa-
tion of this return, companies
should be investing today in pre-
IPO roadshows to familiarize in-
vestors with their businesses and
management teams.
With adversity comes opportu-
nity. A cold IPO market leaves
room for M&A opportunities
according to several of the pan-
elists. Because of firms’ inabil-
ity to access capital in the public
markets, firms will need strategic
investors to come to the table.
With strong distribution chan-
nels, technical know-how, and
engineering resources, strategic
buyers have the ability to incubate technolo-
gies and deploy them in markets at scale more
quickly. Because of these synergies, the M&A
environment is healthier and may not be driven
by as much distress going forward, supporting
valuations for clean tech companies that cannot
be justified elsewhere in the current environ-
ment.
Cash equity is out there. The expiration of
the Section 1603 Cash Grant Program in 2012
means sponsors will need to utilize relation-
ships and demonstrate increased skills to exe-
cute in a tax-equity only environment. Despite
the increased pressures on the development
side, panelists agreed that the tax equity mar-
ket remains competitive on the investor side,
too. Paul Leggett, Executive Director of Mor-
gan Stanley, mentioned that if he had been
asked one year ago what 2012 would look like,
he would have predicted more distressed as-
sets in solar and wind than exist today. To the
contrary, there appear to be a healthy number
of buyers for projects in the market, support-
ing asset prices for projects that are distressed
but not fundamentally flawed. Mit Buchanan of
JP Morgan agreed, noting fair amounts of cash
equity available in the market to acquire as-
sets, which has led her to caution some clients
against offering purchase prices that are too
low. In summary,Christopher Radtke,Director
of Credit Suisse, said a deep market of buyers
exists. However, projects that are far from the
completion stage, and thus pose permitting and
offtake uncertainty, face a drastically smaller
supply of capital.

Renewable Energy Project Finance 18
Financiers of renewable energy proj-
ects foresee a challenging year ahead, but they
are optimistic about the market’s long-term
prospects due to industry participants’ increas-
ing ability to allocate risks effectively and uti-
lize new financing vehicles. Panelists agreed
that project sponsors will need to demonstrate
flexibility and adaptability to thrive in the pres-
ent environment of political uncertainty and
changing market dynamics.
Demand for tax equity will exceed supply in
the wake of the Cash Grant Program. Panelists
agreed that demand for tax equity will increase
as the Section 1603 Cash Grant Program winds
down. Tax equity investors, however, are in
short supply, and the panelists were uncertain
whether existing players will be able to fill the
gap left by the expiration of the Cash Grant
Program.
Certain characteristics of tax equity invest-
ments have hindered the entrance of new in-
vestors. First, few potential investors have suf-
ficient tax liability that can be offset by the tax
credits associated with renewable energy proj-
ects. Second, new entrants often lack sufficient
knowledge of project finance and tax regula-
tions necessary to participate in deals involving
complex renewable energy assets. Finally, some
investors are hesitant to originate an investment
that will require management over an extended
period of time due to tax credit recapture rules
governing transferability. Despite these barriers
to attracting new tax equity investors, the pan-
elists cited the success stories of non-financial
corporate players liked Google and Chevron.
High tax equity returns are expected to stay
stable. Heightened demand for tax equity is
driving a significant return for investors, with
panelists estimating unlevered annual returns of
seven to nine percent. Prudential Capital’s Ric
Abel explained that the market is thus “a little
upside down” because presently a tax equity
investor can earn more return than a cash eq-
uity investor.
Institutional investors may become more active
players in renewable energy project finance.
Several panelists noted that solar project in-
vestments appear particularly well suited for
insurance companies and pension funds, which
seek low-risk, stable assets to match the dura-
tion of their long-term liabilities. Panelists also
discussed MidAmerican Energy Holdings’ issu-
ance of $850 million in investment grade cor-
porate bonds to finance the utility-scale Topaz
Solar Farm in California. Ric Abel noted that
Renewable Energy
Project Finance
MODERATORS
• Michael Butler, CEO, Cascadia Capital
• Don Weaver, Partner, SNR Denton
SPEAKERS
• Jeetu Balchandani, Head, Structured Tax and Renewable
Energy Investments, MetLife
• Lance Markowitz, SeniorVice President, Union Bank
• Barney Schauble, Managing Principal, Nephila Advisors
• Ric Abel, Managing Director, Prudential Capital Group
• Terry Grant, Managing Director, Marathon CapitalPhoto:Tracy Olson

