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Funding Opportunities for Energy

Efficiency: Utility Programs and Tax

Incentives

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Indiana Energy Efficiency

2015 & Beyond

Michael Goldenberg, Duke Energymichael.goldenberg@duke-energy.com

What Has Changed In Energy Efficiency From A Commercial Customer & Utility Perspective

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Energy Efficiency (“EE”) Overview• Utilities continue to support and offer EE

programs• Current spending could be impacted by opt

out resulting in lower budgets than mandated by Phase II Order however it is significantly higher than pre- 2010

• Each utility is responsible for setting its own goals informed by its IRP. The portfolios will include significant C&I programs for those customers who have not opted out

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Opt-Out

• With passage of SEA 340, customers over 1 MW had the choice to opt-out of utility-sponsored EE programs

• Customer participation in the large C&I customer segment (over 1MW) were major participants in EE programs from 2010-2014

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Indiana Utility Opted-Out Data

• Number of eligible customers and accounts– 1030 customers representing 2227

accounts• Number of opt-out customers/accounts–419 customers representing 1544 accounts

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Indiana Utility Opted-Out Data• Eligible opt-out load as a percentage of

total load (these numbers reflect varying customer mixes by utility)–Range from 26% - 55% (.3% - 1 utility)

• Opted-out load as a percentage of opt-out eligible load– Range from 60% - 81% (3% - 1 utility)

• Opted-out load as a percentage of total load–Range from 21% - 39% (.8% - 1 utility)

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Indiana Utility Opted-Out Data

• Opted-out customers/accounts as a percentage of total C&I Core & Core Plus impacts for 2012 – 2014– Range from 27% - 60%

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What The Data Means

• Utilities will have to expand on ways to reach the “smaller” customer (each utility defines “small” customers differently)

• Opportunities to engage the remaining “larger” customers through existing and new channels needs to be maximized (each utility defines “larger” customers differently)

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“Smaller” Customers

• Hard to reach and connect with key decision makers

• Typically no onsite energy managers• Obtaining capital improvement funding may

be more challenging • Less energy intensive in their usage

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UTILITY SPONSORED PROGRAMS

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Direct Install Program• Small business direct install programs are now

offered or are part of new filings by all the Indiana Investor-Owned Utilities

• Programs vary– Undertake a no-cost audit which identifies measures which can

be installed– Eligible customers range from 100 kW – 300 kW depending

upon utility– Some programs offer limited no-cost measures such as LEDs,

pre-rinse sprayers, and efficient aerators at the time of the audit

– Recommendations from audits are then followed up on with buy-downs that range from 50% to 80% of measure cost

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Prescriptive Programs

• All IOUs offer prescriptive programs• Fixed incentive amounts paid for measures

such as lighting, chillers & VFD’s • Similar to what was offered in former Core &

Core Plus portfolios• Incentives vary; some measure paybacks are

less than 2 years • Main marketing channel is the trade ally that

works with the customer on the purchase

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“Larger” Customers

• All utilities have some large consumers of power who have not opted out

• Utilities need to reemphasize to these customers the opportunities that are available to reduce energy consumption through current programs

• Prescriptive programs are excellent sources for common measures

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Custom Programs• Offered by all investor-owned utilities• Designed to meet the needs of customers with

electrical energy saving projects involving more complicated or alternative technologies, or those measures not covered by standard Prescriptive Incentives

• Customers work with utility to understand the project• Incentives are determined through customer-specific

analysis of energy savings• Process can take longer due to required analysis• Meets very specific needs of customer where

Prescriptive Program may not

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Energy Efficiency Project Examples

Alison Becker, Northern Indiana Public Service Companyabecker@nisource.com

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LaPorte Community School Corporation

“This is all about energy efficiency and safety,” said Marc Cizewski, Director of Facilities for the La Porte Community School Corporation. “Over the last five or six years we budget every year to upgrade our lighting from T-12 to T-8 and we’ve seen anywhere from a couple hundred to a thousand dollars in savings. We can then turn around and use that money to replace even more lights and fixtures.”

