Designing Effective Renewables Programs (Text Version)
Good afternoon, or perhaps I should say good day to those of you who are on the west coast. And welcome to today's presentation from the Department of Energy's technical assistance program on designing effective renewables programs.
My name is Cheryl Jenkins. I'm with the Vermont Energy Investment Corporation. And I'm a member of DOE's technical assistance program through Team Four, the team that's providing assistance on program design and implementation for the technical assistance program.
I have just a couple of organizational pieces that I'd like to cover before we get started on the content today. All of your phone lines have been muted, and we'd like to encourage you to submit questions through the question window on the side of your screen. I won't be answering any questions until the end of the presentation, but they'll all be listed there and we can get to them if we've got enough time to do so.
This session is going to be recorded. A transcript of the recording will be made available along with the presentation slide as well as the audio version on the DOE solution center Web site, probably about three to five days after today. So you'll be able to access all those forms of revisiting the presentations at that point.
And as I said, I will be taking a look at your questions when we get to the end of the presentation. The overview today, I'm going to do a quick moment of review of the technical assistance project and what resources it has to offer you. Review at a high level the framework and steps for designing an effective renewables program, dial down a little deeper and talk about the details of decisions you need to make for three of the most commonly used renewables program designs, and provide you with some resources to get more information on this issue going forward, sprinkled throughout the presentation, actually.
And then I hope we have some time for questions and answers at the end. So at this point, I think many of you are probably familiar with DOE's technical assistance program. It's a set of national resources available to EECBG grantees and the state energy program to provide you with assistance to carry out the grants that you've been awarded.
This particular webinar is one piece of the types of extensive public outreach information that we're providing you through the TAPS library, which also includes other documentation and playbooks, white papers, and best practices resources. In addition, there's one to one assistance available to you at your request through the technical assistance network as well as the development and facilitation of some peer-to-peer exchange through some meetings that are being planned for later this fall and this winter.
And we provide this assistance on a number of different topics as listed here. A little more detail on those topics, our ultimate objective, of course, is to provide you with the information you need to get your project started and to help you in building your capacity to deliver energy efficiency and renewables programs.
Team four, of which I'm a member, really provides help through the technical and program design and implementation sections here. The labs are also available for a lot of technical information on technologies and their deployment. And we have other experts to help out with financial and performance contracting questions available to you.
I've referred to team four a couple of times. We are providing program design and support and implementation help to grantees. Again, I'm with the Vermont Energy Investment Corporation. We are the lead for this team of national resources available to you. And just a quick review of the EIC itself.
It's a nonprofit organization that's been for the last 25 years, accomplishing its mission of reducing the economic and environmental effects of energy use through the work on energy efficiency and renewable energy programs.
In the renewable energy field, we designed and have been providing program support for the renewable incentive program here in Vermont since its inception of 2003. I was a program manager for a number of years. We deliver the customer onsite renewable energy program in New Jersey and have worked with a number of different states and utilities helping to design renewable incentive programs over the years across the country.
So let's see if I can make sure I'm getting my slides to go forward. I do wanna point out that the scope of this presentation is going to be at a fairly high level. The idea is to give you an overview of the kinds of things that you need to consider in the preparation of designing of a renewable energy program.
The specific details, I'll dive a little bit deeper on some details of three very common program design types. But more specific details will follow in either other webinars or in one-on-one assistance that you can request through the technical assistance network.
So this webinar is really designed to answer some questions at the basic level. What are the elements of a successful renewables program? What logical steps would you take, and is there a silver bullet? Is there now a sort of a right answer that works best for most cases? I do wanna take a moment here to talk about the value of considering renewables in the larger context of clean and sustainable energy. And what I mean by that is really encouraging thinking about integrating renewable energy with energy efficiency in a broader assistance view of clean energy support.
We're finding that this can be a very effective way of leveraging consumer interest in renewable energy and getting the savings that one can realize through energy efficiency projects. And I also wanted to point this out because it's my understanding that funding for programs that support renewable energy only is not currently eligible use of grant funds for ECBG grants.
And that the programs really need to integrate energy efficiency and have that be a major component of the program. That said, all the things I'm going to say today would still apply for the renewable energy part of any program that you might be interested in putting together.
So this slide is really a compendium of elements of program success and a reminder of the kinds of things to think about as you're designing a program. We're going to be going over most of these. But I do wanna point out the last bullet, which is the ability to be innovative and flexible. The world of renewable energy demand and support is changing rapidly and that ends up being very important as you go forward. So it's something to keep in mind.
