FINAL REPORT

Creating Carbon Offsets via a

Portfolio of Renewable Energy
Purchases and Investments

Climate Solutions Living Lab

Team IV:
Conleigh Byers
Justin Galle
Jiahua Guo
Richard Schwartz
Augusta Williams

April 30, 2017

This Report and Implementation Plan are student work product completed to
fulfill requirements of the Climate Solutions Living Lab, a 12-week course offered
at Harvard Law School. This report and plan were researched and written under
tight time constraints to answer specific questions posed to the students in their
course assignment. Any opinions expressed in the report are those of the
students and not of Harvard University or Harvard Law School. If you would like
to learn more about Harvard Law School’s Climate Solutions Living Lab, please
contact Professor Wendy Jacobs at wjacobs@[Link].
Table of Contents

Executive Summary ............................................................................................................... 1

Claiming RECs as Carbon Offsets ............................................................................................ 4

REC Selection: Optimizing Health and Other Co-Benefits ........................................................ 9

REC Procurement: Renewable Energy Portfolio Purchase and Investment Options ............... 12

Option 1: Unbundled REC Purchases................................................................................. 13

Option 2: Bundled REC Purchases ..................................................................................... 17

Option 3: REC Equity Investment ...................................................................................... 23

Conclusion........................................................................................................................... 30

Bibliography ........................................................................................................................ 32

Appendix............................................................................................................................. 34
Executive Summary
Unregulated entities can tailor portfolios of renewable energy purchases and
investments to align with their carbon offset and co-benefits goals

Introduction A growing number of environmentally conscious universities,

corporations, and other institutions are choosing to voluntarily reduce
their greenhouse gas (GHG) emissions, even when they have no legal
requirement to do so. These “unregulated entities” have many options
to reduce their emissions. They can reduce energy consumption, invest
in building efficiency, purchase carbon offsets, or procure renewable
energy credits (REC) through purchases and investments in the
renewable energy market. The last option—creating carbon offsets via
a portfolio of renewable energy purchases and investments—is the
focus of this report.

Project Goal Initially, the goal of this project was to develop a feasible plan to obtain
emission reduction offsets, equivalent to at least 50,000 metric tons of
CO2 annually, that an unregulated entity could legitimately and credibly
use to offset its emissions (the Target Emissions Reduction). However, if
unregulated entities have any feature in common it is variability.
Unregulated entities are subject to distinct state and local regulations,
and have made disparate progress in greening their energy
consumption. In recognition of this variability, we refined the project
goal. Instead of designing a single set of options, all of which must be
implemented to achieve the Target Emissions Reduction, we developed
a portfolio of options that unregulated entities can tailor to their unique
values and environmental missions.

Screening Process Given the inclusivity inherent in a portfolio approach, our screening
process focused less on excluding options and more on developing
categories from which the unregulated entity can craft its renewable
energy purchase and investment strategy. We identified two categories:
Operational Excellence and Thought Leadership.

The Operational Excellence category prioritizes purchases of RECs

through market-tested mechanisms that offer greater certainty of
achieving the Target Emissions Reduction, but fewer co-benefits. The
Thought Leadership category prioritizes investments in renewable
energy projects through a novel finance structure that offers more co-
benefits, but fewer carbon offsets.

Executive Summary Implementation Plan│1

Claiming RECs as RECs represent proof that a given amount of electricity was generated
Carbon Offsets from eligible renewable energy resources and may be sold unbundled
from the electricity itself. The decision to purchase RECs to claim carbon
emission offsets should be carefully considered due to the difficulty in
demonstrating both additionality and the value of the offset achieved.
Spot-market purchases of RECs often do not pass credible additionality
tests. A low REC price in the spot market most likely represents
renewable energy investment that would have occurred under a
business-as-usual (BAU) scenario without the added revenue of REC
sales. We recommend a strict financial additionality test that requires
expected REC purchases to enter into long-term contracts.

REC Selection: Implementing renewable energy projects allows for reductions in air
Optimizing Health pollution that is reduced by the burning of fossil fuels associated with
and Other Co- coal and natural gas. The recommended options will provide public
Benefits health co-benefits from the reduced combustion of fossil fuels. These co-
benefits can be maximized by critically evaluating the geographic
location of the project, the sizes of potential projects, and working
closely with the project developer. The proposed projects will also
produce other co-benefits, such as improved occupational conditions,
reduced water and soil contamination, improved environmental justice,
and enhanced educational opportunities when renewable energy
projects are implemented.

REC Procurement: Option 1: Unbundled REC Purchases

Renewable Energy We recommend purchasing unbundled RECs only by means of long-term
Purchase and contracts before project construction, due to the need to firmly establish
Investment additionality to credibly use a REC as a carbon offset instrument. We
Portfolio recommend this option to unregulated entities that have low risk
tolerance, limited budget for upfront costs, and would like to purchase
RECs from locations outside their home state to maximize co-benefits or
minimize costs.

Option 2: Bundled REC Purchases

We recommend signing PPAs to purchase RECs bundled with power that
allow new renewable projects to be realized. Signing a physical PPA, with
power supplied to the buyer’s local market, or a virtual PPA, allowing for
the maximization of co-benefits, both offer compelling opportunities.
Entities signing PPAs may credibly claim additionality if projects would
not have been realized without the agreement.

Option 3: REC Equity Investment

High upfront capital costs remain a key limiting factor to the growth of
renewable energy. Countless projects that fail to meet thresholds for

Executive Summary Implementation Plan│2

 investor returns remain unbuilt. This innovative investment option is
designed to bring these projects online by pairing a low-cost equity
investment with a REC Transfer Agreement to increase installations of
non-BAU projects, decrease the unregulated entity’s carbon footprint,
and generate a return on investment.

Conclusion Creating a portfolio of renewable energy purchases and investments to

achieve emissions reduction goals of 50,000 metric tons of CO2 for an
unregulated entity requires consideration of additionality, project
location and technology, and procurement options. We recommend
creating a portfolio that starts with REC Equity investments and then
reinvests the returns from those projects in additional renewable energy
purchases and investments. By starting with investments, the
unregulated entity can create a portfolio that adds more green energy
to the grid and reduces the unregulated entity’s carbon emissions
through a self-sustaining portfolio of purchases and investments that
not only helps the unregulated entity achieve its goals, but also lowers
the cost of renewable energy and drives innovation across the industry.

Executive Summary Implementation Plan│3

Claiming RECs as Carbon Offsets
Establishing additionality and calculating the time- and location-specific
properties of RECs is crucial to credibly claiming carbon offsets

Overview Renewable energy certificates (RECs) represent proof that a given amount
of electricity was generated from eligible renewable energy resources and
may be sold unbundled from the electricity itself. The decision to purchase
RECs to claim carbon emission offsets should be considered with caution
due to the difficulty in demonstrating both additionality and the value of
the offset achieved. Spot-market purchases of RECs often do not pass
credible additionality tests. A low REC price in the spot market most likely
represents renewable energy investment that would have occurred under
a business-as-usual (BAU) scenario without the added revenue of REC sales.
We recommend a strict financial additionality test that requires expected
REC purchases to enter into the investment decision significantly, so long-
term purchase agreements are recommended. The unregulated entity
should determine that the desired environmental attributes are conveyed
by a REC in a given jurisdiction. Environmental benefits, including carbon
emissions offsets, are time- and location-dependent. Determining the
offsets associated with renewable energy generation requires a modeling
trade-off between computational intensity and realism.

Achieving RECs can be purchased in two markets: compliance markets and voluntary
Additionality markets. In compliance markets, RECs are a quota instrument used to meet
a state’s renewable portfolio standard (RPS). In voluntary markets, such as
“green power” markets and voluntary GHG offset markets, RECs are
implicitly assumed to function as an offset credit instrument. However,
RECs not designed as offset instruments, and should pass strict regulatory
and financial additionality tests if an unregulated entity wishes to credibly
claim carbon offsets via the purchase and retirement of RECs. To pass the
regulatory test, the REC should not be used to meet RPS requirements and
the environmental attributes desired must be bundled with the REC and
not used in any other compliance market. To pass the financial test, the
purchase of the RECs must have affected the decision whether to invest in
additional renewable energy generating capacity.

For an unregulated entity to be able to credibly claim to offset emissions

via the purchase of renewable energy, it must be demonstrated that the
purchase led to a change in behavior from the BAU scenario; otherwise, the
total global emissions remain the same, and there has simply been an
accounting maneuver to transfer the responsibility for the emissions from
one party to another. A credit, be it carbon offset or renewable energy, may

Claiming RECs as Carbon Offsets Implementation Plan│4

 be considered additional if the value represented by the credit “would not
have occurred in the absence of the activity that generates the credit”
(World Bank Group, 2016). A REC may be considered additional only if the
creation of the market and its purchase led to the financing of projects that
otherwise would not have been economically feasible.

Because some amount of renewable generation capacity investment will

occur under the BAU scenario and be allotted RECs, the voluntary purchase
of a REC can only achieve additionality if the demand for RECs is greater
than the BAU supply of RECs in the market. Even then, much of the RECs
available in the market will be part of the BAU supply and not additional. A
number of studies have shown no effect of REC purchases in voluntary
markets on renewable energy production or investment, primarily because
the BAU supply of RECs is greater than the demand (Gillenwater 2008,
Gillenwater 2013, Gillenwater et. al 2014). Voluntary market purchases are
unlikely to be beyond BAU RECs at current average prices of $0.5-$2/MWh.

Figure 1. Demand for RECs Above and Below the BAU Supply

If demand for RECs does not exceed the BAU supply of RECs,
the price will reflect transaction costs and RECs are not additional.

Option 1: Unbundled REC Purchases Implementation Plan│5

 Voluntarily retiring RECs from a compliance market with a stringent quota
can lead to additional procurement of renewable energy by regulated
entities only if there is a scarcity of RECs in the market. In compliance
markets, REC prices vary widely based not only on the project-specific
financials but also the stringency of the cap under the RPS. If the cap is set
such that it creates market scarcity for RECs, the price of RECs will rise. One
indication that marginal voluntary REC purchases from a compliance
market are additional is when REC prices approach the penalty fee for non-
compliance with the RPS quota (Agnolucci 2007). For instance, RECs
purchased on the Texas spot market do not achieve additionality. Texas has
a low RPS target relative to its economic supply of renewable energy with
current subsidies, yielding very low REC prices average less than $1/MWh
in recent years.

However, even RECs purchased in compliance markets with high prices do

not pass strict financial additionality testing. Compliance market spot
prices are volatile, subject to regulatory risk, and deeply discounted by
developers in the investment decision process. Only with a long-term
contract can a voluntary REC purchase provide sufficient income certainty
to a project developer to affect the investment decision (Baratoff 2007).
Bundled or unbundled RECs purchased via a long-term contract at the time
of the project investment decision are likely to represent additional
renewable energy generation if the REC purchases enables the internal rate
of return to exceed the target rate of return. If the project would not
otherwise be built without the expectation of revenue from REC sales, the
RECs associated with the project can be considered additional.

Quantification of Credible emission offset accounting requires passing additionality tests,

Offset Value but the fungibility of RECs and carbon offsets requires yet more due
diligence of time- and location-specific factors. The effect of an additional
MWh of renewable energy depends on the prevailing electricity mix in a
given area, which may change over the lifetime of the project. The
underlying resource mix may change over time; if the grid decarbonizes as
more renewables penetrate the market or thermal units are retired, more
renewable energy will be required to offset the same amount of carbon in
future years.

The displaced unit at the margin will also vary by time-of-day, yielding
different results in different regions and for different technologies. The
displaced electricity generating unit (e.g., coal, natural gas plant) may
change depending on overall system demand at the time in which the
renewable resource is generating. Some locations like California require
more GWh of renewable energy to offset the same amount of carbon
because the resource mix is less carbon intensive; in contrast, PJM requires

Option 1: Unbundled REC Purchases Implementation Plan│6

 less GWh of renewable generation because of the comparatively larger
amount of coal, a more carbon-intensive resource, in the generation mix.
Variation also exists by technology, as solar and wind have different
generation profiles, often displacing different marginal units because of
time-variation in output.

Figure 2. Marginal Unit Displacement by Renewable Energy

The overall demand on a system at a given time in a given geography determines the
marginal unit displaced. Units may be displaced out-of-merit-order due to security
constraints, leading to additional modeling complications.

Modelling The modeling choice to quantify avoided emissions from additional

Challenges and renewable generation must balance intensity of computation with realism.
Assumptions Power systems optimization models with subhourly data computationally
intensive and require access to data often not publicly available. Statistical
and other approaches are insufficient for large structural changes in the
resource mix, but helpful for a first pass for marginal changes.

In this analysis, we use AVERT, a statistical tool, to estimate the renewable

generation needed by technology type and geographic location to offset
50,000 metric tons of CO2. Limitations to this method include the use of the
2015 resource mix only, so future year requirements will be
underestimated if the carbon intensity of the prevailing resource mix
changes. We recommend a more in depth calculation for future studies or
at least benchmarking to more realistic power system simulation models.

Option 1: Unbundled REC Purchases Implementation Plan│7

Table 1. AVERT Results for Wind and Solar Generation Required to Offset 50,000 tons of CO2
in 2015 in Several Regions in the United States.

Region Wind Generation Solar Generation

California 99 GWh 97 GWh
PJM 64 GWh 62 GWh
Texas 83 GWh 82 GWh
New England 94 GWh 94 GWh

Recommendations A long-term contract before project construction is recommended to pass

financial additionality testing with confidence. Spot market purchases of
RECs, including via REC arbitrage, do not pass strict financial additionality
tests required to credibly claim carbon offsets from the renewable energy
production. The cost of avoided carbon can be optimized by considering
the cost of RECs and the carbon offset value of a REC in a given region. This
methodology is further explored in subsequent sections.

Option 1: Unbundled REC Purchases Implementation Plan│8

REC Selection: Optimizing Health and Other Co-Benefits
Evaluating the benefits accrued through renewable energy projects with respect
to different geographic locations, project size, and technology type is essential

Overview To assess potential health and other co-benefits from a portfolio of

renewable energy projects, both quantitative and qualitative information is
used. The Estimating Air Pollution Societal Impacts Using Regression
(EASIUR) model can be utilized to calculate the social costs of pollution
reductions associated with the immediate reductions in the burning of fossil
fuels through the implementation of a renewable energy portfolio (Heo et
al. 2016). EASIUR estimates marginal social costs and intake fractions of
emissions from large datasets of tagged locations with chemical transport
models with very high spatial resolution (36 km x 36 km). Based on an input
latitude and longitude, we are able to estimate the social marginal damage
(in dollars) per ton of emission for primary PM2.5, SO2, and NOx, over four
seasons, and at three emissions heights—ground, 150 meters and 300
meters.

When analyzing other co-benefits that occur more indirectly through job
growth, occupational hazard reduction, educational opportunities, etc., a
full Health Impact Assessment is needed. Here, we outline, qualitatively, the
potential for maximizing benefits and minimizing harms through specific
program design opportunities when implementing solar or wind projects, as
compared to coal and natural gas.

