BILL ANALYSIS Ó
AB 1637
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Date of Hearing: August 30, 2016
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB 1637
(Low) - As Amended August 18, 2016
SUBJECT: Energy: greenhouse gas reduction
SUMMARY: Doubles the annual funding authorization for the
Self-Generation Incentive Program (SGIP), which permits the
Public Utilities Commission (PUC) to collect an additional $83
million/year from utility customers to fund payments to
distributed energy resources (DER) until 2019 ($249 million
total).
Extends the net energy metering program for fuel cells (NEMFC)
for five years, increases the individual project cap from one
megawatt (MW) to five MW, increases the statewide cap of 500 MW
by subtracting existing facilities, and updates emission
standards applicable to each fuel cell participating in NEMFC.
Specifically, this bill:
1)Doubles the funding authorized for SGIP for the program's
remaining three years.
2)Extends the NEMFC program for five years, including fuel cells
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that commence operation on or before December 31, 2021.
a) Increases the individual project cap from one to five
MW.
b) Increases the statewide cap of 500MW by subtracting
projects installed as of January 1, 2017.
c) Requires eligible projects to comply with the Air
Resources Board (ARB) distributed generation certification
standards (establishing emission limits for oxides of
nitrogen and other criteria pollutants).
d) Requires ARB to establish and update greenhouse gas
(GHG) standards applicable each year to assure that each
eligible fuel cell reduces GHG emissions compared to the
electrical grid. Fuel cells must continue to meet the
applicable annual standard during operation to maintain
eligibility for NEMFC.
EXISTING LAW:
1)Authorizes the PUC to authorize investor-owned electric
utilities (IOUs) to collect up to $83 million per year from
their customers through distribution rates through 2019 to
fund SGIP. Under SGIP, utilities provide ratepayer-funded
incentives for eligible DER, including advanced energy storage
and generation technologies that the PUC, in consultation with
ARB, determines will achieve reductions in GHG emissions.
Under a PUC decision adopted earlier this year, 75% of SGIP
funds are allocated to storage technologies.
2)Requires each IOU, until January 1, 2017, to offer a NEM
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tariff for a customer who generates electricity using an
onsite fuel cell electrical generating facility not greater
than one MW until total installed fuel cell electrical
generation resources reaches the IOU's proportional share of
500 MW.
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's statement:
In 2001, the Legislature created SGIP as a peak load
reduction program in response to the energy crisis. Since
then, the program has undergone several revisions and is
now an essential market development tool for customer sited
clean-energy technologies like energy storage and wind
energy. The SGIP provides incentives for installation of
distributed energy resources that are located at a
customer's site and sized no larger than what is needed to
meet on-site energy needs. The SGIP program has been
recently (in June of this year) reformed and will be much
more effective and accountable to ratepayers. Most of the
incentives under the SGIP program will now be provided to
energy storage systems which are crucial to managing our
integration of electric vehicles and clean energy into the
power grid. AB 1637 would double the amount of money the
PUC is authorized to require the IOUs to collect from
ratepayers through program's sunset in 2019.
In 2003, the Legislature created the NEMFC program out of
recognition of the benefits associated with the increased
deployment of advanced fuel cell technology for clean
distributed energy generation. This existing policy is set
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to expire at the end of 2016. AB 1637 extends the 2016
sunset date for FC NEM by 5 years and expands the law to
enable larger fuel cell projects to be installed at
customer facilities while ensuring that stringent GHG
reduction requirements are met.
Continuing policies such as SGIP and NEMFC help achieve the
State's ambitious clean energy goals by reducing GHG
emissions and supporting renewable energy integration and
technological innovation. The state's continued investment
in these technologies will complement the rest of the
state's suite of policies that drive clean energy
investments, create jobs, and protect our environment.
