BILL ANALYSIS Ó
AB 2460
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Date of Hearing: April 13, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
AB 2460
(Irwin) - As Amended March 17, 2016
SUBJECT: Solar thermal systems
SUMMARY: Extends and modifies an existing program that provides
incentives for solar water heating incentives and administered
by investor-owned utilities under the supervision of the
California Public Utilities Commission (CPUC). Specifically,
this bill:
1)Extends and modifies an existing program to promote the
installation of solar water systems throughout the state, set
the funding cap for the program between January 1, 2017, and
July 31, 2027, at $1 billion, reserve 50% of the total program
budget for the installation of solar water heating systems in
low-income residential housing or in buildings in
disadvantaged communities, and extend the operation of the
program through July 31, 2027.
2)Requires the governing body of each publicly-owned utility
providing gas service, until August 1, 2027, to adopt,
implement, and finance a solar water heating system incentive
program.
EXISTING LAW establishes a program to support installation of
200,000 solar water heaters by 2017 funded by up to $250 million
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in ratepayer surcharges. (Public Utilities Code Section 2860)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement. "The Aliso Canyon natural gas leak and the
San Bruno tragedy are stark reminders of the everyday dangers
of natural gas. The policies that we set forth must work to
reduce our use and reliance on natural gas. One proven and
effective technology to reduce natural gas use is solar
heating technologies.
"In 2007, AB 1470 [Huffman, Chapter 536, Statutes of 2007]
created a solar thermal rebate program. The program was
designed to incentivize and create a market for rooftop solar
water heating projects. The CPUC did not actually begin the
program until 2010. Soon after, natural gas prices plummeted
and the rebate designed to simulate solar water heating was
too low. It was not until January 2015 that a properly
designed rebate was approved and until May 2015 that it was
implemented. This finally resulted in steady growth as the
program was intended. Now the program is beginning to see
some success, but it is scheduled to sunset in 2017."
"AB 2460 is designed to do several things - extend the program
in order to give it time to work as intended, dedicate at
least 50% of the program rebates to disadvantaged communities,
require the CPUC to review the rebate amount more frequently,
and increase the overall program budget."
2)Current Program: In 2007, AB 1470 (Huffman), Chapter 536,
created the CSI Thermal rebate program to reduce the use of
natural gas in buildings through solar heating technologies.
Approximately 40% of the state's natural gas consumption is
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used for heat within buildings. Up to 80% of that energy could
be provided by rooftop solar heating technologies. Incentives
are needed to give consumers a positive economic value for
their investment. However, although the legislation was passed
in 2007, CSI Thermal rebates were not made available until
2010. In addition, it is unclear whether the CPUC has
authorized sufficient marketing and education about this
program.
In 2014, the State Auditor issued a report on California
Alternative Energy and Energy Efficiency Initiatives<1> where
it stated that the California Solar Initiative Thermal Program
will not install enough solar water heating systems to meet
its goal by the time the program ends in 2017. The State
Auditor recommended the Legislature consider whether it wants
to continue authorizing the collection of ratepayers' money to
fund the program.
According to the CPUC, the current annual energy savings for
this program are more than 4.5 million therms, almost 1
million kilowatt hours, and nearly 25 thousand tonnes of
greenhouse gas (GHG) emission reductions. The current program
has paid out about $45 million in incentives since 2010. The
majority of these funds have been used to fund commercial
multifamily housing and low income multifamily housing
projects ($35 million).
As part of the proposed action plan developed by the CPUC, the
California Energy Commission (CEC), and the Los Angeles
Department of Water and Power (LADWP), they recommend
reprioritizing the existing solar thermal program to fund
projects installable by summer 2017. They particularly note
that funds from this program for low-income customers have
been fully utilized.
--------------------------
<1> https://www.bsa.ca.gov/pdfs/reports/2014-124.pdf
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3)Water Heating Only? This bill specifies a program limited to
solar water heating. Yet solar thermal can provide other
services, such as space heating and cooling. These other
services can not only offset natural gas use but may also
offset electricity use.