Figure 3. Potential Health and Other Co-Benefits from Renewable Energy Projects

Optimizing Health and Other Co-Benefits Implementation Plan│9

Steps for Assess Health Benefits via the Marginal Damages of Emissions
Implementation 1. Determine latitude and longitude of the site where emissions are
avoided from displacing coal or natural gas power plants based on
EPA’s AVERT or another modeling tool.
2. Utilize the Estimating Air Pollution Societal Impacts Using
Regression (EASIUR) model (Heo et al. 2016a, Heo et al., 2016b) to
estimate marginal social costs at that latitude and longitude, which
is available at: [Link]
3. Select the dollar year (1980-2010), income year (1990-2024), and
population year (2000-2050) that is most appropriate for your
chosen analysis.
4. Review the output of your analyses for the pollutants included –
primary PM2.5, SO2, NOx, and NH3 – the four seasons assessed,
and the three emissions heights covered (ground, 150 meters and
300 meters).

Note: to fully quantify the full range of health and other co-benefits, a
detailed Health Impact Assessment and Environmental Impact
Assessment should be conducted to ensure that the selected project(s)
are optimizing co-benefits and minimizing harms done to the surrounding
communities, ecosystems, and atmosphere. Through this assessment, the
unregulated entity could determine quantitatively the specific
improvements in morbidity and mortality based on the geographic region
of choice. Here, because of time and resources available, a catalog of
potential externalities, their mechanistic pathway, and ways to maximize
benefits and minimize harms are outlined and identified as key areas to
assess when implementing a project.

An Ideal Health Impact Assessment (HIA) would contain the following:

1. Screening of the feasibility and value of the HIA.
2. Scoping of potential health effects and other externalities related
to the decision, while identifying evidence and stakeholder roles.
3. Assessment of the potential health effects using evidence of
baseline conditions, expected conditions post-decision making,
and uncertainty regarding this evidence.
4. Recommend strategies to mitigate harms and maximize benefits
via design strategies or alternative decisions.
5. Reporting and communicating the process, findings, and
recommendations to the necessary stakeholders.
6. Monitor health and co-benefits during and after implementation
to measure outcomes that were impacted by the decision.

Recommendations Based on the analyses throughout this report, as well as previous

literature, there are some locations where the co-benefits accrued are

Optimizing Health and Other Co-Benefits Implementation Plan│10

 favorable for implementation over other projects. As described by Siler-
Evans et al. (2013), wind energy in the Appalachian Mountains provides
the greatest social benefits. Because of the high amount of carbon dioxide
emissions avoided in a grid with a lot of pre-existing coal and the resulting
NOx, SO2, and PM2.5 pollutants, wind in West Virginia would have the
greatest amount of co-benefits. From our screening and feasibility
analyses previously conducted, solar and wind within the Pennsylvania-
New Jersey-Maryland Interconnection LLC (PJM) or within ISO New
England (ISO-NE) would provide high levels of benefits given the costs. An
unregulated entity can prioritize which co-benefits they would like to
maximize and choose project locations accordingly. The implementation
plan provided here provides information on how to move forward with
renewable energy investments in any area, and how to assess which
project type and financing structure may be optimal for an unregulated
entity’s needs. It will be essential during project development to
incorporate local community members and continual monitoring to
ensure the predicted co-benefits are maximized to their full potential.

In the Appendix, there is a catalog of potential harms and benefits

associated with electricity generation from coal and natural gas as
compared to solar and wind energy that should be considered in a full
Health Impact Assessment or Environmental Impact Assessment. As
shown below, the potential benefits provided by solar and wind greatly
outweigh the few potential harms that are possible as compared to the
harms incurred by the burning of coal and natural gas for electricity
generation. This is especially true if care is taken to mitigate potential
harms with design solutions and best practices when siting and
implementing the project.

Optimizing Health and Other Co-Benefits Implementation Plan│11

 REC Procurement:
Renewable Energy Portfolio Purchase and Investment Options

Optimizing Health and Other Co-Benefits Implementation Plan│12

Option 1: Unbundled REC Purchases
Purchasing unbundled RECs via a long-term contract can create additional
renewable energy generation and reduce carbon emissions
Overview Unbundled RECs can be purchased in either the spot market (voluntary or
compliance), or via a long-term purchase agreement. Due to the need to
firmly establish additionality to credibly use a REC as a carbon offset
instrument, we recommend purchasing unbundled RECs through long-term
contracts before project construction. However, spot market purchases of
RECs can pass a weak financial additionality test in some cases, which are
explored in the Feasibility Report but excluded from this Implementation
Plan.

Figure 4. Long-Term REC Purchase Agreement

Recommendations This option allows unregulated entities to pursue long-term emission

reduction goals by providing financial support to non-BAU renewable
energy projects. A long-term contract helps mitigate the risk of having
volatile market prices of RECs for both the unregulated entity and the
renewable project.

The implementation of this option is not constrained by the geographic

location of the unregulated entity. We recommend REC purchases in
either the local state of unregulated entity where it can maximize its local
co-benefits, or in locations with high carbon intensity and pollutant
emissions.

For unregulated entities that prioritize Operational Excellence, we

recommend REC purchases from projects implementing proven
technologies, such as on-shore wind and solar PV generation.

For unregulated entities that prioritize Thought Leadership, we

recommend REC purchases from projects implementing innovative

Option 1: Unbundled REC Purchases Implementation Plan│13

 technologies, such as off-shore wind, utility-scale solar thermal
generation, and storage systems.

Steps for 1. Establish a REC Purchase Committee at the Unregulated Entity

Implementation Determine which division at the unregulated entity will oversee the
process of long-term REC purchase implementation and guide the
unregulated entity through the legal and technical analysis and financial
contracting process.

2. Narrow the Selection of Renewable Projects Based on Technology

and Location Criteria
Cost, health benefits and other co-benefits depend on the location and
the technology of a project.

3. Design a “Project-Based” Additionality Test

For the RECs purchased to be additional, the revenue from the RECs and
the long-term certainty of this revenue must be a primary driver for
implementation of the renewable project. To avoid making this test
subjective, the committee, with the assistance of consultants (if needed),
must establish standardized criteria for what amount of revenue qualifies
as a “primary driver.” Based on the operational features required from
the project and projected wholesale prices of electricity, the committee
could compare the IRR of the project with and without revenue from REC
sales, with the investors’ target rate of return to determine whether the
secured long-term revenue from REC sales significantly increases the
investors’ probability to invest (Gillenwater 2013, Bode et al. 2003).

4. Identify a Pre-construction Project that Meets the Additionality Test,

Emissions Avoided Target, and Cost Constraints of the Unregulated
Entity
The unregulated entity should identify a pre-construction renewable
energy project based on the screening from steps 2 and 3, and other
factors, such as their demand of RECs, time length of the purchases, and
their budget constraint.

5. Negotiate a Long-term REC Purchase Agreement with the Identified

Renewable Project Company
The unregulated entity should negotiate a long-term REC purchase
agreement with the identified renewable project company, regarding the
number of RECs being purchased each year, the unit price of a REC, terms
of the contract price and any annual increases, the length of the contract,
timing and guarantee of the transactions.

Option 1: Unbundled REC Purchases Implementation Plan│14

 6. Properly Retire the RECs to Claim Carbon Emissions Reduction
To claim the green attributes, the unregulated entity must retire the RECs
after it receives them from the renewable project. Thereafter, the
unregulated entity can convert the MWh of green energy associated with
the RECs into avoided emissions via time- and location-specific modeling
tools to estimate the effects of avoided fossil fuel generation. The carbon
offset could be roughly estimated by a simple model, such as AVERT,
which estimates the emission avoided on an hourly-base. To calculate the
carbon offset more accurately, the unregulated entity may consult with
a third party to estimate the carbon avoided from a marginal power plant
on a shorter time scale with more realistic operating characteristics of the
system.

Cost Analysis The cost of spot-market REC or SREC purchases in three regions (PJM,
Texas, and New England) are summarized in Tables 2 and 3. The costs are
estimated based on the historical price of RECs ($/MWh) in the
compliance market in different states (O’Shaughnessy et al. 2015), and
the amount of additional renewable energy required to fulfill our goal of
50,000 metric ton CO2 emission reduction simulated from AVERT.1 To
calculate long-term purchase NPV, we assume a 7-year REC purchases
agreement with a fixed REC price and a 7% discount rate. Long-term
purchase agreement REC prices may vary considerably from the spot-
market benchmarking shown here.

Table 2. Cost Estimate of Long-term Unbundled REC Purchases

Wind Long-term
generation REC price Cost of carbon purchase NPV
Region (MWh)* ($/MWh)† Annual cost ($K) avoided ($/ton) ($M)
PJM 64000 10-20 640-1280 13 - 26 3.6-7.2

Texas 83000 0-2 <166 <3.3 <1.0

New England 94000 40-60 3600-5400 72 - 108 20-30

1
AVERT is a model simulating the avoided carbon emissions, and other pollutants from avoided fossil fuel generation
with additional renewable capacity added. The results are based on the grid energy mix in 2015. The 2015 mix is
held constant for the 7 years of the analysis. In reality, we expect many of these regions to decarbonize as they meet
increasingly stringent RPS targets, which would raise the cost of avoided carbon.

Option 1: Unbundled REC Purchases Implementation Plan│15

 Table 3. Cost Estimate of Long-term Unbundled SREC Purchases

Long-term
Solar generation REC price Annual cost Cost of carbon purchase NPV
Region (MWh)* ($/MWh)† ($K) avoided ($/ton) ($M)
PJM 62000 50-200 3100-12400 62 - 248 20-70

Texas 82000 NA NA NA NA

New England 94000 200 18800 376 90

*
Calculated from AVERT using 2015 Regional Data Files
†
Source: O’Shaughnessy et al. (2015)

Option 1: Unbundled REC Purchases Implementation Plan│16

Option 2: Bundled REC Purchases
Purchasing power and the associated RECs directly from generators through long
term contracts promotes additional renewable energy generation and reductions
in carbon emissions

Overview A power purchase agreement (PPA) is a contract between a generator of

electricity (the seller) and a purchaser of electricity (the buyer). The PPA
typically provides financing for a renewable energy project through a
fixed price per MWh generated over a fixed term, or with agreed-upon
adjustment mechanisms. The project developer carries out installation,
interconnection, operation, maintenance, and repair of the renewable
energy system for the duration of the contract, usually 15 to 25 years.
The long-term contract for a fixed price is a key dynamic that allows the
developer to secure financing for a renewables project.

PPA contracts can be either “physical,” in which the power purchased is

supplied to the market directly servicing the unregulated entity, or
“virtual,” in which the power is in a separate market from the
unregulated entity. In physical PPAs, the unregulated entity purchases
the power and associated RECs generated together, retiring or selling
RECs as needed. The buyer of the physical PPA is hedged against the
wholesale market rate for power for the amount of contracted
generation because the buyer’s energy costs are kept flat. Electricity
prices are expected to increase over time, making a fixed price highly
advantageous. However, this is not guaranteed, and the buyer should
have a sophisticated understanding of the market dynamics. The buyer
must have power marketing authority from the Federal Energy
Regulatory Commission (FERC) or contract with a market participant who
does, making a physical PPA difficult to implement for some entities in
some jurisdictions.

Option 2: Bundled REC Purchases Implementation Plan│17

 Figure 5. Physical PPA Arrangement

Source: Kent 2016

Note for Figure 6 A virtual PPA is a financial contract-for-differences, not a physical

contract. In virtual PPAs, the unregulated entity receives the RECs
generated, while the power generated is sold into the local power market
and the two parties settle the differences based on the market price.

Figure 6. Virtual PPA Arrangement

Source: Kent 2016

Option 2: Bundled REC Purchases Implementation Plan│18

Assessment of Levelized PPA prices, including the price of electricity and RECs, have
PPA Prices declined compared to electricity wholesale prices, approaching and
beating wholesale power prices in some cases (Figure 7). Average utility-
scale solar and wind PPA prices in 2016 neared $50/MWh and $20/MWh,
respectively, including federal and state subsidies. PPA prices have
historically been nudged upwards by political or public barriers to
acceptance of projects, interconnection issues, a lack of incentives, and
regulatory complexity. If more RECs bundled with power are purchased
than are needed to be retired, the excess may be sold.

Figure 7. PPA Contract Prices over Time

Source: O’Shaughnessy et al. (2015). This figure shows the PPA prices, levelized over full contract term at a discount
rate of 7%, signed in bilateral utility-scale contracts since January of 2008. Prices include both energy and RECs. The
size of the circle represents the nameplate capacity (MW) of the project, yellow being solar and blue being wind.
The dotted lines show the average price, both trending down over time. The shaded green region shows the range
of wholesale prices over the same time period.

Recommendations A physical PPA ensures that the unregulated entity is truly working
towards supplying its own energy use with renewables and furthering
renewable energy penetration in their power market. The physical PPA
also provides a full price hedge for the cost of electricity for the entity.
However, this option will limit flexibility in minimizing the cost of avoided
carbon and maximizing co-benefits, and is not feasible from a regulatory
perspective for all entities.

A virtual PPA may be preferred for geographic flexibility. The unregulated

entity should support a renewable energy project in a geographic area
that optimizes the associated GHG emissions reductions and co-benefits
with the price of RECs in that market. The least expensive prices for PPAs

Option 2: Bundled REC Purchases Implementation Plan│19

 are the Southwest, California, and Texas for solar and the Interior and
Great Lakes for wind. The greatest SO2 and NOX emissions reductions
associated with projects that avoided 50,000 tons of CO2 are in the mid-
Atlantic region, displacing coal generation as opposed to cleaner natural
gas in other regions.

As in all procurement options, the unregulated entity should practice due

diligence with respect to financial additionality. The long-term contract
should be necessary to affect the decision to invest in the project. In
contrast to other procurement options, bundled RECs in the form of PPAs
often require contract durations of the project lifetime, on the order of
15-20 years. This contract length may be undesirable for some
unregulated entities that are accustomed to procuring energy on shorter
time frames.

Steps for 1. Create a PPA Procurement Committee

Implementation Determine which division will oversee the PPA implementation process
and guide the unregulated entity through the legal and technical analysis
and financial contracting process.

2. Establish Selection Criteria that Align with Mission

Key terms to consider for the selection criteria include:
 Physical or Virtual PPA
 Price/kWh
 MWh of generation and associated RECs
 Technology / location
 Length of Contract
 Tax code/government subsidy landscape
 Co-benefits: health, water usage, energy price risk, lifecycle
analysis, wildlife, local community, economy

3. Design a “Project-Based” Additionality Test

Similar to the additionality test outlined in Option 1, for the RECs
purchased to be additional, the revenue from the generated power and
the bundled RECs and the long-term certainty of this revenue must be a
primary driver for implementation of the renewable project. To avoid
making this test subjective, the committee, with the assistance of
consultants (if needed), must establish standardized criteria for what
amount of revenue or certainty of revenue qualifies as a “primary driver.”
Based on the operational features required from the project and
projected wholesale prices of electricity, including uncertainty, the
committee could compare the IRR of the project with and without
revenue from long-term contract, with the investors’ target rate of return

Option 2: Bundled REC Purchases Implementation Plan│20

 to determine whether the secured long-term revenue from the
agreement significantly increases the investors’ probability to invest
(Gillenwater 2013, Bode et al. 2003).

4. Competitively Select a PPA Contract

 Issue a request for proposal
 OR Directly approach developers
 Conduct benefit-cost analyses of proposals

5. Identify a Pre-construction Project that Meets the Additionality Test,

Emissions Avoided Target, and Unregulated Entity’s Cost Constraints
The unregulated entity should identify a pre-construction renewable
energy project based on the screening from steps 2, 3, and 4 and other
factors, such as their demand of RECs, time length of the purchases, and
their budget constraint.