Renewable Energy Project Finance 19
institutional investors like Prudential are
willing to offer construction and term fi-
nancing as well.
New financing mechanisms could open the re-
newable energy sector to a larger investor base.
Panelists discussed the promise of high-liquidity,
tax-advantaged vehicles like the Master Limited
Partnership (MLP) and Real Estate Investment
Trust (REIT) for lowering the cost of capital for
renewable energy projects.
Previously active EU banks have scaled back re-
newable energy project financing. Panelists not-
ed that European banks have decreased long-
term lending to U.S. renewable energy projects
due to the Eurozone’s ongoing credit crisis.
They also expect the upcoming implementa-
tion of the Basel III financial regulations to fur-
ther reduce the availability of long-term debt
finance, increasing the cost and decreasing the
length of project finance debt. In contrast, Ric
Abel of Prudential Capital pointed to Japanese
and Canadian banks as well-funded institutions
that are still able to offer longer tenors.
Despite disruptions in the debt markets, ample
financing remains available for “good projects.”
Ric Abel of Prudential Capital expressed the
common sentiment that “good projects still
get financed.” Noting that “debt is extraordi-
narily cheap,” Union Bank’s Lance Markowitz
explained that—because expiring federal in-
centives have reduced the number of available
renewable energy project investments—banks
are willing to be “fairly aggressive” in order to
retain market share. Interestingly, while some
panelists noted that today’s low-priced power
market is harming renewable energy project at-
tractiveness, MetLife’s Jeetu Balchandani stated
that he views low PPA prices as a credit posi-
tive because highly priced PPAs are riskier if the
offtaker experiences financial difficulty.
The use of insurance to unbundle and allocate
renewable energy project risks is “a sign of a
healthy market.” Barney Schauble explained
that Nephila Capital is offering project own-
ers weather-linked insurance coverage
to hedge cash flow volatility resulting from
less-than-expected resource volume (e.g. less
wind, sunlight, or water flow). Panelists agreed
with his assessment that such insurance prod-
ucts are “a sign of a healthy market” because
they play a critical role in obtaining better fi-
nancing terms and protecting against future
losses.
Closing Thoughts. To close out the discussion,
each panelist was asked to share a “provocative
prediction” for the renewable power sector.
• Jeetu Balchandani of MetLife optimistically
forecasted an extension of the PTC due to
its crucial role in facilitating U.S. wind proj-
ect financing.
• Lance Markowitz of Union Bank predicted
that even with a PTC extension, solar deals
would outshine wind financings in 2013. He
also forecasted—with tongue in cheek—
that people will realize “that tax equity guys
are really the good people.”
• Ric Abel of Prudential Capital also predict-
ed a PTC extension, but he stated it will
not solve the problem of low PPA prices.
To overcome that challenge, the renewable
energy industry will need to wait for newly
constructed gas-fired projects to increase
demand for natural gas and drive more fa-
vorable PPA pricing across the board.
• Barney Schauble of Nephila Capital offered
a silver lining prediction that while removal
of key policy incentives may seem like “bad
news,” the disappearance of these incen-
tives may spur increased cooperation with
natural gas players, with the potential for
combined natural gas and renewable energy
projects that would pose significant advan-
tages to the grid.
• Terry Grant of Marathon Capital expressed
the potential entry of “some very sophisti-
cated,probably internationally-oriented” in-
vestors into the renewable energy project
market “who love the yield” offered by U.S.
solar assets.