The author may wish to consider an amendment to revise the
definition of solar water heating to instead define solar
thermal and make conforming changes to references to solar
water heating to instead state solar thermal.
4)Impact on Ratepayers: This bill allocates up to $1 billion
from ratepayers to fund the incentive program through 2027. If
the program does not use the full amount of funds available by
2027, ratepayer funds would not be collected. The current
program has been in rates since 2007 and has expended $45
million of the original $250 million allocation.
5)Allocation of Funds: This bill apportions 50% of the budget to
low income solar water heating. The CPUC is free to allocate
the remaining 50% as it determines appropriate. Solar thermal
can be used to meet the needs of food, beverage, textiles,
paper and pulp industries. Processes like sterilizing,
pasteurizing, drying, hydrolyzing, distillation and
evaporation, and washing and cleaning do not require high
temperatures and could benefit from the use of solar thermal
technologies.
The author may wish to consider an amendment to revise the
allocation of funds to set aside 10% of the funds to
industrial applications.
6)Suggested Amendments:
SECTION 1. Section 2860 of the Public Utilities Code is
repealed.
SEC. 2. Section 2861 of the Public Utilities Code is amended
to read:
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2861. As used in this article, the following terms have the
following meanings:
(a) "Disadvantaged community" means a community identified by
the California Environmental Protection Agency pursuant to
Section 39711 of the Health and Safety Code.
(b) "Gas customer" includes both "core" and "noncore"
customers, as those terms are used in Chapter 2.2 (commencing
with Section 328) of Part 1, that receive retail end-use gas
service within the service territory of a gas corporation.
(c) "kWth" or "kilowatts thermal" means the unit of measure
of the equivalent thermal capacity of a solar water heating
thermal system that is calculated by multiplying the aperture
area of the solar collector area of the system, expressed in
square meters, by a conversion factor of 0.7.
(d) "kWhth" means kilowatthours thermal as measured by the
number of kilowatts thermal generated, or displaced, in an
hour.
(e) "Low-income residential housing" means either of the
following:
(1) Residential housing financed with low-income housing tax
credits, tax-exempt mortgage revenue bonds, general obligation
bonds, or local, state, or federal loans or grants, and for
which the rents of the occupants who are lower income
households, as defined in Section 50079.5 of the Health and
Safety Code, do not exceed those prescribed by deed
restrictions or regulatory agreements pursuant to the terms of
the financing or financial assistance.
(2) A residential complex in which at least 20 percent of the
total units are sold or rented to lower income households, as
defined in Section 50079.5 of the Health and Safety Code, and
the housing units targeted for lower income households are
subject to a deed restriction or affordability covenant with a
public entity that ensures that the units will be available at
an affordable housing cost meeting the requirements of Section
50052.5 of the Health and Safety Code, or at an affordable
rent meeting the requirements of Section 50053 of the Health
and Safety Code, for a period of not less than 30 years.
(f) "New Solar Homes Partnership" means the 10-year program,
administered by the Energy Commission, encouraging solar
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energy systems in new home construction.
(g) "Solar heating collector" means a device that is used to
collect or capture heat from the sun and that is generally,
but need not be, located on a roof.
(h) "Solar water heating thermal system" means a solar energy
device that has the primary purpose of reducing demand for
natural gas or electricity through water heating, space
heating or cooling , or other methods of capturing heat energy
from the sun to reduce natural gas or electricity consumption
in a home, business, or any building or facility receiving
natural gas that is subject to the surcharge established
pursuant to subdivision (b) of Section 2863, or exempt from
the surcharge pursuant to subdivision (c) (b) of Section 2863,
and that meets or exceeds the eligibility criteria established
pursuant to Section 2864. "Solar water heating thermal
systems" include multifamily residential, industrial,
governmental, educational, and nonprofit solar pool heating
systems, but do not include single-family residential solar
pool heating systems.