So let's talk about many of these things in the context of thinking about a framework for an effective program. These are the design elements that I really like to think about as you're thinking about putting together a renewable energy program. The steps would go through an identification of your objectives for the program, understanding the local context of the program would be delivered under.
Then, with that understanding, define the program approach you wanna take, design the specifics of the way the program will work, implement them, and be sure to evaluate and refine the program as it's going forward. So we'll talk about each one of these specifically.
And I start with identifying objectives because really understanding what your specific goals and needs are is not only important as you design your program, but it helps you have a touchstone to revisit when you need to change the program or react to changes in the environment.
Some - there's a number of common objectives that programs have as they go forward trying to support renewable energy. And quite often, certainly, the promotion of the development and the deployment of renewable technology is a major component of all programs. You may, however, find that you're really wanting to promote this for all the technologies that might be available, that the market is interested in, or you may be wanting to focus on particular targeted technology.
Then that will affect the way you design the program. You may decide that you want to serve as many customers as possible, or you may instead be looking to maximize the energy that comes from the funds through this program. And those two things would mean that you would design the program a little differently. Maximizing energy might mean that you're supporting particular high saving technology.
There's often a component of wanting to realize an economic benefit of instate technology, either technology development or deployment through being able to create a strong and vibrant local renewal energy job market.
We certainly often see that we want to reduce long-term energy costs to consumers and a component that is quite often designed into programs is to provide access to renewable energy to all economic classes. Something like that may mean that you're providing different incentive levels for, say, low-income housing developments or consumers that live in certain economically depressed parts of your jurisdiction.
You may wish to also be diversified in energy supply across a number of technologies. If you're interested in increasing grid reliability and security, you might be wanting to think about providing more targeted support in certain localities. And we certainly wanna take advantage of consumer interest and environmental benefits of renewalbes and leverage that.
At this point, there's such a strong interest in renewable energy, it provides a real opportunity to leverage public funds through the private investments that people are willing to make. Now, all that is important and worth your consideration, but I don't wanna lose sight of the fact that you have to be practical as well.
You do want to design certain objectives into your program and make sure that your program is viable. So there's some specific operational objectives you need to be addressing. The program should strive to be economically efficient and particularly if you're designing an incentive program.
The word incentive by its very definition is designed to be just exactly that amount of funding that tips the consumer's decision into making a purchase that they wouldn't have already made. Now, designing that perfectly is a very difficult thing to do, but we do find that it's effective to strive to set those incentive levels as low as possible so that you can provide as much funding as possible to a wide array of your participants.
You also wanna design the program that you're striving as much as possible for sustainability. If you know that you have a secure funding source that's going to go on in the future, it's a great thing to think about designing your program for a three- to five-year horizon so that you can think about ways in which it will extend and be sustainable.
On the other hand, if your funding source is limited, you wanna put together a design that takes advantage of perhaps loans or financing that allows the funding to continue for a period of time. You certainly wanna design your program and your operations for low program delivery costs when you can. The simpler you can make it, the better, that will reduce the administrative costs, and consistency and predictability are good not only for your participants but also for the program operations.
You wanna be sure you think ahead of time about the way you track your funding and your participation levels and to set up systems that you can capture the data from measurable results so that you can report on your progress to your funders and your constituents.
The next step in designing a good program is really to understand the local context that the program is going to be sitting in. And one of the first pieces that you wanna look at is certainly the policy environment that you're operating in. Now, some state programs are sitting in a situation where they may actually be able to influence state policy. And these are good things to think about as well.
But for many others, you're sort of given a policy environment that your program is going to be operating in. It may include things like renewable portfolio standards, production kinds of incentives, like speed and tariff. There may be legislation in place that makes it easy for community-scale projects to be developed.
There will be tax policy there and energy __________ standards, all of which you will wanna understand as you're designing your program. You will wanna know what the utility infrastructure is that your customers are building your projects into. What are the interconnection rules for the utilities? Is there net metering available for customer on-site projects? And in fact, is there group net metering that makes it easier to do community-scale projects?
What exactly does the market look like for renewable energy in your jurisdiction? Are there contractors available? Are they mom-and-pop shops or are there some large national, sophisticated installers there? And are they providing products such as third-party ownership leasing arrangements for renewable systems as well as just installation and straight ownership type situations?