Developers'Viewpoints 20
West Coast developers gave their perspectives
on the latest trends in financing and transmis-
sion development. They also discussed the best
policies to mitigate technology risk and sustain
renewable energy project investment.
The limited availability of tax equity will con-
tinue to challenge the financing of renewable
energy projects. Over the past few years, tax
equity has comprised a smaller part of a proj-
ect’s investment. It will occupy an increasingly
larger portion, however, as the Section 1603
Cash Grant Program wanes. Bob Powell noted
that, despite developer demand for more part-
ners with significant tax appetite, the list of tax
equity investors is relatively static.
Cash equity is becoming more prevalent, espe-
cially in solar. Arno Harris and Jim Rice pointed
out that there have been many more cash equi-
ty investors coming into the market, especially
downstream.
Stable fed-
eral incentives
would bring
greater certain-
ty to renewable
energy project
investment, and
new legislation could foster more robust indus-
try and project development. The developers’
wish list for upcoming federal government ac-
tion included extension of the production tax
credit and defense of the investment tax credit.
Arno Harris argued that the best case scenario
would be a price on carbon. Jonathan Weisgall
noted that a carbon price would be potentially
politically viable because it has both liberal and
conservative supporters. Mr.Weisgall addition-
ally expressed hope for comprehensive tax re-
form that could offer options other than tax
equity to structure deals. Bob Powell support-
ed this and mentioned Master Limited Partner-
ships as one example of a vehicle that could
spur investment in renewables. A.G. Kawamura
stated the need for multiple agencies to work
together on innovation grants, obtain public
support,and to get buy-in for new technologies.
Bigger projects are more viable than smaller
projects. The biggest risks with project devel-
opment are interconnection and permitting
Developers’Viewpoints:
What’s Happening on the Ground?
MODERATOR
• Nancy Hartsoch, SVP, Marketing and Sales, SolFocus Inc.
SPEAKERS
• Bob Powell, Chief Financial Officer, NRG Solar
• Jim Rice, CEO, Nautilus Solar
• Jonathan Weisgall, VP, Legislative & Regulatory Affairs, MidAmerican
Energy Holdings Company
• A.G. Kawamura, Former Secretary, California Department of Food and Agricul-
ture
• Arno Harris, CEO & Chairman, Recurrent Energy;
Board Chair, Solar Energy Industry Association (SEIA)
Photo:Thomas Ormston

Developers'Viewpoints 21
requirements. Both require
considerable time and money,
sometimes making smaller
projects unaffordable. For
behind-the-meter projects,
there is very little margin for
error. Bob Powell stated that
developing distributed gener-
ation projects was like “vacu-
uming nickels.”
The industry is averse to try-
ing lesser known technolo-
gies. New technologies make
project developers worry
whether the manufacturer
will last beyond the life of
the PPA. Jim Rice said that
his company was simply not
in the business of trying any-
thing new. The consensus
view was that commercial-
ization of new technologies
presents too many challenges.
Taking a technology out of a lab, ramping it up,
and having a revolutionary effect on prices is an
illusory goal for many developers. Nancy Hart-
soch commented on a technology-investment
disconnect: technologies are expected to last
twenty to thirty years and often need to be
proven in just two to three years.
The public sector plays an important role in
commercializing technologies. Jonathan Weis-
gall and A.G. Kawamura cited examples such as
government loan guarantees and public-private
partnerships with universities that created
commercialization platforms.
Panelists disagreed about the need for ad-
ditional transmission in California. Jonathan
Weisgall noted that only about 40 percent of
the transmission that is needed for California
to meet its Renewable Portfolio Standard (RPS)
goals is currently available. Arno Harris and
Bob Powell stated that it is less clear wheth-
er California has enough transmission or not.
While there are congestion spots with projects
tying up the queue, many of those projects are
actually non-viable. Conclusions over the po-
tential lack of transmission, therefore, could be
premature. Arno Harris noted that there is a
mismatch between the priorities of the utilities,
which prioritize projects based on a “least cost,
best fit” analysis, and those of the California In-
dependent System Operator (CAISO), which
uses a first-come, first-served system to rank
projects. Though the CAISO and the CPUC
can be bureaucratic, they are making progress;
they recently created guidelines that harmonize
procurement and prioritize deliverability.
“You really need to think about how to build your
bulletproof project as we get to 2016 or 2017 because we’re going to
lose the level of subsidies we’ve had.”
-Bob Powell, CFO, NRG Solar