6. Negotiate a Long-term Power Purchase Agreement with Bundled

RECs with the Identified Renewable Project Company
The unregulated entity should negotiate a long-term REC purchase
agreement with the identified renewable project company, regarding the
number of RECs being purchased each year, the unit price of a REC, terms
of the contract price and any annual increases, the length of the contract,
timing and guarantee of the transactions.

7. Project Design, Procurement, Construction, Commissioning

The system owner and operator would be responsible for project
development and claiming of applicable tax credits and incentives. The
unregulated entity should obtain verification of relevant filings, oversight
of timeline, and guarantee of service.

8. Properly Retire the RECs to Claim Carbon Emission Reduction

To claim the green attributes, the unregulated entity must retire the RECs
after it receives them from the renewable project. Thereafter, the
unregulated entity can convert the MWh of green energy associated with
the RECs into avoided emissions via time- and location-specific modeling
tools to estimate the effects of avoided fossil fuel generation. The carbon
offset could be roughly estimated by a simple model, such as AVERT,
which estimates the emission avoided on an hourly-base. To calculate the
carbon offset more accurately, the unregulated entity may consult with
a third party to estimate the carbon avoided from a marginal power plant
on a shorter time scale with more realistic operating characteristics of
the system.

Option 2: Bundled REC Purchases Implementation Plan│21

Cost Analysis The cost of wind and solar PPA in four regions (Northeast, Interior,
Southwest, and Texas) are summarized in Tables 4 and 5. The costs are
estimated based on recent bilateral, utility scale PPA prices (Bolinger et
al. 2015, Wiser et al. 2015) and the amount of additional renewable
energy required to fulfill our goal of 50,000 metric ton CO2 emission
reduction simulated from AVERT. Since these prices include both
electricity and RECs, for reference, the average historical wholesale price
of electricity for each region is noted. To calculate long-term purchase
NPV, we assume a 15-year PPA with a fixed price and a 7% discount rate.

Table 4. Cost Estimate of Long-term Wind PPA

Average
PPA price, Historical Cost of Long-term
Wind RECs + Wholesale carbon purchase
Generation Energy Price PPA Annual avoided NPV, RECs +
Region (MWh)* ($/MWh)† ($/MWh)‡ cost ($K) ($/ton) Energy ($M)
Northeast 93000 60 61.02 5580 111.6 50.8
Interior
(including 60000 20 32.94 1200 24 10.9
Texas)

Table 5. Cost Estimate of Long-term Solar PPA

Average
PPA price, Historical Cost of Long-term
Solar RECs + Wholesale carbon purchase
generation Energy Price PPA Annual avoided NPV, RECs +
Region (MWh) * ($/MWh)† ($/MWh)‡ cost ($K) ($/ton) Energy ($M)
Southwest 97000 30 - 40 44.87 2910 - 3880 58.2 - 77.6 26.5 - 35.3

Texas 82000 35 - 45 32.94 2870 - 3690 57.4 - 73.8 26.1 – 33.6

*
Calculated from AVERT using 2015 Regional Data Files
† Pricesreflect PPAs signed in 2015. Source: Bolinger et al. (2015) and Wiser et al. (2015)
‡ Source: Energy Information Agency Wholesale Electricity Market Data. Average prices from 2001-2016 for

Northeast (Massachusetts Hub) and Southwest (Palo Verde Hub) and from 2014-2016 for Texas (ERCOT-North
Hub).

Option 2: Bundled REC Purchases Implementation Plan│22

Option 3: REC Equity Investment
Equity investment can enable the unregulated entity to increase renewable
energy installations, decrease its emissions, and earn a return on investment.

Overview High upfront capital costs remain a key limiting factor to the growth of
renewable energy. Countless projects that fail to meet thresholds for
investor returns remain unbuilt. This innovative investment option is
designed to bring these projects online by pairing a low-cost equity
investment with a REC Transfer Agreement to increase installations of non-
BAU projects, decrease the unregulated entity’s carbon footprint, and
generate a return on investment.

Modeled after tax equity investing structures, which have been used with
great success in the renewable energy industry, REC Equity brings the
unregulated entity into the project as a REC Equity investor. Under this
structure, the equity component is implemented through the unregulated
entity purchasing a minority interest in the project. To reduce the project’s
capital costs, the unregulated entity agrees to forgo distributions for a
limited initial period. In turn, this deferral permits the other investors to
achieve their target returns and thus enables the installation of a project
that would not receive financing but for the REC Equity investment.

The analogy to tax equity comes to fruition through the REC component of
this structure. Like tax equity investors accepting lower returns on their
investment for the project’s tax attributes, the unregulated entity reduces
its return threshold in exchange for a share of the project’s RECs. To link the
low-cost equity investment to RECs, the unregulated entity and offtaker
execute a REC Transfer Agreement to transfer a share of the RECs to the
unregulated entity whenever it forgoes cash distributions. Notably, this
transfer provides a mechanism by which the unregulated entity can claim it
has reduced its emissions.

The REC Equity financing structure is illustrated conceptually in Figure 8 and

quantitatively in Figure 9. Both figures are intended to provide context for
the implementation steps. Thereafter, to underscore the value of this novel
investment structure, the recommendations describe an example
investment in a utility solar project in the PJM region. The purpose of this
example is to show that REC Equity can enable the unregulated entity to
increase installations of non-BAU projects, decrease the unregulated
entity’s carbon footprint, and generate a return on investment.

Option 3: REC Equity Investment Implementation Plan│23

 Figure 8: REC Equity Finance Structure

REC Transfer Agreement

Tax Equity Unregulated

Offtaker Lender Sponsor
Investor Entity

Electricity and Loan Equity Equity Equity

REC Purchases Disbursement Contribution Contribution Contribution

Project Company

Electricity; Interest; Distributions Tax Credits; Distributions

RECs Principal Distributions (after RECs
Repayment transferred)
Tax Equity Unregulated
Offtaker Lender Sponsor
Investor Entity

Transferred RECs (when Distributions forgone)

Required Legal Documents

Offtaker Lender Sponsor Tax Equity Investor Unregulated Entity
Executes a Power Executes a Loan Executes a Executes a Executes a REC
Purchase Agreement with the Partnership Partnership Transfer Agreement
Agreement with the Project Company to Agreement with the Agreement with the with the Offtaker to
Project Company to provide debt other Equity other Equity receive RECs during
purchase electricity financing based on Investors to Investors to the deferral period
and RECs (if the expected cash contribute equity to contribute equity to
bundled) flows from the sale the Project the Project Executes a
of electricity and Company in Company in Partnership
Executes a REC RECs exchange for a exchange for tax Agreement with the
Transfer Agreement share of the credits, depreciation other Equity
with the distributable cash under the Modified Investors to
Unregulated Entity Accelerated Cost contribute equity to
to transfer RECs Recovery System the Project
(during the deferral (MACRS), and a Company in
period) share of the exchange for a
distributable cash deferred share of
the distributable
cash

Legal Note for This structure assumes that the Unregulated Entity has the capability and
Figure 8 authority to make equity investments in renewable energy projects.
Acquiring the capability may require adding experienced personnel, while
obtaining authority may require Board of Directors or equivalent approval.

Option 3: REC Equity Investment Implementation Plan│24

Financial Note for The analysis that appears in Figure 9 below is illustrative. It assumes that the
Figure 9 project company only sells RECs and that all of the cash from the REC sales
is distributable. Outputs from a more robust project model appear in the
figures accompanying the example investment.

Figure 9. How REC Equity Works: An “Illustrative” Analysis (a)

Equity Project Year

Investment 1 2 3 4 5 IRR (b) Comment
Sponsor Ask:
REC Price ($/MWh) $50 $50 $50 $50 $50 ● Sponsor asks for a price
MWh 100 100 100 100 100 of $50/MWh for RECs to
REC Sales $5,000 $5,000 $5,000 $5,000 $5,000 achieve a 20% IRR

Distributions to Sponsor ($15,000) $5,000 $5,000 $5,000 $5,000 $5,000 20%

Offtaker Bid:
REC Price ($/MWh) $48 $48 $48 $48 $48 ● Offtaker's maximum
MWh 100 100 100 100 100 willingness to pay of
REC Sales $4,800 $4,800 $4,800 $4,800 $4,800 $48/MWh for RECs
drops the IRR below
Distributions to Sponsor ($15,000) $4,800 $4,800 $4,800 $4,800 $4,800 18% the Sponsor's threshold

Bid-Ask Gap:
REC Price ($/MWh) ($2) ($2) ($2) ($2) ($2) ● REC Equity is designed to
Distributions to Sponsor ($200) ($200) ($200) ($200) ($200) (0%) bridge this bid-ask gap

Negotiated Price:
REC Price ($/MWh) $45 $45 $45 $45 $45 ● Unregulated Entity makes
MWh 100 100 100 100 100 an equity investment, but
REC Sales $4,500 $4,500 $4,500 $4,500 $4,500 forgoes cash distributions
in year 1 to eanble the
Distributions to Sponsor ($10,500) $4,500 $3,150 $3,150 $3,150 $3,150 20% Sponsor to achieve a
Distributions to Unregulated Entity (c) ($4,500) $0 $1,350 $1,350 $1,350 $1,350 5% 20% return

Offtaker Savings:
Offtaker Bid ($/MWh) $48 $48 $48 $48 $48 ● The Unregulated Entity's
Negotiated Price ($/MWh) $45 $45 $45 $45 $45 investment in the project
Offtaker Savings ($/MWh) $3 $3 $3 $3 $3 enables the Offtaker to
to save $3/MWh
MWh 100 100 100 100 100 (equivalent to $300/year
Offtaker Savings $300 $300 $300 $300 $300 based on MWh output)

REC Transfer:
Forgone Cash Distribution (d) Yes No No No No ● When the Unregulated
Entity forgoes cash
Offtaker Savings $300 distributions, the Offtaker
Negotiated Price ($/MWh) $45 is obligated to transfer
RECs Transferred (MWh) 7 a share of RECs equal in
value to its savings
RECs with Offtaker (MWh) 93 100 100 100 100 ($300/$45MWh)

(a) This financial analysis makes a number of simplifying assumptions to illustrate the mechanics of REC Equity. It is not intended to represent
a robust project model.
(b) The IRR are based on the illustrated 5-years of cash flows.
(c) The Unregulated Entity IRR is illustrative. It does not reflect a target return.
(d) The initial deferral period may be longer than 1 year. Here, the deferral period is one year because the returns are based on only 5 years of
cash flows. A longer project life, such as 20 years, can support longer deferral periods.

Option 3: REC Equity Investment Implementation Plan│25

Steps for 1. Establish an Investment Team at the Unregulated Entity
Implementation Effective equity investing requires distinct expertise from that associated
with REC purchases and negotiating PPAs. Before moving forward with
this option, the unregulated entity should establish an investment team,
either by hiring professionals with energy investing expertise or
partnering with existing teams within the unregulated entity who already
have this expertise. For example, a private university’s Office for
Sustainability could partner with or, perhaps, hire professionals from the
team that manages the university’s endowment fund.

2. Design a Standardized Investment Test for Additionality

This option centers implementation on the “investment test” for
additionality. Revenue from the RECs is a primary driver for
implementation. To avoid making this test subjective, the Investment
Team, with the assistance of consultants (if needed), should establish
standardized criteria for what amount of revenue qualifies as a “primary
driver” and what gap between the asking price for RECs and the offtaker’s
willingness to pay is truly a barrier to financing the project. Put differently,
an impasse between one offtaker and one set of investors may be
insufficient to satisfy the investment test. Instead, the case for
additionality could be strengthened by placing the gap in the context of
broader market prices.

3. Select a Standardized Method for Estimating Emissions Avoided

Acquiring a REC by itself does not permit the unregulated entity to claim
an emissions reduction. Further analysis is required to estimate the
emissions avoided by the project’s contribution of green energy to the
grid. One way to perform this analysis is to use the EPA Avoided Emissions
and generation Tool (AVERT), which estimates the emissions benefits of
installing new wind and solar projects. As part of this step, this tool (or
another one like it) should be used to establish an emissions avoided floor
below which the unregulated entity will not provide low-cost equity
financing even if revenue from RECs is a primary driver of project
implementation.

4. Identify a Project that Meets the Additionality Test and Exceeds the
Emissions Avoided Floor
Leveraging the work from steps 2 and 3, the unregulated entity should
screen for renewable energy projects where the asking price for RECs is
greater than the offtaker’s willingness to pay in accordance with the
standardized additionality test. Other factors, such as technology, size,
and location may become barriers based on the emissions avoided test—
either because the project falls below the emissions avoided floor or

Option 3: REC Equity Investment Implementation Plan│26

 because a tool like AVERT estimates emissions benefits only for certain
technologies (wind, utility-scale solar, and rooftop solar).

5. Negotiate Partnership Agreement with Equity Investors

Garnering buy-in from the investors whose asking price is above the
offtaker’s willingness to pay is vital for this structure to work. Although
these investors would likely appreciate a pathway to higher returns, they
may resist reducing their investment amount to preserve their ownership
position in the project. However, the unregulated entity can address this
objection by emphasizing that the project would not be possible without
a change in the ownership allocations and, if needed, by adjusting various
governance rights in the Partnership Agreement to enable the sponsor to
achieve control equivalent to what it would have had if its ownership had
not been reduced. Regardless of the ultimate bargain, the unregulated
entity’s equity contribution should be contingent on the offtaker signing a
PPA and REC Transfer Agreement to ensure that an ability to claim
emission reductions accompanies the equity investment.

6. Negotiate REC Transfer Agreement with Offtaker

This step is critical to unlocking the value of REC Equity. Normally, an
offtaker who buys bundled RECs either retires the RECs to claim their
green attributes or sells them to a third party. Under the REC Equity
structure, the offtaker transfers a portion of its RECs to the unregulated
entity at a nominal cost whenever the unregulated entity forgoes cash
distributions during a defined initial period. Although the offtaker may be
unaccustomed to this novel structure, the unregulated entity can show its
value to the offtaker by demonstrating that REC Equity lowers the REC
price below what the offtaker would normally pay. This way the transfer
can be framed as a transaction that rewards the unregulated entity with
RECs in exchange for reducing the offtaker’s outlay for RECs over the term
of the PPA.

7. Retire Transferred RECs and Estimate Emissions Avoided

To claim the green attributes, the unregulated entity must retire the RECs
after it receives them from the offtaker. Thereafter, the unregulated
entity can convert the MWh of green energy associated with the RECs into
an emissions avoided estimate to track its progress against the target
emissions reduction.

8. Invest Distributions into Other Renewable Energy Projects

After the deferral period, the unregulated entity will begin to receive cash
distributions from the project. These distributions provide a source of
capital that the unregulated entity can use to fund additional renewable
energy purchases and investments to reduce its carbon emissions.

Option 3: REC Equity Investment Implementation Plan│27

Recommendations REC Equity is specifically designed to enable the installation of projects
that would otherwise not be built under BAU circumstances. Within this
group of projects, we recommend selecting projects for which (1) the
social benefits based on emissions avoidance are greater than the upfront
investment cost; and (2) the REC price range is sufficiently broad that the
offtaker and equity investors are unlikely to agree on a REC price that
satisfies both parties in the absence of a REC Equity investment. Figure 10
illustrates an example selection of a PJM utility solar project based on
these criteria. Figure 11 replicates Figure 9 with inputs based on the
selected PJM utility solar project.