SEC. 3. Section 2862 of the Public Utilities Code is amended
and renumbered to read:
2860. (a) Legislature finds and declares all of the
following:
(1) California is heavily dependent on natural gas.
(2) The storage and delivery of natural gas relies on aging
infrastructure that is prone to leaks that can damage the
environment and imperil public health.
(3) Natural gas is a fossil fuel and a major source of global
warming pollution and the pollutants that cause air pollution,
including smog.
(4) California's growing population and economy will put a
strain on energy supplies and threaten the ability of the
state to meet its global warming goals unless specific steps
are taken to reduce demand and generate energy cleanly and
efficiently.
(5) Water heating for domestic and industrial use relies
almost entirely on natural gas and accounts for a significant
percentage of the state's natural gas consumption.
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(6) Solar water thermal heating systems represent the major
untapped natural gas saving potential in California.
(7) In addition to financial and energy savings, solar water
heating thermal systems can help protect against future gas
and electricity shortages and reduce our dependence on foreign
sources of energy.
(8) Solar water heating thermal systems can also help preserve
the environment and protect public health by reducing air
pollution, including carbon dioxide, a leading global warming
gas, and nitrogen oxide, a precursor to smog.
(9) Growing demand for these technologies will create jobs in
California as well as promote greater energy independence,
protect consumers from rising energy costs, and result in
cleaner air.
(10) Installing solar water heating thermal systems in
disadvantaged communities can provide local economic benefits
while advancing the state's clean energy goals and policies to
reduce the emissions of greenhouse gases.
(11) It is in the interest of the State of California to
promote solar water heating thermal systems and other
technologies that directly reduce demand for natural gas in
homes and businesses.
(b) It is the intent of the Legislature to build a mainstream
market for solar water heating thermal systems that directly
reduces demand for natural gas in homes, businesses, schools,
industrial , and nonprofit and government buildings.
(c) It is the intent of the Legislature that the solar water
heating thermal system incentives created by this article
should be a cost-effective investment by gas customers. Gas
customers will recoup the cost of their investment through
lower energy bills as a result of avoiding purchases of
natural gas.
SEC. 4. Section 2863 of the Public Utilities Code is amended
to read:
2863. (a) By July 31, 2017, the commission shall do all of
the following:
(1) Implement changes to the program as authorized pursuant
to this section on December 31, 2016, applicable to the
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service territories of a gas corporation to promote the
installation of solar water heating thermal systems in homes,
businesses, and buildings or facilities of eligible customer
classes receiving natural gas service throughout the state.
Eligible customer classes shall include single-family and
multifamily residential, commercial, industrial, governmental,
nonprofit, and primary, secondary, and postsecondary
educational customers. The commission shall implement program
changes in phases, if necessary, to enable seamless
continuation of the availability of rebates as of January 1,
2017.
(2) The program shall be administered by gas corporations or
third-party administrators, as determined by the commission,
and subject to the supervision of the commission.
(3) The commission shall coordinate the program with the
Energy Commission's programs and initiatives, including, but
not limited to, the New Solar Homes Partnership, to achieve
the goal of building zero-energy homes.
(b) (1) The commission shall fund the program through the use
of a surcharge applied to gas customers based upon the amount
of natural gas consumed. The surcharge shall be in addition to
any other charges for natural gas sold or transported for
consumption in this state.
(2) Funding for the program established by this article shall
not, for the collective service territories of all gas
corporations, exceed one billion dollars ($1,000,000,000) over
the course of the period from January 1, 2017, to July 31,
2027, inclusive.
(3) Fifty percent of the total program budget shall be
reserved for the installation of solar water heating thermal
systems in low-income residential housing or in buildings in
disadvantaged communities. The commission may revise the
percentage if the budget for other types of customers becomes
depleted.
(4) Ten percent of the total program budget shall be reserved
for the installation of solar thermal systems in industrial
applications. The commission may revise the percentage if the
budget for other types of customers becomes depleted.