2)Each eligible fuel cell must reduce GHG emissions compared to
electrical grid. For NEMFC, this bill establishes more
stringent GHG standards to assure eligible projects remain
cleaner than the grid each year of operation. The bill
establishes a new GHG standard, established by ARB, rather
than the existing PUC/SGIP standard, which is expected to be
lower than the existing standard at the outset, and get
progressively lower each year as the overall GHG emissions
from the grid decrease due to implementation of a 50%
Renewables Portfolio Standard, reduction of coal imports, and
other factors. The bill's new GHG standard applies to
existing installed fuel cells, as well as future installed
fuel cells, requiring all NEMFC participants to meet annual
GHG reduction standards, to be adopted by ARB, to remain
eligible for NEMFC.
3)Has SGIP been reformed enough to justify doubling its budget?
As the author notes, SGIP has been "reformed" pursuant to SB
861, a 2014 budget trailer bill. In 2015, the PUC adopted
more stringent GHG standards required by SB 861, as follows:
a) 350 kilograms (kg)/Megawatts per hour (MWh) (down
from 379 kg/MWh, the prior standard) as the maximum level
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of CO2 emissions allowed for technologies participating
in SGIP in 2016.
b) Decreased GHG emission factors for each successive
program year to reflect the increasing renewable energy
targets imposed by SB 350, with a final GHG threshold of
337 kg/MWh in 2020.
In June 2016, the PUC adopted additional changes to the
program, including the following:
c) Beginning in 2017, generation projects must use 10%
biogas - this escalates up to 100% by 2020.
d) Storage is allocated 75% of funds (15% carved out
for residential projects). Generating technologies are
allocated the remaining 25% (40% carved out for renewable
generation).
e) A lottery will replace the first-come first-served
system, with lottery done by budget category. Energy
storage projects paired with renewables or located in an
Aliso Canyon-affected area will be given priority in the
lottery.
f) A 20% developer cap replaces the previous 40%
manufacturer cap.
As promising as these changes may be, they have yet to be
fully implemented, much less evaluated. In addition, the
recent round of SGIP funding (February 2016) was subject to
allegations of "hacking" and misconduct on the part of an
applicant who manipulated the online application process.
Finally, some aspects of the program design, including the
percentage allocation to storage and generation technologies
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and the developer cap, are based on the current level of
funding. Doubling funding requires these elements of program
design be reevaluated.
4)Greater data transparency is necessary for evaluation of SGIP
and NEMFC emissions performance. The lack of
publicly-available in-use data on SGIP-funded projects makes
determining their actual reliability and emissions performance
difficult. Since emissions performance is essential to
determine eligibility and measure the programs' performance,
it is critical that each eligible customer report in-use
emissions data to the PUC and ARB on a regular basis, and be
subject to on-site inspection to verify equipment operations
and performance, including capacity, thermal output, and
usage, in order to verify criteria pollutant and GHG emissions
performance. This bill lacks provisions to assure that each
eligible customer has an obligation to report emissions data
to ARB which was included in the language previously approved
by this committee, which was later amended into AB 1530
(Levine).
REGISTERED SUPPORT / OPPOSITION:
Support
Advanced Energy Economy
Advanced Microgrid Solutions
Asian Pacific Environmental Network
Axiom Materials
Berkeley City College
Bloom Energy
Brightline Defense Project
California Energy Storage Alliance
California Housing Partnership Corporation
California Solar Energy Industries Association
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Century Link
Clean Power Campaign
College of Alameda
Core States Group
County of Santa Cruz
Doosan
Equinix
E2
Fuel Cell & Hydrogen Energy Association
Fuel Cell Energy
GreenbergFarrow
Green Charge Networks
I & D Consulting
Ice Energy
Inova Diagnostics
Jabil
Johnson Matthey Fuel Cells
Laney College
LG
Lodi Unified School District
Merritt College
Monterey Peninsula Unified School District
National Fuel Cell Research Center
NLine Energy
Oak Park Unified School District
Plug Power
Primate Healthcare
School Energy Coalition
Sharp Laboratories of America
Sierra Nevada
Silicon Valley Leadership Group
Solar City
Stem
Sunpower
Tech Net
Tread Stone Technologies, Inc.
We O'Neil
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Opposition
Capstone Turbine Corporation
Caterpillar, Inc.
Cummins
DE Solutions
ETAGEN
Solar Turbines
Tecogen, Inc.
Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)
319-2092