Continuing the Conversation: Mastering Multi-State Solar Opportunities

-- we're here -- -- America east in Philadelphia. We are continuing the conversation from a panel discussion we had earlier today. The panels on mastering the multistate solar opportunities from Florida to -- joining me are the -- from that session I'll let them introduce themselves. And then we'll get into some questions that were raised during the panel itself we'll take questions from the audience as well so analysts let's say -- -- -- -- talking. Thank you I -- Korea -- and work for sun Edison. Sun Edison is a -- -- right we haven't seen the numbers yet for a 2012 roll -- but it's really 2011 we were at the third largest. In the world and we're getting close to the celebrating again a lot party season so -- be looking forward to that. And I am responsible for policy to that -- and I manage our government payers. Team so that the North American government -- team. I am Jamie resource CEO gross solar -- solar is a fifteen year old firm. That develops and as engineering procurement construction for solar projects. Principal offices in the northeast and -- I'm glad Barry CEO that's right straight ascertain -- founded five years ago focusing on. -- -- transactions and services related to the asset markets. And I'm John -- structured finance vice president of the solar city -- California based provider of distributed solar energy throughout the country. I -- think you -- let's get started. Let's talk about the kind of a major markets here in the mid Atlantic and in the East Coast for solar. What other unique benefit -- of unique challenges in some of these key states. Consider that that's a bit of a -- question so. There are there are I think one of the challenges of the eastern state to -- California has been such a big state it's been very easy for people to get comfortable. With the state specific policies happening in California what challenges we have on the East Coast is the fact that we've got so many small states. And so you know it's EDT you to run out of -- -- -- -- Connecticut. Or -- a Delaware. -- you start to look to bigger states and so I think that. And then unfortunately in -- state by state basis we have very different markets and on a different maturity level I mean -- eight Virginia which. -- continues to basically want to have nothing to do a solar. If -- completely different than a Massachusetts that is really embraced that and it's -- seen the benefits or fairly New Jersey which is the East Coast leader. So I would say that it. We're seeing huge variability on the eastern coast from Miami up in the northeast -- seeing -- army term market southeast generally. Less mature market. Yeah I think that's Dempsey -- in the sense that we do you have the complexities that come from having. In twelve or thirteen different states and then within those states. You know the old New England history and roots of a strong town councils and local planning officials. I'm citizen involvement can -- -- -- a positive for solar but can also present. Some challenges in itself. And I had also glad that you have not deregulate electricity markets on the East Coast whereas on the West Coast a lot of markets are regulated which means that on utility companies on on the East Coast. Aren't the ones that are actually. And generating power and selling arms markets and so that creates a lot of challenges from me a long term contract in perspective. For -- develop insulin East Coast whereas in California it's a lot easier to set up a contract when it. When the regulated utilities. I think underlying that is the context of hyper growth as far as. Residential commercial acceptance of -- as a mature asked that they can provide them clean energy below those little electric -- so we're seeing. A lot of challenges on -- state by state level. But the trend is clearly positive for adoption and large scale. Talk -- us a little bit about the -- the differing state level incentives for solar. Which ones in what states are there really succeeding and really put those. Those individual markets which ones really haven't. Either haven't panned out or have sort of outlived their usefulness and are on the decline. I'm my biggest highly controversial point of view on that I would say that. You know incentives that are too good. Are actually ultimately bad in the long term and he does dissident to the New Jersey case right which is where we had. And people being very aggressive in their assumptions about anthrax and it you know. Or did it over stimulate the market -- -- ask a question. And reimburses AE Maryland which has been much less aggressive but seeing steady growth. So I would you know we like to invest and make long term commitment and stake that we often interested. More interested in where there's long term growth opportunities incident short term flash in the -- -- opportunity. Of course we eat we operatives inside time we got to opportunistic -- he -- only alive focused in Massachusetts right now as 1 of the eastern states. I think it's point yet it's also very important is that not only terms of rebates at what level that -- -- Do you hide it can be a little bit counterproductive in the long term is -- if you apply that concept to. -- how -- the rules today that the utilities required I think generally we can have this ability in some stability. On the rules side and the economics it's easier for us to mobilize. You know developers know what did that -- the framework is investors understand. And -- a long term it really allows the building industry. -- high quality as opposed to more of that stop and start mentality. -- -- point out three different models that we see one as Massachusetts the other teachers in and the -- is