Figure 10. Project Selection Based on Net Social Benefits (a)

Utility Solar Wind
PJM New England PJM New England Selection Process

AVERT Estimates:
Nameplate Capacity (MW) 40 60 28 53 ● Use AVERT to estimate the required
Capacity Factor 18% 18% 26% 20% MWh in renewable energy to avoid
Annual Generation (MWh) 62,000 94,000 64,000 93,000 50,000 metric tonnes of CO2

Project Cost:
Installation Cost ($/W) (b) $2.00 $2.00 $2.30 $2.30 ● Determine the required investment
Installation Cost ($) $80,000,000 $120,000,000 $64,400,000 $121,900,000 amount based on the estimated
installation costs for projects sized
Investment for 5% Ownership $4,000,000 $6,000,000 $3,220,000 $6,095,000 to the AVERT estimates

Social Benefits:
CO2 Avoided (tonnes) (c) 50,000 51,200 50,400 50,500
Social Benefit ($/tonne) (d) $40 $40 $40 $40
Social Benefit from CO2 Avoidance $2,000,000 $2,048,000 $2,016,000 $2,020,000

SO2 Avoided (tonnes) (c) 96 28 104 28 ● Calculate the social benefits derived
Social Benefit ($/tonne) (e) $33,500 $25,000 $33,500 $25,000 from the emissions reductions that
Social Benefit from SO2 Avoidance $3,225,975 $692,863 $3,482,777 $712,141 result from installing the analyzed
renewable energy projects
NOx Avoided (tonnes) (c) 39 28 41 26
Social Benefit ($/tonne) (f) $17,750 $8,490 $17,750 $8,490
Social Benefit from NOx Avoidance $690,799 $239,518 $732,666 $217,954

Total Social Benefit (TSB) $5,916,775 $2,980,381 $6,231,443 $2,950,095 ● Select the project for which (1) the
Net Benefit (TSB less Investment) $1,916,775 ($3,019,619) $3,011,443 ($3,144,905) TSB is greater than the investment
and (2) the REC/SREC price range is
REC Price Range ($/MWh) -- -- $10 - $20 $40 - $60 broad enough to permit REC Equity
SREC Price Range ($/MWh) $50 - $200 $200 -- -- to bridge the bid-ask gap

(a) The social benefits are based on CO2, SO2, and NOx avoided because AVERT provides avoidance estimates only for these emissions. An unregulated entity
could include other benefits as long as the value attributed to them is defensible. CO2, SO2, and NOx benefits are added for illustrative purposes. In
practice, the values would require further refinement to account for the emissions being avoiding collectively, rather than individually.
(b) The installation costs are based on the National Renewable Energy Laboratory (NREL) estimates of costs for wind and solar projects with nameplate
capacities greater than 10MW. These estimates were last udpated in Feburary 2016. The $/MW figures have been rounded.
(c) The CO2, SO2, and NOx avoided were estimated using the AVERT tool.
(d) The $40/tonne social benefit of CO2 avoided is based on the Social Cost of Carbon estimated by President Obama's Interagency Working Group on the
Social Cost of Carbon.
(e) The various social benefits of SO2 avoided were estimated with the Estimating Air pollution Social Impact Using Regression (EASIUR) model. PJM reflects the
average benefit in Maryland, central. New England reflects the average benefit in Maine, northern.
(f) The various social benefits of NOx avoided were estimated with the EASIUR model. PJM reflects the average benefit in Maryland, central. New England
reflects the average benefit in Maine, northern.

Option 3: REC Equity Investment Implementation Plan│28

 Figure 11. How REC Equity Works: An Example Investment (a)
Equity Project Year
($ in '000) Investment 1 2 3 4 5 ... 20 IRR (b) Comment
Sponsor Ask:
SREC Price ($/MWh) $140 $140 $140 $140 $140 $140 ● Sponsor asks for a price
Annual Generation (MWh) (c) 62,000 61,690 61,380 61,070 60,760 56,110 of $140/MWh for SRECs
SREC Sales $8,680 $8,637 $8,593 $8,550 $8,506 $7,855 to achieve a 20% IRR

Distributions to Sponsor (d) ($16,000) $2,051 $5,716 $5,754 $2,513 $58 $5,279 20.3%

Offtaker Bid:
SREC Price ($/MWh) $135 $135 $135 $135 $135 $135 ● Offtaker's maximum
MWh 62,000 61,690 61,380 61,070 60,760 56,110 willingness to pay of
SREC Sales $8,370 $8,328 $8,286 $8,244 $8,203 $7,575 $135/MWh for SRECs
drops the IRR below
Distributions to Sponsor ($16,000) $1,741 $5,407 $5,447 $3,426 $55 $5,108 19.7% the Sponsor's threshold

Bid-Ask Gap:
SREC Price ($/MWh) ($5) ($5) ($5) ($5) ($5) ($5) ● REC Equity is designed to
Distributions to Sponsor ($310) ($308) ($307) $913 ($3) ($171) (0.6%) bridge this bid-ask gap

Negotiated Price:
SREC Price ($/MWh) $130 $130 $130 $130 $130 $130 ● Unregulated Entity makes
MWh 62,000 61,690 61,380 61,070 60,760 56,110 an equity investment, but
SREC Sales $8,060 $8,020 $7,979 $7,939 $7,899 $7,294 forgoes cash distributions
in years 1 - 3 to enable
Distributions to Sponsor ($12,000) $1,431 $5,099 $5,140 $367 $39 $3,703 20.1% the Sponsor to achieve a
Distributions to Unregulated Entity (e) ($4,000) $0 $0 $0 $12 $13 $1,234 10.3% 20% return

Offtaker Savings:
Offtaker Bid ($/MWh) $135 $135 $135 $135 $135 $135 ● The Unregulated Entity's
Negotiated Price ($/MWh) $130 $130 $130 $130 $130 $130 investment in the project
Offtaker Savings ($/MWh) $5 $5 $5 $5 $5 $5 enables the Offtaker to
to save $5/MWh (equal
Annual Generation (MWh) (c) 62,000 61,690 61,380 61,070 60,760 56,110 (to $281K–$310K/year
Offtaker Savings $310 $308 $307 $305 $304 $281 based on annual MWh)

SREC Transfer:
Forgone Cash Distribution? Yes Yes Yes No No No ● When the Unregulated
Entity forgoes cash
Offtaker Savings $310 $308 $307 distributions, the Offtaker
Negotiated Price ($/MWh) $130 $130 $130 transfers a share of SRECs
SRECs Transferred (MWh equivalent) (f) 2,385 2,373 2,361 equal in value to the
Offtaker savings, while
SRECs with Offtaker (MWh equivalent) 59,615 59,317 59,019 61,070 60,760 56,110 retaining other SRECs

Emissions Avoided:
Maximum CO2 Avoided (tonnes) 50,000 49,750 49,501 ● The Offtaker transfers
% SRECs Transferred 4% 4% 4% SRECs equivalent to ~1,900
Unregulated Entity CO2 Avoided (tonnes) 1,923 1,913 1,904 tonnes of CO2 avoided

(a) A 20-year project model supports this analysis. This Figure shows Years 1–5 and Year 20 to simply the output. The 20-year model appears in the Appendix.
(b) The IRR are based on 20-years of cash flows.
(c) Assumes annual degradation of 0.5% based on NREL studies of degradation.
(d) Distributions reflect cash distributed based the sale of electricity and SRECs less operating expenses, debt service payments, contributions/redemptions to
reserve accounts, and cash distributed to the tax equity investor based on the Partnership Agreement. Under the modeled Agreement, the Sponsor
receives priority distributions until it recovers its initial investment (which accounts for the dropoff in Year 5).
(e) Distributions reflect cash distributed based the sale of electricity and SRECs less operating expenses, debt service payments, contributions/redemptions to
reserve accounts, and cash distributed to the sponsor and tax equity investors based on the Partnership Agreement.
(f) The SRECs transferred represent only a portion of the total SRECs generated by the project. In this example, the offtaker transfers slightly less than
2,400 MWh of SRECs to the unregulated entity when it forgoes cash distributions, while retaining more than 59,000 MWh of SRECs. This way, over the life
of the PPA, the offtaker still benefits from the savings enabled by the unregulated entity's investment, while the unregulated entity earns a return on its
investment and receives SRECs to claim credit for reducing its carbon emissions.

Option 3: REC Equity Investment Implementation Plan│29

Conclusion
Unregulated entities can tailor portfolios of renewable energy purchases and
investments to match their carbon offset and co-benefits goals

Portfolio To maximize emission reductions and co-benefits, while minimizing cost, we

Recommendation recommend creating a portfolio that starts with REC Equity investments and
then reinvests the returns from those projects in additional renewable
energy purchases and investments. By starting with investments, the
unregulated entity can create a portfolio that adds more green energy to
the grid and reduces the unregulated entity’s carbon emissions through a
self-sustaining portfolio of purchases and investments that not only helps
the unregulated entity achieve its goals, but also lowers the cost of
renewable energy and drives innovation across the industry.

Portfolio Design Creating a portfolio of renewable energy purchases and investments to

Considerations achieve emissions reduction goals of 50,000 metric tons of CO2 for an
unregulated entity requires consideration of additionality, project location
and technology, and procurement options. The REC procurement options
selected for the portfolio can be tailored to the risk tolerance of the
unregulated entity and its goals, prioritizing either Operational Excellence—
proven structures and technologies—or Thought Leadership. Figure 12
summarizes the considerations that an unregulated entity should evaluate
when designing its portfolio.

Figure 12. Renewable Energy Portfolio Considerations

Operational Excellence Thought Leadership

Long-Term Unbundled REC Bundled REC Purchase REC Equity

Purchase Contract Contract Investment

Additionality Strict Financial Test

Health and Co-Benefits Dependent on Location, Technology, and Project Size

Avoided CO2 Target Achievable with Purchases from Single Project Requires Multiple
Investments

Implementation Market-Tested Novel

Cost Recurring One-Time Upfront

Due Diligence Limited Moderate High

Financial Impact Expense Hedge Positive Return

Conclusion Implementation Plan│30

Assessment of An unregulated entity that seeks to create carbon offsets through a portfolio
Tradeoffs of renewable energy purchases and investments will need to grapple with
between the additionality considerations regardless of the REC procurement options
Options selected. Across the options, we recommended a strict financial test.
Similarly, the evaluation of health and other co-benefits will be equally
dependent on location, technology, and project size for all of the options.
Once these threshold factors are analyzed, the unregulated entity may
customize its portfolio based on the following tradeoffs:

 Avoided CO2 Target: Achieving the target reductions via Long-Term

Unbundled or Bundled REC Purchases Contracts can be achieved
with purchases from a single project in a selected region, but
achieving the target solely through REC Equity would likely require
multiple investments, increasing transaction costs for the entity.

 Implementation: Long-Term Unbundled or Bundled REC Purchases

Contracts are both well-accepted procurement options that are
market-tested, whereas REC Equity is a novel approach. Additionally,
bundled REC purchases likely entail long contract durations, which
may be undesirable for some unregulated entities.

 Cost: Unbundled and Bundled REC Purchase Contracts each entail

recurring expenses. By contrast, a REC Equity investment represents
a one-time upfront expenditure.

 Due Diligence: The due diligence is limited in the case of Long-term

Unbundled REC Purchases and moderate for Bundled REC purchases,
in which the projected costs of wholesale electricity rates must be
considered. A REC Equity investment would require more due
diligence to assess the project company and negotiate the various
contracts that support the novel financial structure.

 Financial Impact: While Unbundled REC Purchases represent an

expense, Bundled REC purchases can provide a hedge against
electricity price fluctuations, potentially yielding lower-cost
electricity in addition to RECs. By contrast, REC Equity investment is
designed to provide a positive return on investment in the
procurement of RECs to achieve emission offset goals.

After considering this tradeoffs, the unregulated entity can create a

portfolio of renewable energy purchases and investments tailored to its
values and environmental mission.

Bibliography Implementation Plan│31

Bibliography
Agnolucci, P., 2007. The effect of financial constraints, technological progress and long-term
contracts on tradable green certificates. Energy Policy 35, 3347–3359.
Adams, R., Jamasb, T. (2016). Optimal Power Generation Portfolios with Renewables: An
Application to the UK. [Link]
Baratoff, M.C., Black, I., Burgess, B., Felt, J.E., Garratt, M., Guenther, C., 2007. Renewable
power, policy, and the cost of capital. UNEP/BASE Sustainable Energy Finance Initiative.
Bode, Sven, and Axel Michaelowa. "Avoiding perverse effects of baseline and investment
additionality determination in the case of renewable energy projects." Energy Policy 31.6
(2003): 505-517.
Bolinger M., Seel J., (2015). Utility-Scale Solar 2015: An Empirical Analysis of Project Cost,
Performance, and Pricing Trends in the United States.
[Link]
Energy Information Agency Wholesale Market Electricity (accessed 2017). U.S. Department of
Energy. [Link]
Gillenwater, M., Lu, X., & Fischlein, M. (2014). Additionality of wind energy investments in the
U.S. voluntary green power market. Renewable Energy, 63, 462–467.
[Link]
Gillenwater, Michael. "Probabilistic decision model of wind power investment and influence of
green power market." Energy policy 63 (2013): 1111-1125.
Gillenwater, M. (2013). Probabilistic decision model of wind power investment and influence of
green power market. Energy Policy, 63, 1111–1125.
[Link]
Gillenwater, M. (2008). Redefining RECs-Part 1: Untangling attributes and offsets. Energy Policy,
36(6), 2109–2119. [Link]
Gillenwater, M. (2008). Redefining RECs-Part 2: Untangling certificates and emission markets.
Energy Policy, 36(6), 2120–2129. [Link]
Heo, J. et al. (2016a). Reduced-form modeling of public health impacts of inorganic PM2.5 and
precursor emissions. Atmospheric Environment. 137: 80-89.
Heo, J. et al. (2016b). Public health costs of primary PM2.5 and inorganic PM2.5 precursor
emissions in the United States. Environmental Science and Technology.