(5) The commission shall annually establish a surcharge rate
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for each class of gas customers. Any gas customer
participating in the California Alternate Rates for Energy
(CARE) or Family Electric Rate Assistance (FERA) programs
shall be exempt from paying any surcharge imposed to fund the
program designed and implemented pursuant to this article.
(5) Any surcharge imposed to fund the program designed and
implemented pursuant to this article shall not be imposed upon
the portion of any gas customer's procurement of natural gas
that is used or employed for a purpose that Section 896
excludes from being categorized as the consumption of natural
gas.
(6) The gas corporation or other person or entity providing
revenue cycle services, as defined in Section 328.1, shall be
responsible for collecting the surcharge.
(c) Funds shall be allocated in the form of customer rebates
to promote utilization of solar water heating thermal systems.
(1) On and after January 1, 2017, the rebate amount shall be
consistent with the amount the commission established for the
calendar year 2016 until revised by the commission pursuant to
paragraph (2).
(2) Beginning in 2017, and every two years thereafter, the
commission shall consider revisions to the rebate amount,
taking into account the cost of installing solar water heating
thermal systems and the price of natural gas to end-use
customers.
(3) The commission shall ensure that a cap on the maximum
rebate amount does not unreasonably impair the ability of
industrial customers to participate in the program.
(d) In designing and implementing the program required by this
article, no moneys shall be diverted from any existing
programs for low-income ratepayers or cost-effective energy
efficiency programs.
SEC. 5. Section 2864 of the Public Utilities Code is amended
to read:
2864. (a) The commission, in consultation with the Energy
Commission and interested members of the public, shall
establish eligibility criteria for solar water heating thermal
systems receiving gas customer funded incentives pursuant to
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this article. The criteria should specify and include all of
the following:
(1) Design, installation, and energy output or displacement
standards. To be eligible for rebate funding, a residential
solar water heating thermal system shall be certified by an
accredited listing agency in accordance with standards adopted
by the commission. Solar collectors used in systems for
multifamily residential, commercial, government, nonprofit,
educational, or industrial water heating applications shall be
certified by an accredited listing agency in accordance with
standards adopted by the commission. Energy output of
collectors and systems shall be determined in accordance with
procedures set forth by the listing agency, and shall be based
on testing results from accredited testing laboratories.
(2) A requirement that solar water heating thermal system
components are new and unused, and have not previously been
placed in service in any other location or for any other
application.
(3) A requirement that solar water heating thermal collectors
have a warranty of not less than 10 years to protect against
defects and undue degradation.
(4) A requirement that solar water heating thermal systems are
in buildings or facilities connected to a natural gas
utility's distribution system within the state.
(5) A requirement that solar water heating thermal systems
have meters or other kWhth measuring devices in place to
monitor and measure the system's performance and the quantity
of energy generated or displaced by the system. The cost of
monitoring the system shall not exceed 2 percent of the system
cost.
(6) A requirement that solar water heating thermal systems
are installed in conformity with the manufacturer's
specifications and all applicable codes and standards.
(b) Gas customer funded incentives shall not be made for a
solar water heating thermal system that does not meet the
eligibility criteria.
(c) The commission may adopt consensus solar standards
applicable to products or systems as developed by accredited
standards developers.
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SEC. 6. Section 2865 of the Public Utilities Code is amended
to read:
2865. (a) The commission shall establish conditions on gas
customer funded incentives pursuant to this article. The
conditions shall require both of the following:
(1) Appropriate siting and high-quality installation of the
solar water heating therma l system based on installation
guidelines that maximize the performance of the system and
prevent qualified systems from being inefficiently or
inappropriately installed. The conditions shall not impact
housing designs or densities presently authorized by a city,
county, or city and county. The goal of this paragraph is to
achieve efficient installation of solar water heating thermal
systems and promote the greatest energy production or
displacement per gas customer dollar.
(2) Appropriate energy efficiency improvements in the new or
existing home or facility where the solar water heating
thermal system is installed.
(b) The commission shall set rating standards for equipment,
components, and systems to ensure reasonable performance and
shall develop procedures that provide for compliance with the
minimum ratings.