What's the customer demand already on the ground in your market? Are people aware of renewables and asking for them? And what's the price structure of projects where you are? Those things also help you identify what the local barriers are to the current use of renewable energy.
In a lot of places, of course, economic barriers are really important. People are looking for help with the high up-front costs of these kinds of technologies. In some spots though, the real barrier to further implementation is an education piece, and it may be that your program needs to have a stronger emphasis on consumer outreach and education to encourage the use of these technologies.
And on the other hand, product availability may be a problem. And perhaps this is the difficulty is really in getting the amount of product that people would really like to be using.
Further, on the local context, you of course need to understand your own program funding and how much you're going to have and for how long. And that is going to affect the way, not only that you design the budgets, but design the programs going forward. And what other types of financial support are available to the project owners. Your decision may be that you wanna leverage on some of these other types of financial support, or you may wanna find the gaps in the support that's already available and fill them.
In a lot of places, there are utility programs available to support renewable projects. There may be other grants or loan guarantees. For example, the Department of Agriculture has renewable energy support for certain eligible projects. There are tax credits and other kinds of tax benefits, particularly for certain technologies, like PV and wind. And federal tax credits and local tax credits as well in some places. Commercial projects may be able to benefit from accelerated appreciation and so forth.
Again, there are production credits of various sources in some places. Feed-in tariffs may be available or other kinds of protection tax credits. Or you may be in a world with a renewable portfolio standard that has a market for renewable energy credits. All of these are providing additional support to your project owners. And there may be third-party ownership opportunities, such as leasing or power purchase agreements available to the consumers in your area.
So once you have identified your objectives and the context, you wanna think about exactly what general approach you want your program to take. Some very common approaches include direct project support, which is direct financial incentives to project owners to help them pay for projects. There are also market-driven investments, such as financing programs, and a whole wealth of different ways, programs that are designed to support the development of an industry through either technology innovation and support type grant, business development grants, marketing and outreach, training and certification types of things for the market.
And it's often really helpful to design a portfolio program to cross these categories to provide different kinds of support in different places when you can do that, when you have the budget and the ability to do that. And this is just an example of, of course, very well funded, and mature state program that the state of California has been offering support for renewable energy projects for quite a long time.
They have a lot of money that they put into this. But you can see that they have designed many different types of programs specifically to be able to provide support that really matches the need in different sectors of their jurisdiction. So we have some industry recruitment and support here, some PACE financing, Property Assessed Clean Energy financing, for these municipal energy districts.
They do have a feed-in tariff that provides production incentive for larger projects and some property tax exclusions. But even within their rebate programs, they have a number of different targeted program designs that are helping to support different subsets of their consumers.
So solar hot water has a specific rebate program and also provided a rebate through their energy efficient appliance program. The low-income housing is supported through two different programs of multifamily affordable housing and single-family affordable housing program. There are PV incentives. There are new solar home partnerships specifically designed to support renewables in residential new construction, an emerging renewables program that is a grant program for larger, less standard programs and so forth.
And the objective of actually setting up different programs for different markets means that you can design the way the programs work to really meet the needs of those particular constituents within those markets. And I will spend the second half of this talk speaking a little bit more about how exactly you might do that, how would you design the details of the program to meet particular market needs? But so in this part, I just wanna say that when you get down to designing the program details, it can be very effective to seek advice from the lessons that others have learned in preparing and delivering renewable energy programs.
There's a lot of expert advice and information out there. I will refer you again to the Department of Energy's Technical Assistance Program. And we are not only putting together webinars and documentation to help, but as I mentioned, there is technical assistance available on a one-on-one basis through the direct technical assistance request program, where if you have questions about putting together a program, you can receive advice from experts.
There are program design consultants out there who have had years and years of working with successful programs and __________ programs, learning lessons of what can often work best in different situations. The DOE's national lab provides a lot of technical expertise in technologies and can really be helpful with things like industry deployment agreements and so forth.
The database of state incentives for renewables and efficiency is an excellent resource. It's very comprehensive and is kept up to date. Very current. Information about all of the financial and policy supports that would be in place in every state in the country. It's a really nice resource and it's one that you should make yourself familiar with.
The Interstate Renewable Energy Council is a great national resource for all sorts of information about renewable energy programs. They have a big focus on contractor certification and training also on grid interconnection issues such as standard and sample interconnection guidelines for cities to undertake, and can be a really effective place for you to go for help.