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Kent, C. (2016). Introduction to Virtual Power Purchase
Agreements. [Link]
09/documents/webinar_kent_20160928.pdf
O’Shaughnessy, E., Heeter, J., Liu, C., & Nobler, E. (2015). Status and Trends in the US Voluntary
Green Power Market (2014 Data), (October). Retrieved from
[Link]
Siler-Evans, K., et al. 2013: Regional variations in the health, environmental and climate benefits
of wind and solar generation. Proceedings of the National Academy of Sciences.
World Bank Group. (2016). Carbon Credits and Additionality: Past, Present, and
[Link] Technical Papers: World Bank, Washington, DC. © World Bank.
[Link] License: CC BY 3.0 IGO
Wiser R., Barbose, Bolinger, M. (2017). Retail Rate Impacts of Renewable Electricity: Some First
Thoughts. [Link]
Wiser, R., Bolinger, M., (2015). 2015 Wind Technologies Market Report.
[Link]

Bibliography Implementation Plan│33

 Appendix:
Catalog of Potential Harms and Benefits Associated with
Electricity Generation from Coal and Natural Gas Compared to
Electricity Generation from Solar and Wind Energy

Implementation Plan│34
 COAL & NATURAL GAS*
COAL NATURAL GAS
Sector Impact Pathway Impact Pathway
Occupational
 By handling chemicals used in fracturing, workers
are exposed to toxic substances, some of which are
known carcinogens and [Link]
 Fracturing requires a lot of heavy equipment, most
of which runs on diesel fuel, exposing workers to
harmful particulates, hydrocarbons, and other
 Human exposure to
pollutants, as well as noise and vibrations, which all
 Human exposure  Exposure to dust, black carbon, particulate matter, harmful chemicals
have detrimental health effects, including certain
to harmful creates harmful work environments for coal miners.  Exposure to air
cancersii
substances Over 200,000 coal miners have died of black lung pollution
Job Safety  Heavy equipment from pipeline installation,
 High disease since 1900.i  High occupational
drilling, flaring, etc. emit air pollutantsii
occupational  Since 1900, 100,000 people have died in coal mining fatality rates
 Silica dust, a proppant during fracking, inhalation
mortality rate accidents in the United States.i  High risk of
can cause silicosis, lung cancer, tuberculosis, kidney
explosion
diseaseii
 Oil and gas occupations have a 2.5-7 times higher
fatality rate than other similar industriesii
 Natural gas reserves contain hydrogen sulfide,
which carries a high explosion risk and is a central
nervous system toxicantii
 Estimates show that the number of jobs in natural
gas should double by 2020 from 2014 levelsii
 With the current United States administration,  Most jobs are for highly trained workers, who are
 Small potential there is a small likelihood for increases in coal-  Potential for job brought into sites from away, and are not usually
for job re-growth related jobs in the near future growth local community membersiv
Job Growth
under the current  However, competitively priced natural gas and  Jobs are for highly  However, with automated processes and
Administration renewables, and increases in automation in the trained workers competitively priced renewables, the evidence is
mining industry are removing coal-related jobsiii unclear whether the growth potential will be fully
realized.

*It was outside the scope of this report to include ways to mitigate harms and maximize benefits from coal and natural gas, as that
cannot be done through the renewable energy projects.

Appendix Implementation Plan│35

 COAL NATURAL GAS
Sector Impact Pathway Impact Pathway
Water

 Many chemicals (e.g. silica, methanol, ethylene

 Phosphorous and nitrogen emitted from coal-burning
glycol, biocides, boron, benzene, toluene and many
power plants result in eutrophication of water
 Eutrophication of more) are utilized for fracturing as they are
Groundwater, sourcesv  Risk of chemical
water bodies injecting into the ground [Link],vii
Fresh, and  Mercury that is emitted from coal-burning power contamination of
 Contamination of  These chemicals, and leaking methane from drill
Surface Water plants is harmful to marine, terrestrial speciesvi fresh, surface and
water sources sites, can contaminate the aquifer and surface
Contamination  20 of the chemicals used in coal slurries that pollute groundwater
harms organisms waters if wells are leaky, spills occur, rocks are
local water sources are known carcinogens, 24
fractured, wells are abandoned, through drilling
associated with lung, heart diseasei,v
discharge, or through waste [Link]
 In order to operate a cooling system, a coal plant  Hydraulic fracturing utilizes a large amount of
 Utilizes a large  Utilizes a large
Water Use uses a small percent of the 70-180 billion gallons of water for injections into wells, anywhere from 2-10
amount of water amount of water
water that is withdrawn each yearviii million gallons of water per well, per fractureix
Natural Resources
 Deforestation and land degradation occur when
 Deforestation and land degradation occur when coal-  Requires a lot of
natural gas-burning power plants are built, as well
burning power plants are built. This occurs at a rate land
Land Use and  Requires a lot of as at fracturing site. Entire networks of fracturing
much larger than any renewable energy [Link]  Land can be
Degradation land wells are created, disrupting large areas of landix
 This land use accounts for another large percent of contaminated
 Chemical spills and leaks can result in soil
greenhouse gases that is often not accounted [Link] during fracturing
contamination with harmful compoundsii

 Wastewater  Although the management of wastewater is

 Waste from coal mining and burning, which consists contains chemicals, monitored, protocol differs by state. In some
 Waste deposited
of heavy metals and other toxicants, can be buried in radioactive places, wastewater can be inserted into the soil,
Waste Disposal in bodies of
streams or put into slurries, which can leach into the materials, metals, stored underground, or re-injected in wells, leading
water
water supplyi and other harmful to a potential for soil [Link],ix
compounds  Wastewater injections can trigger earthquakesx

 Mercury that is emitted from coal-burning power  By inserting wastewater in soil or into wells, or
 Contamination of plants is harmful to marine and terrestrial species inserting chemicals into the ground, with high
 Negatively harm
Wildlife soil harms within 15km of the power plantvi potential for soil and water contamination, wildlife
wildlife
organisms  Large amounts of water extraction can injure and kill have been found to have acute and chronic metal
marine speciesviii toxicities in areas where fracturing is commonx

Appendix Implementation Plan│36

 COAL NATURAL GAS
Sector Impact Pathway Impact Pathway
Environmental Justice
 Fracturing requires a lot of heavy equipment, most
of which runs on diesel fuel, exposing community
 Communities members to harmful particulates, hydrocarbons,
 Typically, lower-income people tend to live in the exposed to higher and other pollutants, as well as noise and
 High air pollution most polluted areas, based on the economics of the levels of air vibrations, which all have detrimental health
in the housing market and other variables, increasing the pollution effects, including certain cancersii
communities health risks that these populations are already  Family members of  Workers can take fracturing chemicals and
Air Pollution around coal- vulnerable to because of their socioeconomic status workers exposed to substances home on their clothes, shoes, skin and
burning power  Regions where coal is mined see the highest rates of harmful chemicals expose family membersii
plants and coal all-cause mortality and lung cancer, heart- disease,  Emits methane, an  Estimated that natural gas power plants emit 30%
mines respiratory, and kidney mortalities and a 16% greater even more potent more methane than coal burning power plants and
odds of a baby being born with low birth weight.i greenhouse gas coal minesxii
than carbon dioxide  Leaks from drilling sites release methane into the
air, exposing workers and the surrounding
populations, which can displace [Link]

Appendix Implementation Plan│37

 SOLAR

Sector Impact Pathway How to Maximize Benefits & Reduce Harms

Occupational
 Utilize personal protective equipment to ensure safety for all
 Potential for occupational  Solar energy industry workers can be harmed via
workers, regardless of sector of the industry
Job Safety hazards if precautions are electric shock, falls, thermal burns, or arc flashes if
 Increase safety procedures for solar workers to decrease risk
avoided proper protective equipment is not utilized. xiii
injury
 Provide job training to local residents to allow them to
 Workers who are highly trained will be employed at
compete for jobs
a higher rate than untrained workersiii
 Allow displaced workers, from coal- or natural gas-burning
 Reports show that the solar industry is hiring new
Job Growth  Potential for job growth energy production units to receive this job training
workers much faster than the rest of the overall
preferentially to prevent job losses
economy, although data is limited to fully assess
 Improve employment tracking to monitor and evaluate job
thisiii
growth potential in the renewable energy sector
Water

 Metals processing and refinement (e.g. copper,

Surface and  Improve waste catchment from extraction and processing to
 Risk of surface water silicon) produces waste, and refuse that is thrown
Groundwater prevent runoff or contamination
contamination away can be discharged/runoff into surface water
Contamination  Provide sustainable waste removal or recycling of refuse
and contaminate surface waterv

 Metals extraction to make panels can result in

 Eutrophication of nearby eutrophication of water bodiesv
 Provide sustainable waste removal or recycling of refuse
Fresh Water bodies of freshwater  Metals processing and refinement and panel refuse
 Improve waste catchment from extraction and processing to
Contamination  Water contamination risk produces waste that can be discharged/runoff into
prevent runoff or contamination
increases surface water or spill and contaminate surface
waterv
Natural Resources
 Requires a moderate amount  Pursue projects that do not require deforestation, and make
 Although land is needed to build solar projects, it is
of land that is relatively flat, use of already cleared space and/or rooftops
estimated that solar projects currently reduces
and receives ample incoming  Re-purpose preexisting spaces (like covering parking lots) to
Land Use and energy land use by 40-63% compared to a coal-
solar radiation allow for innovative design of solar projects, while keeping the
Degradation burning power plant today.v However, this is likely
 Innovative installation original use of the space fully in tact
an underestimate, as this estimate does not
provides opportunity to re-  Avoid disrupting disadvantaged communities or natural
account for land occupied by coal mines.
purpose land ecosystems to integrate solar projects.

Appendix Implementation Plan│38

 Sector Impact Pathway How to Maximize Benefits & Reduce Harms
 Metals extraction (e.g. copper, silicon, silver,
cadmium, tellurium, selenium, etc.) to make
 Obtain materials in sustainable ways
photovoltaic panels, wiring, inverters, transformers,
 Prefer low-impact projects that are using fewer minerals per
Mineral and mounts can result in over extraction of precious
 Over-extraction of minerals panel and are more efficient
Extraction minerals that is 2-3 times current levelsv,ix Over-
 Encourage research that study the efficiency of alternative
extraction of minerals is harmful to biodiverse
materials in solar projects and improves panel efficiency
ecosystem, can lead to ground sinkholes, water
pollution, and erosion.
 Recycle and reuse pieces that are not used
 Metals processing and refinement (e.g. copper,
 Allow for recycling and reuse of parts after a project has
 Harmful exposures from silicon) produces waste, or panel refuse that can
reached its full lifespan
Waste Disposal photovoltaic panel waste spill or is thrown away can be discharged/runoff
 Avoid projects that result in waste being disposed of in
disposal into surface water, causing ecotoxicity of terrestrial
locations where disadvantaged communities or natural
and marine [Link]
ecosystem are located
 Depending on the location of project and the
species found in that geographic region, the clearing  Utilize spatial planners and environmental experts to conduct
 Displacement of and harm to
Wildlife of land for photovoltaic panels or access roads an environmental impact assessment of best practices and
wildlife
could harm or displace animals, plants, and other locations for project placement.
essential organismsvi
Environmental Justice

 During construction, local air pollution increases

from heavy equipment emitting diesel particles,
dust from excavation and building of projects
 Some potential for increases  However, by increasing solar energy, there can be a  Utilize construction companies that prefer more energy
in local air pollution decrease in coal and natural gas powered energy, efficient equipment
Air Pollution  Large potential for decreases which reduces air pollution from particulate matter,  Avoid projects where heavy construction would occur in
in local and regional air sulfur dioxide, and nitrogen oxides in the region disadvantaged communities
pollution  When displacing natural gas powered energy, there  Choose solar projects that maximize emissions reductions
is a decrease in methane leaks, leading to decreases
in methane in the environment that is harmful to
human health and is a potent greenhouse gas.

Appendix Implementation Plan│39

 Sector Impact Pathway How to Maximize Benefits & Reduce Harms

 Partner and collaborate with local organizations to prioritize

 By financing renewable energy projects in low- disadvantaged communities and finance projects that would
income or extremely remote communities, the improve energy security of a population
community can gain access to secure and stable  Review projects recommended by Team 1, 2, and 3 to learn
 Improve energy security for
electricity, improving overall quality of lifexiv about specific opportunities available to further reduce
disadvantaged communities
Energy Security  Assuming transmission infrastructure remains the greenhouse gas emissions
 Potential increase in
same, as more renewable energy is added to the  When possible, invest in transmission and distribution to
transaction costs for others
grid, fewer people are left paying for the ensure equity in energy access for all.
transmission and distribution of energy, which can  As renewable projects are added to the grid, work with utility
result in higher energy bills for those left behind. policy makers to account for increases in transmission costs
through fees or surcharges.

Education
 With new projects in place to reduce greenhouse
gas emissions, the unregulated entity can
 Incorporate the following opportunities (non-exhaustive list)
incorporate lessons learned and hands-on learning
 Improve awareness and into educational settings:
for students of many disciplines
understanding of solar energy o Financing and structuring solar projects
 Students and faculty would have the ability to
On-Campus for students o Maximizing co-benefits from solar projects and
conduct research projects around the investment
Education  Creation of multi-disciplinary conducting Health Impact Assessments
in, development of, and evaluation of various solar
research projects for students o Monitoring and evaluating solar projects
energy investments. For example, a graduate
and faculty o Inspiring local climate action with unregulated entity
student from the unregulated entity’s school of
greenhouse gas reductions
public health can conduct the Health Impact
Assessment for the geographic locations of choice.
 Improve understanding of
 Provide job training and/or internships for local residents to
solar energy for local  With new projects in place to reduce greenhouse
enhance their personal skill sets
residents and communities gas emissions, the unregulated entity can
 Offer community visitation days or open-house events where
 Inspire other unregulated incorporate lessons learned and hands-on learning
Off-Campus community members can learn about the unregulated entities
entities to follow and for community members and job-training exercises
Education journey towards carbon neutrality
implement renewable energy  By voluntarily reducing carbon dioxide emissions,
 Provide public and transparent reports of the available projects
projects of their own the unregulated entity sets an example for
and funding schemes, as well as implementation plans, to
 Enhance job training for local leadership that other entities will likely follow
allow others to follow
residents

Appendix Implementation Plan│40

 WIND

Sector Impact Pathway How to Maximize Benefits & Reduce Harms

Occupational
 Although some reports show that there are injuries
and deaths associated with wind farm workers,  Utilize personal protective equipment to ensure safety for all
 Potential for occupational
those are usually caused by the operation of heavy workers, regardless of sector of the industry
Job Safety hazards if precautions are
equipment, moving objects, hand-held tools,  Increase safety procedures for turbine workers to decrease risk
avoided
vehicles, or electric shock, which are not specific to of falling or other harms
the wind industryxv,xvi
 Provide job training to local residents to allow them to
compete for jobs
 Allow displaced workers, from coal- or natural gas-burning
 Workers who are highly trained will be employed at
Job Growth  Potential for job growth energy production units to receive this job training
a higher rate than untrained workersiii
preferentially to prevent job losses
 Improve employment tracking to monitor and evaluate job
growth potential in the renewable energy sector
Water
Fresh, Surface,  Heavy equipment used in the construction of wind
 Small potential for water  Use protocol to ensure that spills, and other accidents, are
Groundwater farms may contaminate water sources if a spill of
contamination avoided as much as possible
Contamination fuel or other unintended action occurs
Natural Resources
 Prioritize projects where the land utilized can still serve is
primary purpose once the turbine is built (i.e. crops can still be
 Land is required for turbine siting, and the amount grown on agricultural or marginal land where turbines are
Land Use and  Utilizes a moderate amount needed grows with the number of turbines. Land is located)
Degradation of land area also needed for roads and infrastructure to support  Coordinate with developer to ensure that infrastructure for the
the projectvi project enhances the land, allowing for greater use after
construction (i.e. construction of permanent roads, drainage
systems, greater accessibility)
 As today’s turbines reach the end of their life, they  Prioritize developers who sustainably source, recycle, and
will be disposed of, and today they are mostly just dispose of materials
 In the future, a lot of waste
Waste Disposal sent to landfillsxvii  Partner with companies that are collecting old blades, cutting
will be produced
 Across the world, it is expected that there will be them down, and refining them to be repurposes as composite
50,000 tons of waste by 2020xvii materials for new blades

Appendix Implementation Plan│41

 Sector Impact Pathway How to Maximize Benefits & Reduce Harms
 Although wind turbines are thought to kill birds,
bats, and other wildlife, this actually occurs at a
 Utilize spatial planners and environmental experts to conduct
much lower rate than fossil-fuel burning power
an environmental impact assessment of best practices and
plants, airplanes, other animals, and vehiclesxviii
locations for project placement to protect wildlife
Wildlife  May disrupt some wildlife  Depending on the location of project and the
 Ensure that once the turbine is built, the land can be utilized
species found in that geographic region, the clearing
for its original purpose (agriculture, recreation, wildlife) so that
of land for photovoltaic panels or access roads
natural ecosystems are restored
could harm or displace animals, plants, and other
essential organismsvi
Environmental Justice
 During construction, local air pollution increases
from heavy equipment emitting diesel particles,
dust from excavation and building of turbines
 Some potential for increases  However, by increasing wind energy, there can be a  Utilize construction companies that prefer more energy
in local air pollution decrease in coal and natural gas powered energy, efficient equipment
Air Pollution  Large potential for decreases which reduces air pollution from particulate matter,  Avoid projects where heavy construction would occur in
in local and regional air sulfur dioxide, and nitrogen oxides in the region disadvantaged communities
pollution  When displacing natural gas powered energy, there  Choose wind projects that maximize emissions reductions
is a decrease in methane leaks, leading to decreases
in methane in the environment that is harmful to
human health and is a potent greenhouse gas.

