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Bundling Properties Saves Seven Solar Projects

Published by Jennifer Dockery on Thursday, April 1, 2010

Journal cover April 2010   Download PDF

EOS Ventures, a renewable energy development and financial services company, was poised to lose $5 million last summer. The Berkshires-based company had entered solar power purchase agreements (PPAs) with seven organizations throughout its home state of Massachusetts and planned to use state grants to offset a significant portion of the installation and material costs. When Massachusetts changed the way it calculated the grant funding, EOS lost 26 percent of its grant money days before closing which threatened to derail all seven projects. To preserve the projects, EOS transformed the seven projects into a single project called the “Berkshire Bundle,” which qualified for renewable energy tax credits (RETCs). The RETC equity revived the project and EOS placed the seven solar arrays in service by December 31, qualifying the projects for the state grants and federal bonus depreciation.

“This is really an example of how solar energy projects should be done and why the government should continue to look at this as a wise investment,” said Andres Garzon, Berkshire Bank’s vice president and controller. Berkshire Bank, an RETC investor since early 2009, provided equity for the project.

EOS entered into a PPA with each organization in the bundle. Under the standard PPA, EOS owns the 811-kilowatt (kW) solar arrays and sells solar energy to the sites. Any power the organizations do not use, EOS sells to local utility companies. Alteris Renewables, a design-build renewable energy company, installed the solar panels at each of the sites, and will maintain and monitor the solar arrays for EOS. The structure eliminates the need for the organizations using the solar power to provide an initial capital investment.

The $4.5 million Berkshire Bundle included $1.85 million in state rebates, $1.85 million in RETCs and $800,000 in debt. It installed solar arrays at: Bedard Brothers, a car dealership in Cheshire; Berkshire South Regional Community Center, an aquatic, fitness and educational center in Great Barrington; Hancock Shaker Village, an historic village and farm in Hancock; Quality Printing Company, a graphic, printing and mailing service company in Pittsfield; Town of West Stockbridge, a town of 1,650 in the Southern Berkshires; Brandeis University, a private research university in Waltham; and Wheeler Farm, the Wheeler School’s farm campus in Seekonk.

When EOS conceived the individual projects, the company planned to use the Massachusetts Renewable Energy Trust Commonwealth Solar Initiative grants to fund a large portion of the equipment and installation costs. EOS used the reduced grants to offset installation costs for the solar arrays.

“They scaled back the formula that determines the grant amount,” said EOS’s CEO Tyler Fairbank. “That reduced our grants by about 26 percent, which was big money …. They were trying to slow down the pace of distributions to make the program last longer. Unfortunately by mid-fall they stopped accepting applications completely because of lack of funds.”

The Berkshire Bundle properties’ applications were submitted before the cutoff, so the state program provided rebates for their commercial solar systems. The grant program required the systems to be operational by year’s end.

A loan and RETC investment from Berkshire Bank filled the funding gap. Berkshire Bank, a division of Berkshire Hills Bancorp, is an experienced tax credit investor that invested in eight of EOS’s 10 RETC deals last year. The community bank also had relationships with several of the organizations involved in the transaction. Because EOS placed the projects in service by year’s end, Berkshire was also able to benefit from the bonus depreciation provision included in the Housing and Economic Recovery Act of 2008. The provision allowed Berkshire to write off as a loss 60 percent its investment.

“We saw it as a higher quality tax advantage product,” Garzon said. “Having the ability to use these tax credits and not be beholden to the AMT limitations was attractive.”

For the seven organizations that received the solar arrays, the advantages of the transaction included low upfront costs and reduced energy costs. Quality Printing Company installed the panels on its Berkshire County headquarters to reduce greenhouse gas emissions and lower energy consumption. Alteris expects the array to produce nearly 140,000 kW-hours of energy per year. Berkshire South Regional Community Center’s 84-kW solar array is one of many green changes that the community center has made in the past few years. Alteris estimates the system will offset 15 percent of the total electricity the center uses. Bedard Brothers’ car dealership has a 64.4-kW array that will offset 84 percent of its energy usage. Hancock Shaker Village’s 89.6-kW system will produce nearly 105,000 kW-hours of energy. West Stockbridge installed the panels on its town hall to offset 43 percent of its energy usage.

At Brandeis University and the Wheeler School, the panels are part of comprehensive plans to reduce their carbon footprints. Brandeis’s Climate Action Plan will eliminate 15 percent of the university’s greenhouse gas emissions by 2015 and make the campus climate neutral by 2050. Brandeis expects the Gosman Sports and Convocation Center’s 277-kW rooftop solar array to produce 10 percent of the center’s energy each year. The 100-kW solar system at the Wheeler School’s Van Norman Field House is part of an award-winning green initiative the school began in 2008. The array will provide nearly 100 percent of the field house’s energy. The school uses the array as a teaching tool with students participating in the project planning.

“By converting to solar panels and having the farm run completely on solar energy, Wheeler is dramatically decreasing its environmental impact. It’s fantastic to see such a commitment being made by an institution and school,” said student Sol Taubin, co-president of Wheeler’s Environmental Concerns Organization (ECO). ECO members regularly attended planning meetings with EOS, Alteris and school officials.

The solar installations are also part of Massachusetts’ plan to reduce energy consumption. The state plans to support the creation of 400 megawatts of solar photovoltaic though a solar carve-out program. The new program, which replaced the grant program that funded the Berkshire Bundle, provides projects with solar renewable energy credits. The Berkshire Bundle’s financing structure is compatible with the new program and EOS plans to use the program to fund additional projects.

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