It's also really a great idea to learn from the experiences of others who have put together programs that might look like yours. So take advantage of any peer-to-peer opportunities that you have. As I think I mentioned before, the Technical Assistance Program is designing some peer-to-peer regional meetings and will be rolling those out this fall and winter to give grantees to meet with others to talk about the programs that they have in mind and learn from the experiences of others.
And I also wanna point out the Clean Energy States Alliance. This is an association of states with clean energy development funds who come together to really learn from each other and to pull their resources to do research and to design programs to be effective in the renewable energy sphere.
The Clean Energy States Alliance has a huge wealth of publications that they've put together on this topic, such as guidebooks and briefs on program design. And a lot of good work there, so you might want to follow up this link to visit their site. You'll also wanna enlist the input from your local stakeholders as you design the program, any renewable energy trade associations in your area, energy communities, community vocational programs, other kinds of consumer spokes groups would be really helpful in understanding something about the market and in helping you decide what your objectives and the right way to roll out these programs.
Also, in addition to planning the specifics of the program design, you'll wanna plan for the program infrastructure. You may choose to run the program, administer it in-house, or contract with someone to administer the program for you. You'll wanna think about the ways you'll interact with the contracting community. Do you want to require certification or certain levels of training? Or provide an official installer registration list for your consumers to use?
You'll wanna develop application and reporting forms and tools that capture the information you need to know in order to determine eligibility and to track your program. You'll wanna design whatever marketing and outreach plans that you need to have in order to support the program. I want to call out that don't forget that people will call you on the phone, and you'll wanna set up some sort of support for customer service.
Installers and consumers will have questions about the program itself. Also, look to you to answer some more general questions about renewable energy once you're up and running. And you'll wanna think about how much you want to follow a quality assurance process. We certainly recommend that you do some level of technical review of the systems designs that are being proposed within the program, whether that happens up front as you're reviewing an application or at the end of the system installation, it allows you to know that the system has been designed appropriately.
You may also choose to undertake some kind of system verification or inspection, depending upon the funding you wanna put toward this. Both of these are not only assuring quality for your customers, but also are helping to assure that the market develops in a quality way.
And you want to be sure that you've designed an appropriate IT system for tracking the data and a measurement and verification system so that you can evaluate what you're doing and learn from it. When you're ready to implement the programs, of course, this doesn't - is not really surprise that you wanna be ready for business before opening the doors.
This seems to be particularly important when we're talking about renewable energy programs. There's often a lot of interest and a lot of pent up demand for a new program. And if you give into the pressure to roll out your program before you're completely ready to do so, it can cause some damage to the program going forward.
It can be a really good idea to think about doing a pilot program, either on a smaller basis or with a subset of the technologies, you might be interested in considering as a way of determining demand and of getting a little more information about how your program might be accepted.
You of course will want to use that program launch to create publicity, because it's a great opportunity for you to talk about the program and to engage the community in what you're doing. And as you go forward and deliver the program, you wanna be sure to track both the funding and the participation.
We can talk a little bit more about keeping track of budgets in a moment. But I do wanna point out one piece about tracking participation that I think has caught some programs and caused some problems. It's probably a really good idea as you defined a budget for your program to actually track reservations as they're made. In other words, encumber the funds and keep them on hand.
These projects tend to be six to nine months in the making, and if you're not really removing funds from your budget until you're paying for a finished project, you may be making promises on a budget that you haven't actually set aside yet and that can be a problem.
So we strongly encourage that you encumber your budget as you make reservations, and that way you can track exactly what your participation levels are much easier. And finally, you do wanna plan for regular evaluation, not only of how the program is doing, but how your internal processes and the program design is working. Report your results regularly. This is a way for you to toot your horn and talk about how all of the contribution you're making to the renewable energy in your area.
And I'm gonna circle back around to program objectives again, and state that one of the reasons for defining them so clearly is that then they're there to guide you when you need to make adjustments if needed. If the environment changes, if demand is really high, if you find that you need to be reacting to something that's going on with the program, having those program objectives very clearly defined ahead of you can really help you to make your decisions about how to respond to such changes.
So I'd like to go back now and talk a little bit more about some of the components of effective program designs, particularly in regard to three different very commonly used types of program design. And that would be incentive or rebate programs. These are, again, lump sum payments to help project owners pay for a project.
Usually, you pay that at the end of the installation. The idea here is to provide some additional financial leverage to help the project owner. Grant programs differ in that they're usually competitive programs that provide a larger amount of support for a nonstandard type of a project or something - types of projects that require more of a custom approach to their approval.