 By financing renewable energy projects for low-  Partner and collaborate with local organizations to prioritize
income or extremely remote communities, the disadvantaged communities and finance projects that would
 Improve energy security for community can gain access to secure and stable improve energy security of a population
disadvantaged communities electricity, improving overall quality of lifexiv  Review projects recommended by Team 1, 2, and 3 to learn
Energy Security
 Potential increase in  As more renewable energy is added to the grid, about specific opportunities available to further reduce
transaction costs for others fewer people are left paying for the transmission greenhouse gas emissions
and distribution of energy, which can result in  When possible, invest in transmission and distribution to
higher energy bills for those left behind. ensure equity in energy access for all.

Education
 Improve awareness and  With new projects in place to reduce greenhouse  Incorporate the following opportunities (non-exhaustive list)
understanding of solar energy gas emissions, the unregulated entity can into educational settings:
On-Campus for students incorporate lessons learned and hands-on learning o Financing and structuring solar projects
Education  Creation of multi-disciplinary for students of many disciplines o Maximizing co-benefits from solar projects and
research projects for students  Students and faculty would have the ability to conducting Health Impact Assessments
and faculty conduct research projects around the investment o Monitoring and evaluating solar projects

Appendix Implementation Plan│42

 Sector Impact Pathway How to Maximize Benefits & Reduce Harms
in, development of, and evaluation of various wind o Inspiring local climate action with unregulated entity
energy investments. For example, a graduate greenhouse gas reductions
student from the unregulated entity’s school of
public health can conduct the Health Impact
Assessment for the geographic locations of choice.
 Improve understanding of
 Provide job training and/or internships for local residents to
wind energy for local  With new projects in place to reduce greenhouse
enhance their personal skill sets
residents and communities gas emissions, the unregulated entity can
 Offer community visitation days or open-house events where
 Inspire other unregulated incorporate lessons learned and hands-on learning
Off-Campus community members can learn about the unregulated entities
entities to follow and for community members and job-training exercises
Education journey towards carbon neutrality
implement renewable energy  By voluntarily reducing carbon dioxide emissions,
 Provide public and transparent reports of the available projects
projects of their own the unregulated entity sets an example for
and funding schemes, as well as implementation plans, to
 Enhance job training for local leadership that other entities will likely follow
allow others to follow
residents

i
Epstein, P.R. et al. 2011. Full cost accounting for the life cycle of coal. Annals of the New York Academy of Sciences. 1219: 73-98.
ii
Adgate, J.L., B.D. Goldstein, L.M. McKenzie. 2014. Potential public health hazards, exposures and health effects from unconventional natural
gas development. Environ Sci Technol. 48: 8307-8320.
iii
Department of Energy. 2017. U.S. Energy and Employment Report.
iv
Boudet, H. et al. 2014. “Fracking” controversy and communication: Using national survey data to understand public perceptions of hydraulic
fracturing. Energy Policy. 65: 57-67.
v
Berrill, P. et al. 2016. Environmental impacts of high penetration renewable energy scenarios for Europe. Environmental Research Letters. 11.
vi
UNEP (2016) Green Energy Choices: The benefits, risks, and trade-offs of low-carbon technologies for electricity production. Report of the
International Resource Panel. [Link], J. Aloisi de Larderel, A. Arvesen, P. Bayer, J. Bergesen, E. Bouman, T. Gibon, G. Heath, C. Peña, P.
Purohit, A. Ramirez, S. Suh.
vii
Michalski, R. and A. Ficek. 2016. Environmental pollution by chemical substances used in the shale gas extraction - a review. Desalination and
Water Treatment. 57.3: 1336-1343.
viii
Union of Concerned Scientists. Impacts of coal power: water use. Accessed on 2 Apr 2017. Available from: [Link]
energy/coal-and-other-fossil-fuels/coal-water#.WOFJxRIrL8N
ix
Bergesen, J.D. et al. 2014. Thin-film photovoltaic power generation offers decreasing greenhouse gas emissions and increasing environmental
co-benefits in the long term. Environmental Science and Technology. 48: 9834-9843.
x
Pichtel, J. 2016. Oil and gas production wastewater: soil contamination and pollution prevention. Applied and Environmental Soil Science. 2016:
24pgs.
xi
United States Geological Survey. USGS Frequently Asked Questions. United States Department of the Interior. Access on 2 Apr 2017. Available

Appendix Implementation Plan│43

from: [Link]
xii
Howarth, R.W., R. Santoro, and A. Ingraffea. 2011. Methane and the greenhouse-gas footprint of natural gas from shale formations. Climatic
Change. 106: 679-690.
xiii
Occupational Safety & Health Administration. Green Job Hazards: Solar Energy. United States Department of Labor. Accessed on 2 Apr 2017.
Available from: [Link]
xiv
Bilich, A., et al. 2016. Life cycle assessment of solar photovoltaic microgrid systems in off-grid communities. Environmental Science and
Technology. 51: 1043-1052.
xv
Aneziris, O.N., I.A. Papazoglou, A. Psinias. 2016. Occupational risk for an onshore wind farm. Safety Science. 88: 188-198.
xvi
Occupational Safety & Health Administration. Green Job Hazards: Wind Energy. United States Department of Labor. Accessed on 2 Apr 2017.
Available from: [Link]
xvii
Albers, H., et al. 2009. Recycling of wind turbine rotor blades – fact or fiction? DEWI Magazine. 34: 32-41.
xviii
Tabassum, A.M. 2014: Wind energy: increasing deployment, rising environmental concerns. Renewable & sustainable energy reviews. 31:270-
288.

Appendix Implementation Plan│44

 Appendix:
PJM Solar Project Model

Implementation Plan│45
Key Inputs Inputs

Project Assumptions:
Renewable Energy Source Utility PV
Nameplate Capacity (kW) 40,000
Installed Cost ($/W) $2.00
Total Installation Cost ($) $80,000,000
PPA Rate ($/kWh) $0.075
SREC Price with SREC Equity ($/kWh) $0.130

Financing Assumptions:
Bank Debt 40.00% $32,000,000
Tax Equity 40.00% 32,000,000
Sponsor Equity 15.00% 12,000,000
SREC Equity 5.00% 4,000,000
Total Installation Cost 100.00% $80,000,000

Project Year Input 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Offtaker Savings
PPA Rate ($/kWh) $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075
SREC Price without SREC Equity ($/kWh) $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135 $0.135
SREC Price with SREC Equity ($/kWh) $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130

Annual Generation (kWh) 62,000,000 61,690,000 61,380,000 61,070,000 60,760,000 60,450,000 60,140,000 59,830,000 59,520,000 59,210,000 58,900,000 58,590,000 58,280,000 57,970,000 57,660,000 57,350,000 57,040,000 56,730,000 56,420,000 56,110,000

PPA Rate Payment $4,650,000 $4,626,750 $4,603,500 $4,580,250 $4,557,000 $4,533,750 $4,510,500 $4,487,250 $4,464,000 $4,440,750 $4,417,500 $4,394,250 $4,371,000 $4,347,750 $4,324,500 $4,301,250 $4,278,000 $4,254,750 $4,231,500 $4,208,250
SREC Payment without SREC Equity 8,370,000 8,328,150 8,286,300 8,244,450 8,202,600 8,160,750 8,118,900 8,077,050 8,035,200 7,993,350 7,951,500 7,909,650 7,867,800 7,825,950 7,784,100 7,742,250 7,700,400 7,658,550 7,616,700 7,574,850
Offtaker Payments to Project Compay $13,020,000 $12,954,900 $12,889,800 $12,824,700 $12,759,600 $12,694,500 $12,629,400 $12,564,300 $12,499,200 $12,434,100 $12,369,000 $12,303,900 $12,238,800 $12,173,700 $12,108,600 $12,043,500 $11,978,400 $11,913,300 $11,848,200 $11,783,100

SREC Payment with SREC Equity 8,060,000 8,019,700 7,979,400 7,939,100 7,898,800 7,858,500 7,818,200 7,777,900 7,737,600 7,697,300 7,657,000 7,616,700 7,576,400 7,536,100 7,495,800 7,455,500 7,415,200 7,374,900 7,334,600 7,294,300
Offtaker Payments to Project Entity $12,710,000 $12,646,450 $12,582,900 $12,519,350 $12,455,800 $12,392,250 $12,328,700 $12,265,150 $12,201,600 $12,138,050 $12,074,500 $12,010,950 $11,947,400 $11,883,850 $11,820,300 $11,756,750 $11,693,200 $11,629,650 $11,566,100 $11,502,550

Offtaker Savings with SREC Equity $310,000 $308,450 $306,900 $305,350 $303,800 $302,250 $300,700 $299,150 $297,600 $296,050 $294,500 $292,950 $291,400 $289,850 $288,300 $286,750 $285,200 $283,650 $282,100 $280,550

Project Cash Flow

Key Inputs:
Nameplate Capacity (kW) 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Capacity Factor 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69% 17.69%
Production Degradation 0.50% 100.00% 99.50% 99.00% 98.50% 98.00% 97.50% 97.00% 96.50% 96.00% 95.50% 95.00% 94.50% 94.00% 93.50% 93.00% 92.50% 92.00% 91.50% 91.00% 90.50%

Annual Generation (kWh) 62,000,000 62,000,000 61,690,000 61,380,000 61,070,000 60,760,000 60,450,000 60,140,000 59,830,000 59,520,000 59,210,000 58,900,000 58,590,000 58,280,000 57,970,000 57,660,000 57,350,000 57,040,000 56,730,000 56,420,000 56,110,000
PPA Rate ($/kWh) $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075 $0.075
PPA Escalation Factor 0.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

SREC Price ($/kWh) $0.275 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130 $0.130

Inflation Factor 1.50% 0.00% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%

Project Cash Flow:

Electricity Sales $4,650,000 $4,626,750 $4,603,500 $4,580,250 $4,557,000 $4,533,750 $4,510,500 $4,487,250 $4,464,000 $4,440,750 $4,417,500 $4,394,250 $4,371,000 $4,347,750 $4,324,500 $4,301,250 $4,278,000 $4,254,750 $4,231,500 $4,208,250
REC Sales 8,060,000 8,019,700 7,979,400 7,939,100 7,898,800 7,858,500 7,818,200 7,777,900 7,737,600 7,697,300 7,657,000 7,616,700 7,576,400 7,536,100 7,495,800 7,455,500 7,415,200 7,374,900 7,334,600 7,294,300
Project Revenue 12,710,000 12,646,450 12,582,900 12,519,350 12,455,800 12,392,250 12,328,700 12,265,150 12,201,600 12,138,050 12,074,500 12,010,950 11,947,400 11,883,850 11,820,300 11,756,750 11,693,200 11,629,650 11,566,100 11,502,550
$/kWh $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205 $0.205

Fixed O&M 640,000 (640,000) (649,600) (659,344) (669,234) (679,273) (689,462) (699,804) (710,301) (720,955) (731,770) (742,746) (753,887) (765,196) (776,674) (788,324) (800,149) (812,151) (824,333) (836,698) (849,248)
Site Control 640,000 (640,000) (649,600) (659,344) (669,234) (679,273) (689,462) (699,804) (710,301) (720,955) (731,770) (742,746) (753,887) (765,196) (776,674) (788,324) (800,149) (812,151) (824,333) (836,698) (849,248)
Insurance 240,000 (240,000) (243,600) (247,254) (250,963) (254,727) (258,548) (262,426) (266,363) (270,358) (274,414) (278,530) (282,708) (286,948) (291,253) (295,621) (300,056) (304,557) (309,125) (313,762) (318,468)
Property Taxes 400,000 (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000) (400,000)
Asset Management Services 640,000 (640,000) (649,600) (659,344) (669,234) (679,273) (689,462) (699,804) (710,301) (720,955) (731,770) (742,746) (753,887) (765,196) (776,674) (788,324) (800,149) (812,151) (824,333) (836,698) (849,248)
Operating Expenses $2,560,000 (2,560,000) (2,598,400) (2,637,376) (2,676,937) (2,717,091) (2,757,847) (2,799,215) (2,841,203) (2,883,821) (2,927,078) (2,970,985) (3,015,549) (3,060,783) (3,106,694) (3,153,295) (3,200,594) (3,248,603) (3,297,332) (3,346,792) (3,396,994)
$/kWh $0.041 $0.042 $0.043 $0.044 $0.045 $0.046 $0.047 $0.047 $0.048 $0.049 $0.050 $0.051 $0.053 $0.054 $0.055 $0.056 $0.057 $0.058 $0.059 $0.061

EBITDA 10,150,000 10,048,050 9,945,524 9,842,413 9,738,709 9,634,403 9,529,485 9,423,947 9,317,779 9,210,972 9,103,515 8,995,401 8,886,617 8,777,156 8,667,005 8,556,156 8,444,597 8,332,318 8,219,308 8,105,556

D&A (27,448,212) (5,597,292) (3,515,397) (2,261,100) (2,246,907) (1,305,032) (369,976) (369,976) (370,161) (543,136) (717,001) (716,494) (716,678) (716,494) (716,678) (554,707) (392,920) (392,920) (392,920) (566,080)
Interest Expense (1,368,000) (1,224,000) (1,080,000) (936,000) (792,000) (648,000) (504,000) (360,000) (216,000) (72,000) 0 0 0 0 0 0 0 0 0 0
Taxable Income (Loss) (18,666,212) 3,226,758 5,350,127 6,645,314 6,699,802 7,681,371 8,655,509 8,693,971 8,731,618 8,595,835 8,386,515 8,278,907 8,169,939 8,060,662 7,950,327 8,001,449 8,051,677 7,939,398 7,826,388 7,539,476

Appendix Implementation Plan│46

Project Year Input 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Distributions Waterfall