Delaware. New Jersey being the first was really. Push towards a market. Oriented system where the -- -- to go up and down based on on on market dynamics. Massachusetts. Created a similar program but they create a lot of structure around that market where the state had levers they can -- to ensure that the market remained within certain boundaries. And -- Delaware has moved away from market altogether towards more of a structured -- procurement program that is. On -- -- longer term -- -- contracts. It if you look at those three markets they you know each of them has their own shortcomings in one way or another. And and it it it just interesting to see. The wave those markets are evolving in in in their own ways so you know for example NASA she sits it's a great program now I would be a good program until it reaches its -- -- megawatts. And then -- you see see what happens after that. And that's a challenge in Massachusetts house -- -- New Jersey. You know there's there's really there's a long term goal in terms of number of aspects -- need to be acquired over the next. Ten years and so even though there's oversupply now and there's a lot of issues. Without oversupply he still growth that sent by the -- -- the next. -- years. I think generally incentives are inherently meant to burn off. As we achieve scale certificate to a place -- we don't need incentives to compete. A level playing field. We're now at a point where are the cost of capital for solar is starting to. Do conform really what the value is -- like. The past where it was priced much higher in the debt markets and particularly to find -- very inefficient. And you know it's relying more heavily on anthrax and rebates that are. So in a perfect world we put ran out of business and or five years because aspects are really necessary -- -- project. -- in the engines of not putting -- out of business here. Is there it. It was the opportunity to have any kind of a national level. Either either mandates and or incentives. It's either in tandem with the -- replacing the state level. Vs is this really more the state driven. Type of policies sold more state driven -- can go national we just. That's just a little bit on the panel and -- thought background actually -- great points which is that. You've got to recognize the individual resources he that -- what -- what what other renewable resources that each state had. Obviously a state that has a lot of wind resource water and -- -- we in this part -- -- -- makes a lot of sense the state that has no wind resource. The wind makes no -- makes is that they think for -- and Nevada is going to be completely different than an organ. So -- setting national. Targets I think is probably unrealistic I think you brought up a great point. You need -- give each state and flexibility to figure out how to implement that. But -- there are other things that can be done at a national level that would be that would be very enabling TP either set guidelines for example or you -- Address some of these things that we deal with on on a state by state basis which are you know quite maddening at the same time so. These issues -- you know -- a power purchase agreement legal or illegal in the state. Is it are you how you -- -- -- the utility -- not in the state. Is there equitable tax treatment for -- -- or -- that that similar in -- UAE. Another generation ask that that has. Basically very little capital costs -- high fuel costs. There cap it all the tax treatment can be very different than up. At that such as solar which is all capital zero fuel costs. So -- there are certainly think that could be done a national level I'm not sure that setting a and RPS target at a national level is the right. It would be feasible or the right thing to do but. It's really -- here from other pat let other panels are your thoughts are. Yeah I think those are great point and searching. Let's discuss this morning as well we're starting to see some regional -- approaches and worked as an example I think is sort of it is lower hanging through where you can start make policy that impacts. -- development if indirectly so first -- ones 755. Which comes on -- October of this year will require. All -- those. And RTL's like PGM authority does have a program in place to provide compensation friends Hillary services. So you bring in other players like storage players who can. Separately finance components of projects and write down the overall the -- -- developer. That in itself isn't quite powerful and you start getting into the tenth fifteenth -- of -- less cost reduction. We're seeing regions such as New England Connecticut and Massachusetts in particular. Are very. Complementary -- -- resources. At the highest legislative level there there. They're not worried about -- so much is putting the right policies in place. They're able to leverage the work that's been done in other states New Jersey particular Delaware. Both the pros and cons to make sure that they're fine tuning their policy. Most efficiently and I think more regional. Coordination like that is that is -- is going to help. Another topic came up in the panels was. Given do you do different policies in the different support charges -- state was. The simultaneous need for companies to diversify into business navigating through each of these states. So maybe some parents can and address some of the thoughts that came up on the panel about diversification and in this -- different forms that diversification and take. I think there's. As he -- -- -- discussed at this -- the panel I think diversification. Is necessary and take cheap and couple forms are certainly. Geographic -- -- Variety is important because as we've seen. In New Jersey and Pennsylvania which were very. You know