Connecticut’s Clean Energy Finance and Investment Authority (CEFIA) -- the state’s Green Bank, and the first of its kind in the country -- has established a new solar financing system in a bid to expand capacity in the state. CT Solar Lease II seeks to avoid some of the most frequently cited criticisms of renewable energy finance, in that it uses less and recovers more taxpayers' funds, as well as fosters market competition.
CT Solar Lease II is a public-private leasing option for the installation of solar thermal and photovoltaic capacity at residences and businesses. CEFIA, along with US Bancorp and a group of local and regional banks will invest around $60 million in aggregate in solar PV and solar thermal hot water systems. The state expects the program to support 1,500 residential solar PV systems, 400 residential solar thermal hot water systems, and 40 commercial solar systems over two years, ultimately deploying an additional 14 megawatts of solar PV and 4,600 million Btu of solar hot water systems.
Under the arrangement, the state will invest $9.5 million in solar deployment, with private investment totaling $50 million. Program participants include a syndicate of debt providers, a renewable tax equity partner, and insurance and service companies. AFC First will service and manage the program, and insurance firm Assurant will provide property, casualty and liability insurance for solar PV.
“Assurant is going to provide one-call issue resolution for the residential solar PV systems,” said Bert Hunter, CEFIA Chief Investment Officer. “The Assurant package has never been done before,” he continued, adding, “It will provide homeowners with a worry-free solution for solar."
Solar thermal systems will be handled by a company called Alternate Energy Technologies, which will provide equipment and fifteen-year parts and labor warranties, essentially offering the same level of care to those systems that Assurant offers for solar PV, Hunter said.
CEFIA is touting several additional aspects of its new leasing option that offer improvements over traditional solar financing options, such as lower costs to taxpayers and customers and a system that fosters competition among installers, rather than giving some an advantage over others.
CT Solar Lease II eliminates upfront solar PV leasing costs, and will reduce energy bills from the outset, with customers’ energy bill savings outweighing lease payments, according to CEFIA. And it avoids “picking winners” or “subsidizing favored technologies or companies through traditional grants,” in that both residential and commercial customers will have the option to choose from a wider range of installers than just those that manage to raise capital and tax equity, said CEFIA in a statement.
This system will also enable CEFIA to recover most, if not all, of state subsidies paid out to support solar leases.
“With any leasing company, […] they get a performance-based incentive on the residential systems paid over six years,” Hunter said. “Since this is a twenty-year-horizon leasing product, the cash flows over the twenty years actually pay back to the ratepayer the funds that have been invested, as well as the performance-based incentive.”
“Everyone is making a lease payment, those lease payments are collected by the leasing company, and that goes to pay off the banks’ funds and required returns,” Hunter said. “The balance then goes to the CEFIA special-purpose vehicle that is in partnership with the leasing company, so CEFIA derives financial returns, as well.”