Distributable Cash:
Revenue $12,710,000 $12,646,450 $12,582,900 $12,519,350 $12,455,800 $12,392,250 $12,328,700 $12,265,150 $12,201,600 $12,138,050 $12,074,500 $12,010,950 $11,947,400 $11,883,850 $11,820,300 $11,756,750 $11,693,200 $11,629,650 $11,566,100 $11,502,550
Operating Expenses (2,560,000) (2,598,400) (2,637,376) (2,676,937) (2,717,091) (2,757,847) (2,799,215) (2,841,203) (2,883,821) (2,927,078) (2,970,985) (3,015,549) (3,060,783) (3,106,694) (3,153,295) (3,200,594) (3,248,603) (3,297,332) (3,346,792) (3,396,994)
Interest Expense (1,368,000) (1,224,000) (1,080,000) (936,000) (792,000) (648,000) (504,000) (360,000) (216,000) (72,000) 0 0 0 0 0 0 0 0 0 0
Principal Repayment (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) 0 0 0 0 0 0 0 0 0 0
DSRA (Contribution) / Redemption (2,284,000) 72,000 72,000 72,000 72,000 72,000 72,000 72,000 72,000 72,000 1,636,000 0 0 0 0 0 0 0 0 0
O&M/Working Reserve Account (Contribution) / Redemption (1,289,600) (19,344) (19,634) (19,929) (20,228) (20,531) (20,839) (21,152) (21,469) (21,791) (22,118) (22,450) (22,786) (23,128) (23,475) (23,827) (24,184) (24,547) (24,915) (12,550)
MMRA (Contribution) / Redemption (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) 5,200,000 (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) (577,778) 5,200,000
Major Maintenance 0 0 0 0 0 0 0 0 0 (5,200,000) 0 0 0 0 0 0 0 0 0 (5,200,000)
Cash Available for Distrbution pre-Cash Minimum 1,430,622 5,098,928 5,140,112 5,180,707 5,220,704 5,260,094 5,298,868 5,337,018 5,374,532 5,989,181 10,139,620 8,395,173 8,286,053 8,176,250 8,065,753 7,954,551 7,842,635 7,729,993 7,616,615 8,093,006

Cash Reserve (Contribution) / Redemption 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Cash Available for Distribution before Cash Sweep 1,430,622 5,098,928 5,140,112 5,180,707 5,220,704 5,260,094 5,298,868 5,337,018 5,374,532 5,989,181 10,139,620 8,395,173 8,286,053 8,176,250 8,065,753 7,954,551 7,842,635 7,729,993 7,616,615 8,093,006
Cumulative 1,430,622 6,529,550 11,669,663 16,850,369 22,071,073 27,331,168 32,630,036 37,967,054 43,341,586 49,330,767 59,470,387 67,865,560 76,151,614 84,327,864 92,393,616 100,348,167 108,190,802 115,920,795 123,537,410 131,630,415

Cash Sweep to SEI 1,430,622 5,098,928 5,140,112 330,337 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Cash Availdable for Distribution after Cash Sweep 0 0 0 4,850,369 5,220,704 5,260,094 5,298,868 5,337,018 5,374,532 5,989,181 10,139,620 8,395,173 8,286,053 8,176,250 8,065,753 7,954,551 7,842,635 7,729,993 7,616,615 8,093,006

Distributions:
Allocation after Cash Sweep
Tax Equity Investor 99.00% 99.00% 99.00% 99.00% 99.00% 99.00% 99.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00%
Sponsor Equity Investor 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75%
SREC Equity Investor 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25%

Tax Equity Investor $32,000,000 0 0 0 4,801,866 5,168,497 5,207,493 5,245,880 2,081,437 2,096,068 2,335,781 3,954,452 3,274,118 3,231,561 3,188,737 3,145,644 3,102,275 3,058,628 3,014,697 2,970,480 3,156,272
Sponsor Equity Investor $12,000,000 1,430,622 5,098,928 5,140,112 366,715 39,155 39,451 39,742 2,441,686 2,458,849 2,740,050 4,638,876 3,840,792 3,790,869 3,740,634 3,690,082 3,639,207 3,588,005 3,536,472 3,484,601 3,702,550
SREC Equity Investor $4,000,000 0 0 0 12,126 13,052 13,150 13,247 813,895 819,616 913,350 1,546,292 1,280,264 1,263,623 1,246,878 1,230,027 1,213,069 1,196,002 1,178,824 1,161,534 1,234,183

Reserve Accounts:
BoP DSRA $0 $2,284,000 $2,212,000 $2,140,000 $2,068,000 $1,996,000 $1,924,000 $1,852,000 $1,780,000 $1,708,000 $1,636,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contribution 2,284,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Redemption 0 (72,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000) (72,000) (1,636,000) 0 0 0 0 0 0 0 0 0
EoP DSRA $0 $2,284,000 $2,212,000 $2,140,000 $2,068,000 $1,996,000 $1,924,000 $1,852,000 $1,780,000 $1,708,000 $1,636,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

BoP O&M/WC Reserve Account $0 $1,289,600 $1,308,944 $1,328,578 $1,348,507 $1,368,734 $1,389,265 $1,410,104 $1,431,256 $1,452,725 $1,474,516 $1,496,633 $1,519,083 $1,541,869 $1,564,997 $1,588,472 $1,612,299 $1,636,484 $1,661,031 $1,685,946
Contribution 1,289,600 19,344 19,634 19,929 20,228 20,531 20,839 21,152 21,469 21,791 22,118 22,450 22,786 23,128 23,475 23,827 24,184 24,547 24,915 12,550
Redemption 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP O&M/WC Reserve Account $0 $1,289,600 $1,308,944 $1,328,578 $1,348,507 $1,368,734 $1,389,265 $1,410,104 $1,431,256 $1,452,725 $1,474,516 $1,496,633 $1,519,083 $1,541,869 $1,564,997 $1,588,472 $1,612,299 $1,636,484 $1,661,031 $1,685,946 $1,698,497

BoP MMRA $0 $577,778 $1,155,556 $1,733,333 $2,311,111 $2,888,889 $3,466,667 $4,044,444 $4,622,222 $5,200,000 $0 $577,778 $1,155,556 $1,733,333 $2,311,111 $2,888,889 $3,466,667 $4,044,444 $4,622,222 $5,200,000
Contribution 577,778 577,778 577,778 577,778 577,778 577,778 577,778 577,778 577,778 0 577,778 577,778 577,778 577,778 577,778 577,778 577,778 577,778 577,778 0
Redemption 0 0 0 0 0 0 0 0 0 (5,200,000) 0 0 0 0 0 0 0 0 0 (5,200,000)
EoP MMRA $0 $577,778 $1,155,556 $1,733,333 $2,311,111 $2,888,889 $3,466,667 $4,044,444 $4,622,222 $5,200,000 $0 $577,778 $1,155,556 $1,733,333 $2,311,111 $2,888,889 $3,466,667 $4,044,444 $4,622,222 $5,200,000 $0

BoP Cash $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Contribution 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Redemption 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Cash $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Bank Debt

Bank Debt Terms:

Bank Debt $32,000,000
Tenor (yr) 10.0
Interest Expense (L + 350) 4.50%
3M LIBOR 1.00%
DSRA Requirement (yr) 0.5

Debt Schedule:
BoP Balance $0 $28,800,000 $25,600,000 $22,400,000 $19,200,000 $16,000,000 $12,800,000 $9,600,000 $6,400,000 $3,200,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Drawdown $32,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Repayment (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) (3,200,000) 0 0 0 0 0 0 0 0 0 0
EoP Balance $0 $28,800,000 $25,600,000 $22,400,000 $19,200,000 $16,000,000 $12,800,000 $9,600,000 $6,400,000 $3,200,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Interest Expense $1,368,000 $1,224,000 $1,080,000 $936,000 $792,000 $648,000 $504,000 $360,000 $216,000 $72,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Principal Repayment $3,200,000 $3,200,000 $3,200,000 $3,200,000 $3,200,000 $3,200,000 $3,200,000 $3,200,000 $3,200,000 $3,200,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Interest Expense 1,368,000 1,224,000 1,080,000 936,000 792,000 648,000 504,000 360,000 216,000 72,000 0 0 0 0 0 0 0 0 0 0
Debt Service $0 $4,568,000 $4,424,000 $4,280,000 $4,136,000 $3,992,000 $3,848,000 $3,704,000 $3,560,000 $3,416,000 $3,272,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Appendix Implementation Plan│47

Project Year Input 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Tax Equity

Tax Equity Inputs:

Tax Equity $32,000,000
Total Installation Costs $80,000,000
Eligible for ITC 90.00%
Installed Costs Eligible for ITC $72,000,000
ITC 30.00%
ITC $21,600,000

Flip Period 7
Pre-Flip Cash Flow to TEI 99.00%
Post-Flip Cash Flow to TEI 39.00%

Cash Flow Allocation:

Tax Equity Investor 99.00% 99.00% 99.00% 99.00% 99.00% 99.00% 99.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00% 39.00%
Sponsor Equity $12,000,000 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75% 45.75%
SREC Equity $4,000,000 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25% 15.25%

Capital Accounts:
TEI Capital Account
BoP Balance $0 $2,828,450 $6,022,941 $11,319,566 $12,953,353 $14,417,661 $16,814,725 $20,137,799 $21,447,011 $22,756,274 $23,772,870 $23,089,159 $23,043,815 $22,998,530 $22,953,451 $22,908,435 $22,926,725 $23,008,252 $23,089,920 $23,171,731
Investor Contribution 32,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
ITC Basis Reduction (10,692,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Non-Chargeback Income (18,479,550) 3,194,491 5,296,626 6,578,861 6,632,804 7,604,558 8,568,954 3,390,649 3,405,331 3,352,376 3,270,741 3,228,774 3,186,276 3,143,658 3,100,628 3,120,565 3,140,154 3,096,365 3,052,291 2,940,396
Chargeback Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions 0 0 0 (4,801,866) (5,168,497) (5,207,493) (5,245,880) (2,081,437) (2,096,068) (2,335,781) (3,954,452) (3,274,118) (3,231,561) (3,188,737) (3,145,644) (3,102,275) (3,058,628) (3,014,697) (2,970,480) (3,156,272)
Interim Balance 2,828,450 6,022,941 11,319,566 13,096,561 14,417,661 16,814,725 20,137,799 21,447,011 22,756,274 23,772,870 23,089,159 23,043,815 22,998,530 22,953,451 22,908,435 22,926,725 23,008,252 23,089,920 23,171,731 22,955,855
Changes in Minimum Gain
Adjusted Interim Balance 2,828,450 6,022,941 11,319,566 13,096,561 14,417,661 16,814,725 20,137,799 21,447,011 22,756,274 23,772,870 23,089,159 23,043,815 22,998,530 22,953,451 22,908,435 22,926,725 23,008,252 23,089,920 23,171,731 22,955,855
Stop Loss Reallocations (from SEI and SRECEI to TEI) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Stop Loss Reallocations (from TEI to SEI and SRECEI) 0 0 0 (143,208) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Excess Distributions Over Basis Step-Up 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Balance $0 $2,828,450 $6,022,941 $11,319,566 $12,953,353 $14,417,661 $16,814,725 $20,137,799 $21,447,011 $22,756,274 $23,772,870 $23,089,159 $23,043,815 $22,998,530 $22,953,451 $22,908,435 $22,926,725 $23,008,252 $23,089,920 $23,171,731 $22,955,855

SEI Capital Account

BoP Balance $0 $10,348,381 $5,273,654 $173,668 $0 $11,093 $29,253 $54,428 $1,590,234 $3,126,100 $4,318,645 $3,516,599 $3,463,407 $3,410,285 $3,357,404 $3,304,597 $3,326,052 $3,421,689 $3,517,492 $3,613,463
Investor Contribution 12,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
ITC Basis Reduction (81,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Non-Chargeback Income (139,997) 24,201 40,126 49,840 50,249 57,610 64,916 3,977,492 3,994,715 3,932,595 3,836,831 3,787,600 3,737,747 3,687,753 3,637,275 3,660,663 3,683,642 3,632,275 3,580,572 3,449,310
Chargeback Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions (1,430,622) (5,098,928) (5,140,112) (366,715) (39,155) (39,451) (39,742) (2,441,686) (2,458,849) (2,740,050) (4,638,876) (3,840,792) (3,790,869) (3,740,634) (3,690,082) (3,639,207) (3,588,005) (3,536,472) (3,484,601) (3,702,550)
Interim Balance 10,348,381 5,273,654 173,668 (143,208) 11,093 29,253 54,428 1,590,234 3,126,100 4,318,645 3,516,599 3,463,407 3,410,285 3,357,404 3,304,597 3,326,052 3,421,689 3,517,492 3,613,463 3,360,224
Changes in Minimum Gain
Adjusted Interim Balance 10,348,381 5,273,654 173,668 (143,208) 11,093 29,253 54,428 1,590,234 3,126,100 4,318,645 3,516,599 3,463,407 3,410,285 3,357,404 3,304,597 3,326,052 3,421,689 3,517,492 3,613,463 3,360,224
Stop Loss Reallocations (from Sponsor to TEI) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Stop Loss Reallocations (from TEI to Sponsor) 0 0 0 143,208 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Excess Distributions Over Basis Step-Up 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Balance $0 $10,348,381 $5,273,654 $173,668 $0 $11,093 $29,253 $54,428 $1,590,234 $3,126,100 $4,318,645 $3,516,599 $3,463,407 $3,410,285 $3,357,404 $3,304,597 $3,326,052 $3,421,689 $3,517,492 $3,613,463 $3,360,224

SRECEI Capital Account

BoP Balance $0 $3,926,334 $3,934,401 $3,947,777 $3,952,264 $3,955,962 $3,962,015 $3,970,407 $4,482,342 $4,994,298 $5,391,812 $5,124,464 $5,106,733 $5,089,026 $5,071,399 $5,053,796 $5,060,948 $5,092,827 $5,124,761 $5,156,752
Investor Contribution 4,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
ITC Basis Reduction (27,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Non-Chargeback Income (46,666) 8,067 13,375 16,613 16,750 19,203 21,639 1,325,831 1,331,572 1,310,865 1,278,944 1,262,533 1,245,916 1,229,251 1,212,425 1,220,221 1,227,881 1,210,758 1,193,524 1,149,770
Chargeback Income 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions 0 0 0 (12,126) (13,052) (13,150) (13,247) (813,895) (819,616) (913,350) (1,546,292) (1,280,264) (1,263,623) (1,246,878) (1,230,027) (1,213,069) (1,196,002) (1,178,824) (1,161,534) (1,234,183)
Interim Balance 3,926,334 3,934,401 3,947,777 3,952,264 3,955,962 3,962,015 3,970,407 4,482,342 4,994,298 5,391,812 5,124,464 5,106,733 5,089,026 5,071,399 5,053,796 5,060,948 5,092,827 5,124,761 5,156,752 5,072,339
Changes in Minimum Gain
Adjusted Interim Balance 3,926,334 3,934,401 3,947,777 3,952,264 3,955,962 3,962,015 3,970,407 4,482,342 4,994,298 5,391,812 5,124,464 5,106,733 5,089,026 5,071,399 5,053,796 5,060,948 5,092,827 5,124,761 5,156,752 5,072,339
Stop Loss Reallocations (from Sponsor to TEI) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Stop Loss Reallocations (from TEI to Sponsor) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Excess Distributions Over Basis Step-Up 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Balance $0 $3,926,334 $3,934,401 $3,947,777 $3,952,264 $3,955,962 $3,962,015 $3,970,407 $4,482,342 $4,994,298 $5,391,812 $5,124,464 $5,106,733 $5,089,026 $5,071,399 $5,053,796 $5,060,948 $5,092,827 $5,124,761 $5,156,752 $5,072,339