And I'm gonna also talk a little bit about the loan programs, financing types of programs. This has now become a very popular way to leverage your funds for a longer period of time and provide some financing to help cover up front costs of project installation. There are a number of other things that you might consider doing that I'm not going to talk about in much detail today.
Certainly all of these kinds of programs would be supplemented with consumer education and outreach. There could be situations where for a particular technology or in a particular jurisdiction, that's the main focus of what you would wanna support. And there are some very specific things that would provide you with a best practices marketing or consumer education program that you would wanna consider if that were your approach.
You also might find that what you really need to do in your area is to beef up the contractor skills. And so a major component of a program might be contractor training and support. There are resources that could help you with that, but we won't talk about that much today either. And certainly, a focus on technology development or business development could lead to some programs that had very targeted grants focusing on those kinds of activities.
And they also - those are also things that you might want to refer to the DOE national labs, who have established a lot of these sorts of grants and support for that kind of a program.
So first of all, incentive programs are a very common means of providing support for renewable energy across the country. They're very easy to administer. Projects and technologies that would be supportive of this kind of a program tend to be fairly mature technologies. They're very standard. Every project looks somewhat similar and are easy to undertake.
There's a market to the installation. They're kind of cookie-cutter kinds of projects. And these kinds of programs are really designed to support a large number of projects. And that's really good, because they can be very effective at driving consumer demand and market transformation.
That is because they are addressing the need for up-front capital for projects. And they're often very effective because a first-come, first-serve design really allows pretty equitable participation. If your program is designing first-come first-serve for all customers, then whichever customers show up are the ones that actually get support.
Some programs, such as the incentive programs here in Vermont, actually has a first-come, first-served design across technology, which allows the market itself and the demand to determine which technology the majority of the support is going to.
They also can allow for very structured and transparent levels of funding. Everyone knows how to calculate the incentive that they would be getting and knows ahead of time whether or not they'll be eligible for such an incentive.
As I mentioned, this is a very common type of support. There's 29 states currently that offer some kind of incentive program, six local jurisdictions, and a lot of local utilities, utilities in 40 states offer this kind of a program.
There can be real challenges to an incentive program. It is not the only right answer. Markets and customers can come to rely on incentives, and in fact, there's been some evidence that an incentive program that's too rich can actually support - can sustain the prices of the installed system at higher levels than otherwise they might be sitting at.
If you have insecure or cyclical funding, that can really have a problem with market growth. If your funding is not consistent, and it has to stop and start, the contractors can't rely upon the funding and have problems making decisions about hiring and that can really limit the ability of the market to grow.
It may take high levels of support to move new market. The incentive programs are sort of by nature economically inefficient. It's impossible to design that perfect incentive. In fact, the perfect incentive might be a different level for every single customer. So you're likely to be - often to be paying out a little more money than you might really need to in order to drive the market demand with this kind of a program.
You cannot assure project performance. You're just asking for certain kinds of standard projects to be put in. And, as you probably all know, incentive programs can certainly deplete program funding and sometimes amazingly rapidly. When the market changes very quickly and suddenly, there's a surge in demand for whatever reason, lower costs, a new federal tax credit, other things, the run on your budget can be pretty extreme.
And we can talk about a couple of mechanisms you might use in incentive design that can help mitigate this a little bit. So I want to revisit the idea of really being secure and transparent in your plan for your program funding. Again, installers are making hiring decisions; consumers are making purchase decisions. Both of them feel much more comfortable if they could see perfectly into the future.
In fact, the comments that we've heard from the installation community, the one thing that they would like more than anything is a long-term view of exactly how the program funding is going to play out.
So whenever it's possible for you to do so, when you've got the funding, a secure funding source, and you're comfortable with making decisions into the long term, provide a view, a three- to five-year window of what your plans for the program are and the market will respond well.
That said, again, if you put those budgets out there, you may have a real problem with sticking to them if your programs are oversubscribed. And I think the best thing to do there is to really say, "This is our annual budget. And we're going to stick to it." Communicate that clearly and well with your participants, and they at least can plan on ways to react to that.
One tool that has been useful in some situations to help mitigate budgets being used up too quickly is something we're just referring to as budget cycles. It means that you could certainly set out a million-dollar budget for your 2010 program. If the market gets really hot, perhaps if that budget is completely reserved by October, which means that for two months, the installer community is sitting around waiting and can't sign up new participants or you have a que, that's waiting until the start of the next budget year.