• Provides a walk through of the school and a comprehensive report on recommendations

• Provides the direct installation of various measures

• Helps schools utilize other programs for rebates and incentives

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Large Indianapolis Hospital• Indianapolis hospital worked with IPL to

improve the efficiency of cooling towers• Incentive of $100,000• Annual operating savings expected to be

$100,000• Also expected to save water

• Utilities have contractors to assist with evaluation of the project and rebate processing

• Custom programs are typically for larger customers/projects, but not always

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Trade Allies Reaching Niche Markets: Convenience Stores

Energy Use in a Typical Convenience Store

• Utilities offer a menu of measures that receive a rebate once installed• Great for projects that are common: lighting, refrigeration, etc.• Light emitting diode (LED) lighting is common• In refrigerator applications, LEDs are ideal: no compensation for heat, LEDs

perform well in cold environments, come on instantly and to full brightness, which works well with motion sensors/dimmers

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Outside Lighting: Prescriptive or Custom

• Metal halide traditionally used outside• Provide high levels of illumination, but

extreme amounts of glare• Operating and maintenance costs are high

• Induction lighting maintains lumen output

• Operates at cooler temperatures• Uses up to 68% less energy then

metal halide• Bright, clean, glare free

presentation

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Evansville Day School and Vectren• Project-Small Business Energy Savings

– Retrofit 4’ 1 lamp T12 to 4’ 1 lamp T8– Retrofit 2’ T12 Utubes to T8 Linears– Retrofit 4’ 2 lamps T12 to 4’ 2 lamps T*

• Savings– 118,093 kWh– $14,171.16 annually– Investment payback of 1.9 years

• Project-Custom– Retrofit 8’ T12 high output (HO) fixtures with light emitting diodes (LEDs)– Retrofit 2’ T12 HO fixtures with LEDs

• Savings– 118,093 kWh– $17,042– Simple payback before incentive: 2.0 years

• Incentive– $15,895– Simple payback with incentive: 1.1 years

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IU Bloomington: Power Partner with Duke Energy

• A Campus Master Plan that prioritizes sustainability with a goal of becoming a carbon neutral campus and a commitment to design all new buildings for LEED (Leadership in Energy & Environmental Design) Silver or Gold Certification

• Building improvements that include: – switching to high-efficiency lighting fixtures with an estimated energy savings of

$250,000 a year– installing highly energy efficient equipment and cool roofs which led to almost

$500,000 in monetary rebates. • A Utility Information Project that includes metering of every building on campus

and allows for the monitoring of each building's energy consumption and contribution to peak electrical demand.

• Central Control Center efforts which constantly monitor electrical usage and make adjustments to system and building equipment to shave to peak electrical demands.

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Subaru: A Variety of Custom Projects• Projects

• Lighting• Occupancy Sensors• Variable frequency drives

• Savings• 10 million kWh/year• Enough to power more than

800 Indiana homes for a year• Incentive

• Subaru received over $400,000 in incentives from Duke Energy

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Automotive Manufacturing: Custom

Lighting Retrofit• Project

– Replacing HID fixtures with fluorescent fixtures

• Savings– 3 M kWh annually

• Incentive– $90,000

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Federal & State Tax Incentives for Energy

Efficiency InvestmentsTim Rushenberg, Vice President, Indiana Energy Association

trushenberg@indianaenergy.org

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Outline• Federal Tax Incentives

– IRS – U.S. Senate Finance Committee – U.S. EIA “Direct Federal Financial Interventions and

Subsidies in Energy in FY 2013”

• State Tax Incentives– Energy.gov– Indiana Office of Energy Development

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Federal Tax Incentives

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Credit for Energy Efficiency Improvements to Existing Homes (26

U.S.C. 25C)Tax credit 10% credit for purchase of Energy Efficiency improvements to existing homes

Limits (max credit for all taxable years is $500):(1)$50 for advanced main air circulating fan(2)$150 for qualified nat gas, propane, or oil

furnace/hot water boiler; and(3)$300 for any item of energy-efficient building

property

Windows, furnaces, boilers, furnace fans, and “building envelope components,” such as insulation, exterior windows, exterior doors, and metal or asphalt roof

Applies to property placed in service 2011-2014

Senate Finance Committee bill proposes to extend thru 2016

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Credit for Residential Energy Efficient Property (26 U.S.C.