Appendix Implementation Plan│48

Project Year Input 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Tax Equity

Outside Basis:
TEI Tax Basis
BoP Basis $0 $32,828,000 $43,068,000 $52,028,000 $54,906,134 $59,360,869 $66,877,933 $74,041,007 $77,910,219 $80,499,482 $81,516,078 $80,832,367 $80,787,023 $80,741,738 $80,696,659 $80,651,643 $80,669,933 $80,751,460 $80,833,128 $80,914,939
Equity Contribution 32,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions 0 0 0 (4,801,866) (5,168,497) (5,207,493) (5,245,880) (2,081,437) (2,096,068) (2,335,781) (3,954,452) (3,274,118) (3,231,561) (3,188,737) (3,145,644) (3,102,275) (3,058,628) (3,014,697) (2,970,480) (3,156,272)
ITC Adjustment (10,692,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxable Income 0 3,194,491 5,296,626 6,578,861 6,632,804 7,604,558 8,568,954 3,390,649 3,405,331 3,352,376 3,270,741 3,228,774 3,186,276 3,143,658 3,100,628 3,120,565 3,140,154 3,096,365 3,052,291 2,940,396
Change in Share of Liabilities 11,520,000 10,240,000 8,960,000 7,680,000 6,400,000 5,120,000 3,840,000 2,560,000 1,280,000 0 0 0 0 0 0 0 0 0 0 0
Interim Basis 32,828,000 46,262,491 57,324,626 61,484,995 62,770,442 66,877,933 74,041,007 77,910,219 80,499,482 81,516,078 80,832,367 80,787,023 80,741,738 80,696,659 80,651,643 80,669,933 80,751,460 80,833,128 80,914,939 80,699,063
Excess Distributions 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxable Loss (18,479,550) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Interim Basis before Suspended Losses 14,348,450 46,262,491 57,324,626 61,484,995 62,770,442 66,877,933 74,041,007 77,910,219 80,499,482 81,516,078 80,832,367 80,787,023 80,741,738 80,696,659 80,651,643 80,669,933 80,751,460 80,833,128 80,914,939 80,699,063
Suspended Loss Generated 18,479,550 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Suspended Loss Used 0 (3,194,491) (5,296,626) (6,578,861) (3,409,573) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Basis $0 32,828,000 43,068,000 52,028,000 54,906,134 59,360,869 66,877,933 74,041,007 77,910,219 80,499,482 81,516,078 80,832,367 80,787,023 80,741,738 80,696,659 80,651,643 80,669,933 80,751,460 80,833,128 80,914,939 80,699,063

BoP Carryforward $0 $18,479,550 $15,285,059 $9,988,434 $3,409,573 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Addition 18,479,550 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Utilization 0 (3,194,491) (5,296,626) (6,578,861) (3,409,573) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Carryforward $0 $18,479,550 $15,285,059 $9,988,434 $3,409,573 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

SEI Tax Basis

BoP Basis $0 $14,808,378 $13,549,450 $11,769,337 $14,282,622 $16,667,885 $18,606,045 $20,071,220 $22,567,026 $24,582,893 $25,775,437 $24,973,391 $24,920,200 $24,867,077 $24,814,196 $24,761,389 $24,782,845 $24,878,481 $24,974,284 $25,070,256
Equity Contribution 12,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions (1,430,622) (5,098,928) (5,140,112) (366,715) (39,155) (39,451) (39,742) (2,441,686) (2,458,849) (2,740,050) (4,638,876) (3,840,792) (3,790,869) (3,740,634) (3,690,082) (3,639,207) (3,588,005) (3,536,472) (3,484,601) (3,702,550)
ITC Adjustment (81,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxable Income 0 24,201 40,126 49,840 50,249 57,610 64,916 3,977,492 3,994,715 3,932,595 3,836,831 3,787,600 3,737,747 3,687,753 3,637,275 3,660,663 3,683,642 3,632,275 3,580,572 3,449,310
Change in Share of Liabilities 4,320,000 3,840,000 3,360,000 2,880,000 2,400,000 1,920,000 1,440,000 960,000 480,000 0 0 0 0 0 0 0 0 0 0 0
Interim Basis 14,808,378 13,573,650 11,809,463 14,332,462 16,693,715 18,606,045 20,071,220 22,567,026 24,582,893 25,775,437 24,973,391 24,920,200 24,867,077 24,814,196 24,761,389 24,782,845 24,878,481 24,974,284 25,070,256 24,817,016
Excess Distributions 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxable Loss (139,997) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Interim Basis before Suspended Losses 14,668,381 13,573,650 11,809,463 14,332,462 16,693,715 18,606,045 20,071,220 22,567,026 24,582,893 25,775,437 24,973,391 24,920,200 24,867,077 24,814,196 24,761,389 24,782,845 24,878,481 24,974,284 25,070,256 24,817,016
Suspended Loss Generated 139,997 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Suspended Loss Used 0 (24,201) (40,126) (49,840) (25,830) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Basis $0 14,808,378 13,549,450 11,769,337 14,282,622 16,667,885 18,606,045 20,071,220 22,567,026 24,582,893 25,775,437 24,973,391 24,920,200 24,867,077 24,814,196 24,761,389 24,782,845 24,878,481 24,974,284 25,070,256 24,817,016

BoP Carryforward $0 $139,997 $115,796 $75,670 $25,830 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Addition 139,997 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Utilization 0 (24,201) (40,126) (49,840) (25,830) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Carryforward $0 $139,997 $115,796 $75,670 $25,830 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

SRECEI Tax Basis

BoP Basis $0 $5,413,000 $6,693,000 $7,813,000 $8,760,874 $9,555,962 $10,202,015 $10,690,407 $11,522,342 $12,194,298 $12,591,812 $12,324,464 $12,306,733 $12,289,026 $12,271,399 $12,253,796 $12,260,948 $12,292,827 $12,324,761 $12,356,752
Equity Contribution 4,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions 0 0 0 (12,126) (13,052) (13,150) (13,247) (813,895) (819,616) (913,350) (1,546,292) (1,280,264) (1,263,623) (1,246,878) (1,230,027) (1,213,069) (1,196,002) (1,178,824) (1,161,534) (1,234,183)
ITC Adjustment (27,000) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxable Income 0 8,067 13,375 16,613 16,750 19,203 21,639 1,325,831 1,331,572 1,310,865 1,278,944 1,262,533 1,245,916 1,229,251 1,212,425 1,220,221 1,227,881 1,210,758 1,193,524 1,149,770
Change in Share of Liabilities 1,440,000 1,280,000 1,120,000 960,000 800,000 640,000 480,000 320,000 160,000 0 0 0 0 0 0 0 0 0 0 0
Interim Basis 5,413,000 6,701,067 7,826,375 8,777,487 9,564,572 10,202,015 10,690,407 11,522,342 12,194,298 12,591,812 12,324,464 12,306,733 12,289,026 12,271,399 12,253,796 12,260,948 12,292,827 12,324,761 12,356,752 12,272,339
Excess Distributions 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Taxable Loss (46,666) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Interim Basis before Suspended Losses 5,366,334 6,701,067 7,826,375 8,777,487 9,564,572 10,202,015 10,690,407 11,522,342 12,194,298 12,591,812 12,324,464 12,306,733 12,289,026 12,271,399 12,253,796 12,260,948 12,292,827 12,324,761 12,356,752 12,272,339
Suspended Loss Generated 46,666 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Suspended Loss Used 0 (8,067) (13,375) (16,613) (8,610) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Basis $0 5,413,000 6,693,000 7,813,000 8,760,874 9,555,962 10,202,015 10,690,407 11,522,342 12,194,298 12,591,812 12,324,464 12,306,733 12,289,026 12,271,399 12,253,796 12,260,948 12,292,827 12,324,761 12,356,752 12,272,339

BoP Carryforward $0 $46,666 $38,599 $25,223 $8,610 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Addition 46,666 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Utilization 0 (8,067) (13,375) (16,613) (8,610) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EoP Carryforward $0 $46,666 $38,599 $25,223 $8,610 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Appendix Implementation Plan│49

Project Year Input 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Returns Analysis

Tax Equity:
Investment ($32,000,000) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Tax Benefit 35.00% 0 13,952,243 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cash Distributions 0 0 0 4,801,866 5,168,497 5,207,493 5,245,880 2,081,437 2,096,068 2,335,781 3,954,452 3,274,118 3,231,561 3,188,737 3,145,644 3,102,275 3,058,628 3,014,697 2,970,480 3,156,272
Net Cash Flow ($32,000,000) $0 $13,952,243 $0 $4,801,866 $5,168,497 $5,207,493 $5,245,880 $2,081,437 $2,096,068 $2,335,781 $3,954,452 $3,274,118 $3,231,561 $3,188,737 $3,145,644 $3,102,275 $3,058,628 $3,014,697 $2,970,480 $3,156,272

Cumulative Cash Distributions $40,986,126

Cash-on-Cash Return 1.3x
IRR 11.11%

Sponsor Equity:
Investment ($12,000,000) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash Distributions 1,430,622 5,098,928 5,140,112 366,715 39,155 39,451 39,742 2,441,686 2,458,849 2,740,050 4,638,876 3,840,792 3,790,869 3,740,634 3,690,082 3,639,207 3,588,005 3,536,472 3,484,601 3,702,550
Net Cash Flow ($12,000,000) $1,430,622 $5,098,928 $5,140,112 $366,715 $39,155 $39,451 $39,742 $2,441,686 $2,458,849 $2,740,050 $4,638,876 $3,840,792 $3,790,869 $3,740,634 $3,690,082 $3,639,207 $3,588,005 $3,536,472 $3,484,601 $3,702,550

Cumulative Cash Distributions $45,447,399

Cash-on-Cash Return 3.8x
IRR 20.09%

Pro-Rata Purchase of SRECEI Stake 0 0 0 0 (58,509) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Pro-Rata Additional Cash Flow 0 0 0 0 0 132 132 496,476 499,966 557,144 943,238 780,961 770,810 760,596 750,317 739,972 729,561 719,083 708,536 752,852
Payment from SEI to TEI to Maintain TEI IRR 0 0 0 0 0 (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064) (373,064)
Net Cash Flow with Buyout (12,000,000) 1,430,622 5,098,928 5,140,112 366,715 (19,354) (333,482) (333,190) 2,565,098 2,585,751 2,924,130 5,209,050 4,248,689 4,188,616 4,128,166 4,067,335 4,006,115 3,944,503 3,882,491 3,820,073 4,082,338

Cumulative Cash Distributions $49,002,706

Cash-on-Cash Return 4.1x
IRR 20.28%

SREC Equity:
Investment ($4,000,000) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Cash Distributions 0 0 0 12,126 13,052 13,150 13,247 813,895 819,616 913,350 1,546,292 1,280,264 1,263,623 1,246,878 1,230,027 1,213,069 1,196,002 1,178,824 1,161,534 1,234,183
Offtaker Payments SRECEI 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net Cash Flow ($4,000,000) $0 $0 $0 $12,126 $13,052 $13,150 $13,247 $813,895 $819,616 $913,350 $1,546,292 $1,280,264 $1,263,623 $1,246,878 $1,230,027 $1,213,069 $1,196,002 $1,178,824 $1,161,534 $1,234,183

Cumulative Cash Distributions $11,149,133

Cash-on-Cash Return 2.8x
IRR 10.28%

Depreciation Schedule

Key Inputs:
Total Installation Cost $80,000,000
Non-Depreciable 4.0%
Depreciable Installation Cost $76,800,000

Depreciation Schedule:
5 Year MACRS 70.0% 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
7 Year MACRS 0.0% 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
15 Year MACRS 8.0% 5.00% 9.50% 8.55% 7.70% 6.93% 6.23% 5.90% 5.90% 5.91% 5.90% 5.91% 5.90% 5.91% 5.90% 5.91% 2.95% 0.00% 0.00% 0.00% 0.00%
20 Year MACRS 0.0% 3.75% 7.22% 6.68% 6.18% 5.71% 5.29% 4.89% 4.52% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46% 4.46%
5 Year SL 0.0% 10.00% 20.00% 20.00% 20.00% 20.00% 10.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
15 Year SL 14.0% 3.33% 6.67% 6.67% 6.67% 6.67% 6.67% 6.67% 6.67% 6.67% 6.67% 6.67% 6.66% 6.66% 6.66% 6.66% 3.33% 0.00% 0.00% 0.00% 0.00%
20 Year SL 4.0% 2.50% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
39 Year SL 0.0% 1.28% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56% 2.56%
Bonus Depreciation 30.0% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Annual Depreciation:
5 Year MACRS $16,128,000 $3,225,600 $5,160,960 $3,096,576 $1,857,946 $1,857,946 $928,973 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
7 Year MACRS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15 Year MACRS 1,843,200 92,160 175,104 157,594 141,926 127,734 114,831 108,749 108,749 108,933 108,749 108,933 108,749 108,933 108,749 108,933 54,374 0 0 0 0
20 Year MACRS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 Year SL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15 Year SL 3,225,600 107,412 215,148 215,148 215,148 215,148 215,148 215,148 215,148 215,148 215,148 215,148 214,825 214,825 214,825 214,825 107,412 0 0 0 0
20 Year SL 921,600 23,040 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080 46,080
39 Year SL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Bonus Depreciation 24,000,000 24,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Major Maintenance 1 0 0 0 0 0 0 0 0 0 173,160 346,840 346,840 346,840 346,840 346,840 346,840 346,840 346,840 346,840 346,840
Major Maintenance 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 173,160
Annual Depreciation $46,118,400 $27,448,212 $5,597,292 $3,515,397 $2,261,100 $2,246,907 $1,305,032 $369,976 $369,976 $370,161 $543,136 $717,001 $716,494 $716,678 $716,494 $716,678 $554,707 $392,920 $392,920 $392,920 $566,080

Asset Book Value:

BoP Value $80,000,000 $52,551,788 $46,954,496 $43,439,099 $41,177,999 $38,931,092 $37,626,061 $37,256,084 $36,886,108 $36,515,948 $41,172,811 $40,455,811 $39,739,317 $39,022,639 $38,306,145 $37,589,467 $37,034,760 $36,641,840 $36,248,920 $35,856,000
Depreciation (27,448,212) (5,597,292) (3,515,397) (2,261,100) (2,246,907) (1,305,032) (369,976) (369,976) (370,161) (543,136) (717,001) (716,494) (716,678) (716,494) (716,678) (554,707) (392,920) (392,920) (392,920) (566,080)
Capex 0 0 0 0 0 0 0 0 0 5,200,000 0 0 0 0 0 0 0 0 0 5,200,000
EoP Value $80,000,000 $52,551,788 $46,954,496 $43,439,099 $41,177,999 $38,931,092 $37,626,061 $37,256,084 $36,886,108 $36,515,948 $41,172,811 $40,455,811 $39,739,317 $39,022,639 $38,306,145 $37,589,467 $37,034,760 $36,641,840 $36,248,920 $35,856,000 $40,489,920

Appendix Implementation Plan│50