Breaking up your budget into, say, quarterly cycles of $250,000 every three months may mean that you still have a run on that budget, but perhaps the installer community is now waiting for a week and a half or two weeks until you open up the next quarter's budget, which may be something that in their normal business cycle is not as much of a problem. That has been really helpful in a couple of jurisdictions.
It's really important to define up front exactly what the eligibility criteria are for your program. And you wanna think about what technologies you wanna be supporting. You may have a standard plan for those established technologies that are easy to install and have a real market. You may wanna provide some additional support for emerging technologies that you wanna support in your area.
And deciding to actually separate out either a budget bucket or have a defined program for a particular technology can allow a way to really focus that concentrated support and make it look different for those technologies, whereas on the other hand, a large budget that is first-come, first-serve across all technologies again allows the market to determine the mix of technologies that get supported.
You'll wanna think about the eligibility criteria for customers and for projects as well. Are you gonna support residential projects? Projects of the scale that you usually see on commercial buildings or community scale projects. Some special categories may be what you want to actually set aside additional support for. For example, nonprofits who not only may need additional support but may have additional program characteristics that are helpful for them, a longer period of time for them to make the decision to finance because of their procurement processes or a longer installation window may be allowed for a special customer category like that.
It's often useful to set total single customer limits if you - particularly if you're in a jurisdiction that you have a lot of commercial customers with many locations. If you want to spread out your support across a wide customer base, you might want to limit the amount that a single customer can get in one period of time. And think about sending the maximum project size that your program will support.
You also wanna think again about the way you wanna interact with the installation community, require certification or certain kinds of training for participation in the program or perhaps just minimum levels of insurance or warranty requirements on their installation. On the other hand, you may not want to actually monitor your installation community quite that closely, and you might wanna simply provide a list on your Web site that installers can sign up on and provide installation for your consumers.
It can be really effective to actually think about designing your incentive levels in a way that helps you tie a decline in incentive levels to market performance. And again, declining incentive levels over time as project costs go down is the right thing to do. Wanting to provide just enough extra funding to encourage your customers to undertake these projects.
One way to actually tie those declining levels to market performance is a tool called a capacity block. And in that particular situation, you design and publish ahead of time exactly how your incentive levels will decline, and the decline is triggered once a certain capacity of that technology is reserved and approved under your program.
That means that if there's a really high demand, you reach that capacity of approved project very quickly, and the decline in incentive level drops more quickly. If the market slows down, then it takes longer for you to actually sign up that total capacity of approved reservation, and the incentive level stays at a stable level for longer.
As long as these sorts of things are well communicated to the community, they can plan around them, and it can be a more effective way of trying to tie the incentive level to the market performance. You also might wanna consider teiring the incentive levels, and that means providing a $1.50 per watt for the first 10 kW of a PV system, $1.00 per watt for the next 60 kW, and $0.50 per watt up to 100 kW. This allows you to be providing an incentive that matches some of the economies of scale you get for larger projects.
When possible, again, these incentives should be designed to support good system performance. The most common use of incentive design for many technologies is a capacity-based incentive. Simply certain dollar value per capacity per watt for PV system, per kBTU per day for a solar hot water system. They're very easy to administer, and they're very predictable for the consumers. And the sellers know exactly what they might be going to get from your program.
A performance-based incentive is a great way to tie compensation to actual production and know that you're getting a lot of energy for your money. They're most costly to administer. They're much less predictable because the consumer doesn't actually get paid until the project is online and producing energy. So they also don't provide up front money to help with the project cost.
Sort of as a compromise between those two, some programs have now developed estimated performance-based incentives, and that means that you - that the project would actually determine an estimate of their performance for the system based upon prescribed estimation technique, prescribed by the program, that takes into account something about some site-specific characteristics of the particular project in determining what to base the incentive on.
And some programs are actually doing kind of a combination of half of the incentive is provided up front based upon the capacity. The other half, it depends upon the performance for the first two years faster the system is installed. These performance-based incentives can be particular effective for the types of technology where performance is harder to assess up front.
For example, small wind turbines. It's just harder to assess the resource often, and you may wanna be paying based more on the actual site specifics of the projects. There are certain cases where a flat rate incentive can be really effective. In other words, put in another solar hot water heater and get $1200.00. They're really easy, of course, to administer. They're easy to understand. And they can be very effective for jump-starting a market as well. So they could have a place in your scheme.