25D)• 30% tax credit for expenditures made in year:(1)Solar electric systems – e.g., solar panels(2)Solar water heaters(3)Fuel cell ($500 credit cap for each ½ kW

of capacity)(4)Small wind energy(5)Geothermal heat pump

• Existing homes and new construction qualify; both principal residences and second homes qualify, but not rentals

• Credit expires at end of 2016

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Tax Credit and Deduction for Clean-Burning Vehicles (26 U.S.C. 30,

30B, C, D)• 10% tax credit of cost of any plug-in electric car and electric motorcycles and three-wheelers up to $2,500

• Various tax credits:1) Fuel cell cars (before 2015)2) Advanced lean burn technology cars (before

2011) 3) Hybrid cars (before 2010 or 2011)4) Alternative fuel cars (before 2011)5) Plug-in conversion credit (before 2012)

Senate Finance proposal to extend credit for motorcycles, alt fuel and fuel

cell vehicles thru 2016

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Credit for Construction of New Energy Efficient Homes (26 U.S.C.

45L)• Business tax credit for home builders for

each qualified new EE home constructed and acquired for use as a residence

• Credit is $1,000 to $2,000 based on energy savings requirements of the home

• New homes must achieve 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling constructed w/in standards of International Energy Conservation Code

• Applies to homes constructed 2006-2014

Senate Finance proposal to extend thru 2016

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Credit for Energy Efficient Appliances (26 U.S.C. 45M)

• Applies to manufacturers of dishwashers, clothes washers, refrigerators

• Tax credit may be claimed on each qualifying appliance produced by taxpayer and is based on type of appliance, its energy efficiency, and for dishwashers and clothes washers, amount of water it consumes

• $25M annual credit cap / 4% average annual gross receipts limit for three preceding years

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Advanced Energy Manufacturing Facility Investment Tax Credit (26

U.S.C. 48C)• Business tax credit is 30% of qualified investment in selected manufacturing facilities

• Re-equips, expands, or establishes mfg facility for:o Solar, wind, geothermal energy production items o Fuel cells, energy storage system for use with

electric/hybrid carso Electric grids to support transmission of

intermittent renewableso CCSo Renewable fuels or produce energy conservation

technologieso New qualified plug-in electric carso Other advanced energy property designed to

reduce GHG

• Ex: building a factory to manufacture solar panels

• Taxpayers must apply in advance and have their facilities selected to be eligible for the credit. 

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Credit for Holding Qualified Energy Conservation Bonds (26 U.S.C.

54D)• “Qualified energy conservation bond” issued

by state or local government for qualified conservation purpose

• “Qualified conservation purpose”:o Reduce energy consumption in public buildings by

20%o Research to support development of ethanol, CCSo Mass transito Green building technologieso Conversion of ag waste to fuel, advanced battery

mfg technologieso Public education campaigns to promote Energy

Efficiency

• $3.2 B national energy conservation bond limit

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Exclusion from Income of Conservation Subsidies Provided by

Public Utilities (26 U.S.C. 136)

• Payments to individual consumers from utilities for investing in energy conversation measures are nontaxable and may be excluded from gross income for purposes of calculating taxable income

• Does not apply to payments to or from a qualified cogeneration facility or qualifying small power production facility pursuant to Sec. 210 of PURPA

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Allowance of Deduction for Certain Energy-Efficient Commercial

Building Property (26 U.S.C. 179D)

• Deduction for amount equal to cost of EE commercial building property expenditures made by taxpayer (e.g., interior lighting system, HVAC and hot water systems)

• Deduction capped at $1.80 per square foot for an efficiency improvement of at least 50% in comparison to reference building which meets minimum Standards

• Applies to property placed in service 2006-2014

Senate Finance Comm. proposes to extend thru 2016

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USDA’s Rural Energy for America Program

• Guaranteed loan financing and grant funding to install renewable energy systems or make energy efficiency improvements

• Applicants limited:o Agricultural producers with at least half of gross

income coming from agricultural operations; oro Small businesses in “eligible rural areas” (must be

in area other than city/town larger than 50,000 inhabitants)

• Funds may be used for installation of Energy Efficiency improvements, such as high efficiency HVAC, insulation, lighting, refrigeration, doors/windows, etc.

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State & Local Incentives

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State & Local Incentives

• Insulation Tax Deduction (IC 6-3-2-5): Indiana offers a tax deduction of up to $1000 for purchase and installation of residential insulation

• OED’s Community Conservation Challenge: Non-residential entities may apply to receive $25,000-$100,000 in grants for community energy conservation projects

• City of Indianapolis – EcoHouse Project: Energy Efficiency loan program – up to $8,000 for 6 years – for medium and low-income homeowners

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Questions?