cooled off rather quickly. Whereas other states have come on -- the same time I think is this industry instant mature. You're finding out the firm just trying to focus. And you know it's important -- expertise as well so to a combination having the right diversity. So from the business model perspective you're not vulnerable to. A change of rules. Or economics in one part of the country. But this same time you -- I've been able to focus whether it's within -- residential or commercial. Or you know what types of vertical market. But today. Given that you guys are all kind of put me out at -- it's been it's been a topic it's been really important lesson last two years I think when we started this business we always -- abstracts were gonna out. They're useful life at some point our businesses and after -- it's something different. Unfortunately I think that that evolution is gonna have to happen a lot sooner and we had anticipated back in 2000 sent in 2008. And an -- that has to do it costs coming down and that document -- -- -- but. You know the way the way we look at it is. We tried a variety of things and and you're always trying to balance beam. Completely laser focused on what -- mean he's really cute at that one thing on -- making sure that you're diversified enough that you're protected it out when business falls apart. So warnings that we. Pride ourselves in doing is in. Trying new things. Getting it to -- -- violence practiced these possible. And then failing fast and making sure that we don't. Work on any project for more than six to nine months and we haven't figured out by and then you know shut it down and kind. Come back because you can take what we've learned a lot and and and do something else it's interesting about it is you know we try to keep things -- -- -- -- -- swingman jerseys -- markets are decline. And a few things. You know. It's -- some things worked some didn't. And what's intercede with their business today -- working really well for us is that we. Put our emphasis back on our core business of being really really cute at brokering -- transactions and we've -- like growth particularly commercial. Institutional segment the market. And that's really what's been done this lately so after all of that -- at least in the short term. It's our our growth is coming from focusing on court is answering. Yeah I would doubt that there. As discussed as. This morning there's there there are -- business models that are now forming out of the mature industry the maturing of the industry. Things like insurance things like performance guarantee. Back stops residual value insurance. Due diligence -- or certain types of investment banks -- developers to. Who don't have the resources or time or. Expertise to focus on the core market so if -- small enough to be nimble. You can capture some of those niche markets that are starting to spring up around the industry which is. Great for the industry I think reflects the maturing of the industry. And if you large enough you can get the scale geographically -- to be able to sort of be everywhere. You need to be and -- -- -- risk efficient efficiently. Lot of third -- discussion here these -- focused on the mid Atlantic states early adopters of New Jersey. Pennsylvania and growth in New York but. Only a couple of times in the panel this morning was there mention of some of the southeast states -- who -- up once. Floors in the title panels so it can you describe more about. What's going on with solar -- -- -- and some of the southeastern states mean logic would say it is they get a lot of sunshine so they'd be good markets for solar but there's more to it than that. I actually -- I'm working on the southeast I'd be happy to take that one those are certainly all emerging markets. This in Florida has certainly the the date that the used solar industry has. Crashed itself upon a couple of times and it's that there was efforts to make you -- -- -- -- which was then you know not mentally repealed but ultimately died. -- needed to then be read vetted by the general assembly. So at. What you see in the southeast -- I think that there has been telling them reluctant -- me -- while there's been conversation about the fact that the northeastern states -- deregulated. The southeastern states are all regulated so you know a lot of what we. Do you and an industry we -- we can talk thinking that we are used solar industry we're not where we're part of the electricity industry war. And so as the electricity is regulated and so is still -- regulated and so. Is that a number of challenges with with first getting the utilities comfortable with having -- You know pesky solar companies in their backyard because he -- they have the -- right to to generate electricity -- that date. So how do you deal that you know -- that's the question of our power purchase agreement legal or not legal. Obviously we use the fact that they are completely just -- financing mechanism and they should be if people have the right to do that -- their property what they want to do. So why should a business to business transaction that allows me access financing -- -- way he bargains -- There is a lot going on in in southeastern states of Georgia has certainly been -- caught -- attention recently with their recently announced program. Is that you know -- -- a couple of years and we are all talking about Florida because you there was a lot going on in Florida and we've -- also live construction of Florida and soaring as -- -- it's all -- utility owned. And that didn't you come and gone to -- as well but they do have great solar resources. They also have relatively high electricity rates you look at any of those masses like you know -- is great parity occurring. And -- you know -- -- -- is occurring incident out on a year by year is as costs come down -- occurring out of the southwest. But then you immediately start to the Florida popping up too as well so we are regret -- -- great parity will get their Sunday. I think actually the argument you did you know Florida now to be -- -- By a regulatory discussion. And not legislative discussion -- -- certainly fail there a couple of times and making an argument successfully. And builds on the southeastern states. You could at Puerto Rico into the next in the -- -- -- you wanna get. Technical because you can take the -- in the tax benefits there and the sunshine certainly is -- -- of -- that's an interesting market where there's a lot of activity. New administration and it's gonna try to make an imprint. In a positive policy and I think that's a great example a market that. Needs to tread. In the direction that leverages best practices. And doesn't -- -- a rebate program. Or -- program. With the right mix of incentives for both distributed -- utility scale generation. That ultimately can create a lot of jobs or economy needs them and I think that's the other benefit. That solar brings to table we've -- that statement. Succeed. I think also there's did you look at the southeast in his China develops and these markets it's it's a reminder that. -- even -- -- state you have some markets you got residential midsize commercial and utility so Florida for example had some big utility stuff. Has had little smattering. Of residential. But you know as good as the rules Kramer street are generating. Is really keep in mind there's the other sub markets that are all -- -- and we won't be very levels -- importance. -- we shouldn't forget North Carolina team as well as I mean I don't really talk about North Carolina this great things happening in North Carolina right now you. Quickly -- the map here and he wasn't a lot of talk about. The northeastern New England states Maine and New Hampshire. Some talk of Vermont I know one of our -- listed as -- I was originally from Maine. It is. Is there much going on in solar and in the top of New England. Is it is it simply is -- -- -- are there incentives or or other reasons. And supplies solar justice isn't. As much a part of the mix up there. Like -- -- comment but we're very active in Vermont that our company was founded in Vermont fifteen years ago. And Vermont really has had there's been a leader in many ways -- that it -- Robust residential program they have the bulletin now -- -- to the feed -- care program all albeit limited cap. There's now even pushing ahead with the idea that you have also in Colorado through the community based solar as well so. Either one -- -- much attention you know it's a small state in terms of population. But like a lot of the northeast -- expensive electricity. And so you know as a percentage per capita it's it's quite. Important in -- -- and also can demonstrate outside its borders some tools that can be very positive. I would agree as the main Maine native I lament that the lack of purchasing. Burgeoning industry there but hopefully we can take some lessons from Vermont actually have a residential system on -- house that I don't up there so I've been through the process -- great stars in Maine. It's all about really up there -- to avoid electric cars lot of Hydro coming from Canada to have to compete right now. And with the current administration. They've been more focused on other issues and energy. But I think things bode well for New England in general trend in employment costs increase. In his administration's change. Does we'll just a question came -- is that does it get better or easier. Working across or within. Several states -- it easier going from working in Washington and Richmond area working in another -- -- -- -- easier than. Expanding into other states or is that it isn't -- Linear progression. Does -- get any easier. I think it does I think you because. It. You get a little bit more of a checklist in your head of writing your head immediately suited to formalized -- of what -- the issues that you need to be understanding. It before you go into a market. Oh you know I was not with -- -- -- we -- that it went into a couple that additional markets I certainly been there. As we -- you progress through different markets in the eastern state. You know they we -- -- -- -- -- a couple things just because you we certainly were I'm like oh right taxes. Of course. -- we do need to understand the tax structure. And then the very giving incredible -- that you get it like how tax structure is treated I mean Ohio taxes is its higher Trieste could be written on that. I got. Some Massachusetts was the the eight state market that we entered. So we had some experiences in the other markets particularly in the early stages of getting there -- programs up and running. And it was if it was a lot easier -- we were coming from a place where we. -- a lot of the pitfalls of -- and into other markets and now. We're the first organization to aggregate and and and create vast tracts and -- aspects of Massachusetts. And a big part of that process we spent working with the deal we -- in particular Nazis who were very close with and and and structuring things that. On getting recognized when -- set -- the original program that might -- issues so one example was. When you produce an abstract if you had a fraction of an abstract left over at the end of the year you'd lose that faction wouldn't carry over into the next year. So we got that rule change that -- would carry over and the reason why that was important aspect markets vs. When Rex and I directs an abstract could be worth as much as 600 dollars at the time. And so half mast track is -- and all that's a