BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 585| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 585 Author: Kehoe (D) Amended: 5/31/11 Vote: 27 - Urgency SENATE ENERGY, UTIL. & COMM. COMMITTEE : 10-1, 4/05/11 AYES: Padilla, Fuller, Berryhill, Corbett, De León, DeSaulnier, Pavley, Rubio, Simitian, Strickland NOES: Wright SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Runner NO VOTE RECORDED: Emmerson SUBJECT : Energy: solar energy systems: funding SOURCE : California Solar Energy Industry Association Solar Alliance DIGEST : This bill requires the Public Utilities Commission (PUC) to utilize accrued interest from California Solar Initiative (CSI) funds to meet the incentive payments for non-residential installations and to increase collections from electric ratepayers of the state's 3 largest electrical corporations for any remaining shortfalls in funding. Requires the discount rate to be set at 4 percent, unless the commission determines the rate should be reduced. Defines "discount rate" as a financial mechanism that provides a given amount of interest as an CONTINUED SB 585 Page 2 offset to the loss of the time value of money on solar projects that receive performance-based incentives. ANALYSIS : Existing law 1.Establishes the CSI, a $3.3 billion program which provides incentives for the installation of solar photovoltaic (PV) systems for customers of the state's investor-owned utilities (IOUs) and publicly owned utilities (POUs). 2.Requires the PUC, in implementing the CSI, to adopt incentive payments that decline not less than an average of 7% per year which shall be zero as of December 31, 2016 and to adopt performance-based incentives (e.g. payments based on the amount of electricity produced) all PV systems over 100 kilowatts (kW) and for half of all systems over 30 kW. Background California Solar Initiative (CSI) Effective in 2007, the CSI calls for the installation of 3,000 megawatts (MW) of new, solar-produced electricity by 2016. Targeted expenditures under the CSI, funded by ratepayers, are $3.3 billion over ten years, distributed among three distinct program components: 1.IOUs - $2.167 million/1940 MW for existing residential homes, as well as existing and new commercial, industrial, government, non-profit, and agricultural properties; 2.New Solar Homes Partnership, $400 million/360 MW, administered by the California Energy Commission and funded by the Public Goods Charge for new residential homes; and 3.POUs $784 million/700 MW. In July 2010, the PUC reported that "three years into the SB 585 Page 3 state's 10-year solar program, California is already 42 percent of the way towards its general market program goal in the territories of the IOUs. This figure included both projects already installed and those holding reservations for incentives and in the process of being installed. As of last summer, California had over 600 MW of solar connected to the electric grid at nearly 65,000 customer sites. Of the 598 MW of capacity installed in investor-owned utility territories, 342 MW were installed under the CSI Program at 31,000 sites, as well as 256 MW installed through other programs." Comments According to the author's office, funding for non-residential incentives in the CSI's 10-tier'd, performance based declining incentive program, is exhausted in two IOU service territories - PG&E & SDG&E. At the eighth tier incentives make up about 5% of the total costs for non-residential solar installation. SB 585 is needed to ensure that the goals of the program are met and seeks to provide a means to identify additional funding for that purpose. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Program oversight Absorbable within existing resources Special* Increased electricity costs $2,400 over the next several years Various to state agencies Incentive payments to state Unknown revenues Various agencies SB 585 Page 4 * Public Utilities Commission Utilities Reimbursement Account. SUPPORT : (Verified 5/26/11) California Solar Energy Industry Association (co-source) Solar Alliance (co-source) AEE Solar, Inc. CA Public Utilities Commission Clean Water Action Clovis Unified School District Coalition for Adequate School Housing Fowler Unified School District Kings Canyon Unified School District KyotoUSA Mainstream Energy Corp. REC Solar, Inc. San Diego Gas and Electric (if amended) School Innovations & Advocacy Sharp Solar Electricity Silicon Valley Leadership Group SolarCity Solaria Corporation SPG Solar Inc. TerraVerde Renewable Partners The Vote Solar Initiative OPPOSITION : (Verified 5/26/11) Southern California Edison (unless amended) The Utility Reform Network (unless amended) ARGUMENTS IN SUPPORT : The Silicon Valley Leadership Group would like to offer support for SB 585. The California Solar Initiative has funded nearly 80,000 solar projects making California the leading state for solar installations across the country. CSI has led to employment, business growth, and has helped to reduce the cost of solar energy systems from $10/W in 2007 to $8.56/W in December 2010 for systems under 10kW. Addressing the shortfall in funding for private and public sector projects will help to continue the success of this program. The Public Utilities Commission states this bill allows the PUC SB 585 Page 5 to fully fund the CSI program's budget shortfall. The CSI program is very popular, and is helping to create a strong solar industry in California. The CSI program is a key component in the State's ability to achieve reduced greenhouse gas emissions through the use of clean, distributed technology. The proposed bill is a reasonable effort to increase funding for this worthwhile effort. The bill will allow the State's ratepayers to reap the benefits of the most cost-effective phase of the program where they will stimulate the most MWs of solar installations for the least incentive payment. The Clean Water Action states SB 585 is critical to the growth of renewable energy in California. In light of the pending commitment to achieve a 30% renewable portfolio, passage of SB 585 will be critical to help meet that requirement. This is the time to further diversify the sources and location of energy in order to build a safe and sustainable system. California must reduce dependence on energy sources that threaten oceans with oil spills, require enormous amounts of water for cooling or put our citizens at risk of radiation exposure. RM:rm 5/31/2011 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****