Again, you wanna assure quality installations by establishing process of rigorous technical review, considering onsite verification or inspection, and you can certainly tie incentive levels themselves to equipment and ______ practices. For example, you may want to give certain kinds of adders for wind-turbine installations that provide certain tower heights, so that you're encouraging the deployment of wind turbines on appropriate towers. Or you may actually require a shading analysis as part of the application form for a PV project.
You do certainly wanna establish close communication with the local installation community, work with trade groups and others to design the eligibility review requirements. They're often very interested in having your help in encouraging a high quality workforce.
This is just a quick example of an incentive program that has - well, it is a PV incentive program. But it has a number of different components to it that are helping it meet some of these objectives of the program itself. There's a residential business and nonprofit component to the program. All of them have to have installers that participate in this workforce development program. And you can see some adders for some particular things the program wanted to encourage.
A little bit higher incentive for low-income customers, an additional adder if you use an installer who's based in the city, hire incentives for nonprofit multiunit residential property. So it's a way of designing a single program that can meet multiple objectives.
So in addition to incentive programs, we find that grant programs can be very effective. In particular, they're often designed to provide a competitive opportunity for these nonstandard types of projects, where either the project is larger, the technology is newer and less standard, or it allows the program to consider additional objectives beyond just simply deploying as many projects as possible.
You can really select based upon cost effectiveness. The awards can be very flexible, and it provides an opportunity for really good publicity. Currently, there's fewer grant programs, but a fair number of them, 23 state programs, three local, and utilities, are not quite as fond of these. They're harder to administer and follow through.
And that is one of the challenges. These certainly are best designed when the program objectives are very clearly defined. It's a lot more trouble for the applicant. They have to submit a full comprehensive technical plan for an economic analysis for their project in order for the reviewers to really be clear on what it is that they're funding.
There are fewer awardees. Administrative costs can be fairly high in the best programs, because they often provide some level of follow-through and work with the grantees to be sure that the projects really turn out well. In order to really make sure that you've got an effective grant program, it's a lot simpler to design a program like this. It certainly is important to clearly define the goals of the solicitation and make it very clear to the proposers what it is you're looking for.
You can be specific about the particular kinds of technologies or social objectives that you want to support. Or you can have a very open-ended project solidification and just be looking for the most cost-effective project. It is really important that that process and the decision criteria you're gonna use to determine the awardees is very transparent. It can be very politically sensitive if those things are not clear and people don't understand how the awards are being named.
And the scoring criteria, there can be all sorts of things that you actually wanna take a look at, savings impact, cost effectiveness, who's on the project team, and what's their experience and so forth. So these can be very effective ways to promote, patriotically very visible projects.
Loan programs for renewable energy projects don't look a lot different than loan programs for energy efficiency projects or other kinds of things. They have the standard advantages. They can fill the gaps of any availability of private financing to help cover capital costs. Like incentives, they can provide funding for a wide range of project types. And one sure advantage to your program is that it can allow the program funding to continue for many years as the loans are repaid.
The challenges are the challenges of any financing program and can certainly depend on program specifics. They can be a lot of risk in them. They are high and costly to administer. You may be finding that you're competing with private lenders, and that may not make them happy and so forth.
They are becoming more and more popular. Financing has become a very popular thing to do in this field. You'll see that quite a number of jurisdictions are currently offering financing and more and more are doing so every day.
The typical common approaches, direct loans, interest rate buy-downs, matching loans, and new types of pay as you save types of programs, such as the property of ______ clean energy programs or on bill financing. The key customer attributes of this program, you want to be sure you've got low interest rates, you're able to amortize the loans over the life of the technology.
That's one of the things that really is not always available through private sources of financing. The transaction cost should be low, and you generally don't want to have to secure the loans. And there are a few design considerations. Some of the design considerations for a good loan program are very similar to the incentive programs. The things you wanna consider eligibility, your customer base, and what your objectives for the program are.
But it is really important to be sure you have effective program marketing. The financial institutions as well as the consumers should be aware of exactly what the program requirements are and that the processes are easy to understand. You wanna be able to have quick review and approval in order to keep everybody happy.
These kinds of programs really do take skilled staff. They need to be conversant both in renewable technologies themselves as well as these financial practices. And these really work best if you have some sort of ongoing loan monitoring support. And I'm not going to go any further. There are of course a million technical details about designing good financial programs.
