This presentation covers the basics legal considerations associated with solar financing for non profits, including federal incentives and Massachusetts incentives and the future of solar under the Trump Administration

1. Solar Basics for Non Profits in
Massachusetts
Bethany A. Bartlett
Sherin and Lodgen LLP
November 18, 2016

2. Agenda
 Net metering
 Federal tax incentives
 Massachusetts SREC Program
 Key documents
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3. What is net metering?
 Allows customers of certain electric distribution companies to generate their
own electricity in order to offset their electricity usage.
 All customer classes are eligible for net metering.
 Common examples of net metering installations include solar panels on a home
or a wind turbine at a school.
 These installations are connected to a meter, which will measure the net
quantity of electricity that the customer uses (“retail meter”).
 The retail meter spins forward when the customer uses electricity from the
distribution company, and it spins backward when the customer generates
excess electricity (thereby “exporting” electricity to the electric grid).
 A special retail meter (also called the “net meter”) is required to allow for the
“netting” of usage and generation, especially when there may be exporting of
electricity.
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4. What is net metering?
Solar array converts
energy from sunlight into
electricity for use
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Energy used in business,
school, home, etc.2 3
Meter measures net
quantity of electricity
that customer uses
Energy used by your
business from the
electric grid
Energy produced by
solar array
Excess energy
not used by
business goes
back to
electric grid
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5. Why would I want to get involved in net metering?
 Lower electricity bill by reducing the amount of
electricity customer buys from distribution company.
 Allows customers to receive credits for excess
electricity created but not used.
 Renewable energy is good for the environment.
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6. System of Assurance
 If you plan to use net metering, you need to submit an
Application for Cap Allocation (ACAs) to System of Assurance
of Net Meter Eligibility.
 You do not need to register with the System of Assurance if
you are offsetting your load on site and never plan on
exporting electricity to the grid.
 To learn more about net metering eligibility visit massaca.org.
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7. Federal Tax Incentives – 30% Solar Investment Tax Credit
Phases-down the 30 percent renewable energy investment tax credit (ITC) over five
years for facilities where construction has commenced before Jan. 1, 2022.
2017-
2019
The bill provides extension of the 30% ITC
2020 26% ITC
2021 22% ITC
2022 30% ITC will expire, leaving 10% ITC ongoing
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8. ITC Summary
 ITC based on 30% of costs, which can be based on an appraised value.
 100% of the ITC is earned by the owner of the facility on the date the
project is Placed in Service.
 ITC has a 5 year recapture period of 20% per year and occurs if the
taxpayer disposes of the property or the facility ceases to be an
investment credit property.
 ITC eligible costs – do not include roof replacement or land purchase (but
lease is OK) because these are not directly tied to the energy producing
property investment.
 No ITC is allowed for organizations exempt from Income Tax by IRS.
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9. Bonus Depreciation
Extends bonus depreciation for five years
through 2019, at 50% for the first three years and
phased down over the next two years.
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10. How will Trump administration affect ITC?
 Limited incentive to repeal the ITC
because its renewal in December
2015 was based on a stepped down
plan with definitive expiration dates
(ITC will drop by 10% by 2022).
 President has no authority to repeal
ITC. An act of Congress is needed to
change ITC because it is part of the
tax code.
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11. What are Trump’s options?
Change to ITC extension by Act of Congress
 Trump and Congressional Republicans can go after tax incentive or other
renewable energy supports and use budget reconciliation procedure to get
around a Democratic filibuster (Republicans could push budget with only
51 votes).
Change to ITC extension by IRS
 Trump can avoid public political battle against solar and could have IRS
revise its interpretation of the “commence construction” provision so that
the tax credits sunset sooner.
With a Corporate tax rate cut, ITC becomes less valuable
 If Trump administration cuts corporate tax rate to 15%, then it would
dilute the effect of ITC because there would be less taxes to offset with tax
credits.
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12. Massachusetts SREC II Program
SRECs are the largest source of income
for MA solar projects and start at an
auction price of $285 which declines
over time and can be pre-sold on the
spot market.
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13. Massachusetts SREC II Program
The Massachusetts financial incentive program, Solar Renewable Energy
Certificates (SREC), provides credits that solar system owners sell to
electricity suppliers to fulfill the suppliers’ requirement under state law to
generate a certain percentage of electricity from renewable energy sources.
– SRECs can also be sold or pre-sold on the spot market
– 1 Megawatt hour of solar power = 1 SREC
– 10 Kilowatt system produces about 12 SRECs annually
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14. Massachusetts SREC II Program
 SREC I program completed with 656 MW qualified as
of 12/9/14 and total allowable solar is capped at 1600
MW.
 SREC II is currently filled and projects have a
construction deadline of January 2017.
 Currently there are four different Market Sectors and
each are allocated an SREC Factor to be applied during
the 10 year production eligibility period (40 quarters).
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15. Post SREC II
 Currently DOER is having weekly stakeholder meetings to
develop the next Massachusetts solar incentive.
 New program may be a feed in tariff regulated by the utilities,
with capacity block allotments for each of the
Commonwealth's five utilities.
 Current Market Sectors will be replaced by Tariff Adders
(community solar, rooftop, parking canopies, affordable
properties).
 Massachusetts is trending toward solar and storage.
 Obstacles for next program include timing (potential dead
zone following SREC II) and siting for ground mounted
projects.
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16. Key Documents
 Lease – Property owner to provide long term rights to
developer to property or rooftop
 Lease should contain provisions/restrictions relating to
construction, access, site security, etc.
 Power Purchase Agreement – Provides for purchase of
electricity or net metering credits
 Generally the term of each is for 20 years
 Potential cross default/termination language
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17. Structure and Financing Considerations
 Existing Mortgage on property? Need Lender consent for
facility and a Subordination, Non-Disturbance and
Attornment Agreement
 Forbearance Agreement with a tax equity investor during
5 year recapture period
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18. Questions?
Bethany A. Bartlett
babartlett@sherin.com
617.646.2038
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