Broadening the Debate 22
In this session, a diverse set
of panelists discussed new
areas of innovation in ener-
gy financial structures,their
firms’ activities to date,
and their perspectives on
potential future developments. Financial struc-
tures covered included Master Limited Part-
nerships (MLPs), Real Estate Investment Trusts
(REITs), and On-Bill Financing for investing in
and funding renewable energy and energy ef-
ficiency projects.
Opportunities exist in new financial structures.
The panelists discussed a variety of new fi-
nancial structures that offer the potential for
expanded access to capital and lower costs of
capital. Rick Needham,Director of Green Busi-
ness Operations at Google, highlighted the po-
tential of utilizing Master Limited Partnerships
(MLPs) for renewable energy. MLPs are a tax-
preferential investment vehicle used widely in
the oil and natural gas industry. Current law,
however, excludes renewable energy projects
from eligibility for MLP classification. Needham
urged that “it just makes sense” to make the
MLP classification available to renewable ener-
gy investments. Brad Copithorne, Director of
Financial Innovation at the Environmental De-
fense Fund, provided an overview of the prom-
ise of On-Bill Repayment, which would enable
building owners and renters to fund energy
efficiency upgrades and renewable electricity
generation projects with bank or other private
loans that are repaid through their utility bills.
John Bohn, CEO of Renewable Energy Trust,
laid out the core reasons for his firm’s pursuit
of a new REIT model for residential solar, citing
the benefits of its simplicity and lower dividend
requirements as compared to MLPs. Despite
the range of innovative structures being cham-
pioned, all panelists agreed that the objective
was to help expand access to cost-effective
capital and increase investor participation in re-
newable energy projects.
Funding of renewable energy projects must be
democratized. The panelists highlighted the
current gap in the market for retail investors.
Despite having an interest in renewable en-
ergy and capital to invest, the average person
still cannot effectively invest in renewable en-
ergy infrastructure,with current financial struc-
tures limiting opportunities to large corpora-
tions and investment funds. As Google’s Rick
Broadening the Debate:
New Financial Structures for the Future
Photo: Sophia
MODERATOR
• Dan Adler, President, California Clean Energy Fund (CalCEF)
PANELISTS
• Luka Erceg, Founder, President & CEO, Simbol Materials
• Rick Needham, Director of Green Business Operations, Google Inc.
• Alex Keros, Senior Project Engineer, General Motors
• John Bohn, CEO, Renewable Energy Trust Capital
• Brad Copithorne, Director of Financial Innovation, Energy Program,
Environmental Defense Fund (EDF)

Broadening the Debate 23
“If an average install for an electric vehicle charging station is
a thousand bucks, and we sold 100,000 cars, that’s 100 million dollars of revenue.
You’re telling me someone here can’t figure out a way to make money out of it?”
-Bob Powell, CFO, NRG Solar
Needham said, “Every time we make
an investment, I wish I could do it, too,
but I can’t. These projects would do
better than our 401(k) the last couple
years and you’d know you’re investing
in something you really can support.”
John Bonn added, “There is no way at
this point for a retail investor, no mat-
ter how enthusiastic he or she is, to in-
vest directly in this industry[...] yet the
public market is the gateway to lower
costs of capital and expanded public
demand.” The panelists shared a sense
of promise for vehicles that open up
investment channels to retail investors.
California remains the hub for innova-
tion. Panelists shared their reasons for
incubating their ideas in California. Rick
Needham of Google said the company’s
objective is to keep its pulse on new
innovations, citing Google’s commercial
installation of a new fuel cell technolo-
gy, which may not have happened if the
start-up fuel cell company had not been
just a five-minute drive down the road.
John Bohn of RET pointed out that in
the Bay Area,“Small is OK.” Unlike on
Wall Street,where a multi-hundred mil-
lion or billion dollar deal is the starting
point for a meeting, small is acceptable
around the Bay Area and allows firms
to get a start and develop markets.
The scale of the renewable energy and clean
tech market promises further financial innova-
tion. Where new financial structures had not
been identified, panelists cited the sheer size of
the market as promising for future innovation.
For example, Alex Keros of GM trumpeted
the sale of 100,000 electric vehicles per year
and average charging station installation costs
of $1,000 as a $100 million revenue oppor-
tunity. “Someone will make that an opportu-
nity,” he said. Rick Needham highlighted the
current constraints around financing transmis-
sion, where developers must pay for upgrades
up front. Specifically he saw an opportunity for
financing a large scale network of high-voltage
direct current (DC) transmission.
“The key to this is not the
manufacturing.
The key is the technology.”
-BillWatkins, CEO, Bridgelux

24
Contributors
Tim Cronin
J.D. Candidate, May 2014
U.C. Berkeley School of Law
tim.cronin@berkeley.edu
Grace Hsu
grace.hsu@berkeley.edu
Carol Lu
Master in Public Affairs
Princeton University
carollu@alumni.princeton.edu
Rohan Ma
M.B.A. Candidate, May 2013
U.C. Berkeley, Haas School of Business
rohan_ma@mba.berkeley.edu
Himani Phadke
M.A., Stanford University
COO, REwiRE LLC
hphadke@rewireworldwide.com
Emily Sangi
J.D. Candidate, December 2012
U.C. Berkeley, School of Law
emily.sangi@berkeley.edu
Ari van Schilfgaarde
U.C. Berkeley, School of Law
arivs@berkeley.edu
Acknowledgments
Editor
Tim Cronin
tim.cronin@berkeley.edu
Layout
Kyle Halvorson
kylejhalvorson@gmail.com

REFF West Report

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (6)

Similar to REFF West Report

Similar to REFF West Report (20)

Recently uploaded

Recently uploaded (20)

REFF West Report