We have a huge body of technical assistance resources available for you to answer questions about financing. And the financing for a renewable energy program doesn't look a lot different than for an energy efficient program. So you will find that we have a number of upgoing webinars and playbooks and guidebooks for the design of financial programs becoming available through the technical assistance program.
And so I will refer you to many of those resources for further details about the specifics of the design of programs like this. So this is just - I'm putting this slide back in here to remind you of resources. Again, all of these slides will be available to you after this talk for you to use as a reminder for resources. This is just so that when you get the presentation, you take a look at this.
Some actual publications that I think might be useful to you, thinking further about effective renewal energy program designs, all of these actually are available as links through DOE Solar American City sites and can help you actually to do some additional research on best practices for these kinds of programs.
Just a reminder, as I mentioned, there will be upcoming webinars and other resources available to you through the technical assistance program in the future. These are just some other webinars that are currently scheduled over the next couple of weeks. And you will find information on those webinars as well as more resources at the DOE Solutions Center site.
That's the place that you go to register for Webinars. You probably know that because you had to go there to register for this one. But please keep checking back to find resources for you for any other questions you have about financing or other details about design for renewable programs. Or visit is through submitting a technical assistance request through the technical assistance center if you're looking for specific answers to questions you have about your program.
So that's it for me today. I'm going to now open up my screen and take a look at any questions that I see that you may have asked and try to answer them. If I can just make this bigger - let me scroll up and see if I can - I apologize. Give me just one minute to try and read - ooh. There's a lot of questions here. (Laughter) And I need to make my screen a little bigger so that I can read them all.
We ______ the slides would be available - question on quality assurance. Should verification be done on 100 percent, 50 percent, or small sample? Those are the kinds of questions that you wanna answer. There's a real trade-off, of course, on your budget. If you're going to be doing full inspections on all of your projects or just the sample. There are some programs that believe that it's important to actually look at every single project that goes in.
Some that have decided that an after-the-fact evaluation of the sample is really the best. So those are questions that are going to be program-specific, depending upon other things. It also could depend certainly on the sophistication and the maturity of your contracting community. If you have a lot of new installers, you may also find that you want to ramp up the percentage of projects put in by those installers that you're verifying in some way. That can help with your budget and target the quality assurance to the component of the market that you're really most interested in.
I'm sorry. I'm just having a little trouble scrolling through questions. Yes. Someone asked how can I explain the concept that first come, first serve allows the markets to determine the mix? What I mean there is for example, in Vermont, we actually have not got separate programs for PV solar, hot water, and wind, but instead have a single program with different incentive levels for those different technologies, but a single budget. If most of the demand this year is for PV, that's what gets all the money.
On the other hand, if most - if there's a lot of demand for solar hot water, then solar hot water gets a larger percentage of the budget this year. So what we're essentially saying is we're allowing the customer demand to determine what proportion of the budget goes to different technology.
Just a moment longer while I'm trying to scroll through these questions. Could I further explain what is meant by a feed-in tariff? A feed-in tariff is actually a prescribed production payment that is in states where feed-in tariffs have been legislated or designed and put into place. The utilities are required pay a production amount for all renewable energy that is eligible to participate in the feed-in tariff.
So it's as if you are determining that distributed generation will be treated in the same way as a utility project with a standard rate paid per kilowatt hour of energy - excuse me, the rate is prescribed ahead of time, so that project developers can know exactly what they're going to be paid for their energy as they design the project.
They have different deign qualities depending upon the particular feed-in tariff. And that's something that you can get more information on if you look on the desire site for different feed-in tariffs and take a look at what's going on in different jurisdictions.
Let's see. Someone's asking for specific resources to help design incentive programs for small wind. One of the best places to go is the AWEA site, A-W-E-A, the American Wind Energy Association, and also the Small Wind Certification Organization. One of the best things to do for things like that is to actually take a look at the programs that are being provided by other jurisdictions in the country that has programs. One of the most effective that's often referred to is the Nicerta Small Wind Program.
They have a very specific set of criteria and eligibility to participate in their small wind incentive programs, and many other programs simply refer to Nicerta's tables of eligible technologies for their own programs because Nicerta went through all the trouble to develop those. They're very useful.
I see that we have come to the end of the hour. I apologize for not being able to answer more questions. I really appreciate all this participation and look forward to interacting with some of you one-on-one if you have more questions and need some more help on designing effective renewables programs. Thanks very much for your attendance today.