lot of money as opposed to you know the wind -- in training her for. You know ten dollars -- seller Iraq. On six of those of the kind of things that we had an opportunity to work with and now market. And the other thing that I really love about entering new markets really seized the opportunity out -- We work through. A network of partners in and all of the states and you know our relationships are fairly established in the states we've been operating in over the last five years. I never -- state opens up on it's really an opportunity for us to go out and and and network and get to know some means dollars and golfers in the markets I personally don't get to do that enough these days that we haven't -- -- -- -- -- markets pop up over the last couple years. Good time for maybe one more questions so let's get very down to it looking at the next. A couple of years which of these markets in states in this region are gonna see the most growth -- -- -- the most attractive for people who -- to do solar. And I guess the other side. Not a question is which ones are probably not going to be as attractive personal development. Well Brian. Basic thing to look as you evaluate market is certainly a market -- -- -- has a renewable portfolio standard look at the year by year increased. You know and figure out you know how easily is that going to be. Taken up or how much room for growth is there. Of course I may be bullish about the southeastern states I think that those are untapped potential. I think that you strategy the approach -- need to be very different. As you're seeing in North Carolina my discussion about the -- program qualified facility program. -- it cost. There's also discussion about you know -- you know the the cost of solar. In and that's linked to the -- don't Georgia solar program. I think that there is a lot of room for growth there I think that smaller states well our -- going to be tough. I think gay a Delaware's gonna be tough to maintain just simply because the size of small state has you don't even if they need 5% drill holes that's not a whole lot of megawatt hours I think those would be some of the tougher market. I think one that I think we're optimistic about his New York which has had a long track record in the residential side that we got so -- there before we. -- of the residential business and had a very successful. History in with an absurd another policy planners in New York State -- -- activity. And for many years it just wasn't much for program that helped the commercial with that that's not coming in place. And just by the sheer size of new York and then -- we have there and high priced energy -- basic fundamentals. Suggest there's a lot of growth. Potential there. I mentioned earlier that there -- different ways that Massachusetts New Jersey and Delaware have approached. Promoting solar particularly to the -- -- vast -- I think what encourages me the most -- the Delaware is a small state. On it it does represent -- a pretty cute. Testing ground. And I think and in such a small state it's easier to get things done and and you see a lot of progress there in terms of the way they've set up this this long term aspect procurement program. And and what's great about it is that anyone signing a contract there is getting contractor for us tracks for twenty years and that's not something you see anywhere else on it's also they've also moved away from. Kind of the deregulated. Electricity model of having all these competitive suppliers by -- -- and competitive basis and they're moving towards putting their requirement back on heat distribution companies to regulated -- utility industry in Delaware. And and that helps that that creates kind of long term. On. A long term opportunity team to -- -- those programs so you know I think for -- to take away is what I'm hoping to see over the next few years -- other states take a look at. Models like Delaware models like Massachusetts. On and and learn from those those different programs and and implement them in their own ways and and what's -- -- seeing different models in different states where the energy industry. -- -- in different ways -- but it's working in each of the states and hopefully we can seats -- to scale up in some of the bigger states. Yeah I -- else agree with Jamie on new York and particularly. Excited about Richard Kaufman's appointment as the -- there so the -- is certainly showing all the right signs for creating. A lasting program and and it's really soliciting a lot of private sector input to the development bank between development bank that's been announced. I think generally. It's amazing when you step back to see the impact we've made in the last few years through the worst economic period last several generations. -- electric right rates basically stabilizing if not flattening so. With the cost of capital -- reducing over the next couple years the innovation on the financing side whether that's driven by. Federal impetus to to make us. MLP worthy or so Lou -- or other innovation on the finance things. We're gonna see. Less than an impact on incentives we won't need as much and -- certainly. As we do now and that -- -- -- more demand which feeds on itself. And the policies in place in New England a particular states like Massachusetts and Connecticut. That are taking serious. Team that residential customers. Branding group buying program -- -- mass polarized Connecticut. Those those on the political level -- seeing the job creation accrue from solar. Distributed generation I think that's just -- -- itself. And we'll see I think fairly well distributed growth across market. Excellent well the big thanks to our panelists for helping us continue the conversation here at -- America east. Thank you.