SEC. 7. Section 2866 of the Public Utilities Code is amended
to read:
2866. (a) The commission may establish a grant program or a
revolving loan or loan guarantee program for low-income
residential housing consistent with the requirements of
Chapter 5.3 (commencing with Section 25425) of Division 15 of
the Public Resources Code. All Notwithstanding Section 2867.4,
all loans outstanding as of August 1, 2018, 2027, shall
continue to be repaid in a manner that is consistent with the
terms and conditions of the program adopted and implemented by
the commission pursuant to this subdivision, until repaid in
full.
(b) The commission may extend eligibility for funding
pursuant to this section to include residential housing
occupied by ratepayers participating in a commission approved
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and supervised gas corporation Low-Income Energy Efficiency
(LIEE) program and who either:
(1) Occupy a single-family home.
(2) Occupy at least 50 percent of all units in a multifamily
dwelling structure.
(c) The commission shall ensure that lower income households,
as defined in Section 50079.5 of the Health and Safety Code,
and, if the commission expands the program pursuant to
subdivision (b), ratepayers participating in a LIEE program,
that receive gas service at residential housing with a solar
water heating system receiving incentives pursuant to
subdivision (a), benefit from the installation of the solar
water heating thermal systems through reduced or lowered
energy costs.
(d) The commission shall do all of the following to implement
the requirements of this section:
(1) Maximize incentives to properties that are committed to
continuously serving the needs of lower income households, as
defined in Section 50079.5 of the Health and Safety Code, and,
if the commission expands the program pursuant to subdivision
(c), (b), ratepayers participating in a LIEE program.
(2) Establish conditions on the installation of solar water
heating thermal systems that ensure properties on which solar
water heating thermal systems are installed under subdivision
(a) remain low-income residential properties for at least 10
years from the time of installation, including property
ownership restrictions and income rental protections, and
appropriate enforcement of these conditions.
SEC. 8. Section 2867 of the Public Utilities Code is amended
to read:
2867. (a) Consistent with subdivision (c) of Section 2863, the
commission shall consider reductions over time in rebates
provided through the program. The rebate shall be structured
so as to drive down the cost of the solar water heating
thermal technologies, and be paid out on a performance-based
incentive basis so that incentives are earned based on the
actual energy savings, or on predicted energy savings as
established by the commission.
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(b) The commission shall consider federal tax credits and
other incentives available for this technology when
determining the appropriate rebate amount.
(c) The commission shall consider the impact of rebates for
solar water heating thermal systems pursuant to this article
on existing incentive programs for energy efficiency
technology.
(d) In coordination with the commission, the Energy Commission
shall consider, when appropriate, coupling rebates for solar
water heating thermal systems with complementary energy
efficiency technologies, including, but not limited to,
efficient hot water heating tanks and tankless or on demand
hot water systems that can be installed in addition to the
solar water heating thermal system.
SEC. 9. Section 2867.1 of the Public Utilities Code is
repealed.
SEC. 10. Section 2867.2 of the Public Utilities Code is
repealed.
SEC. 11. Section 2867.3 of the Public Utilities Code is
amended to read:
2867.3.The governing body of each publicly owned utility
providing gas service to retail end-use gas customers shall,
after a public proceeding, adopt, implement, and finance a
solar water heating thermal system incentive program that does
all the following:
(a) Ensures that any solar water heating thermal system
receiving monetary incentives complies with eligibility
criteria adopted by the governing body. The eligibility
criteria shall include those elements contained in paragraphs
(1) to (6), inclusive, of subdivision (a) of Section 2864.
(b) Includes minimum ratings and standards for equipment,
components, and systems to ensure reasonable performance and
compliance with the minimum ratings and standards.
(c) Includes an element that addresses the installation of
solar water heating thermal systems on low-income residential
housing. If deemed appropriate in consultation with the
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California Tax Credit Allocation Committee, the governing
board may establish a grant program or a revolving loan or
loan guarantee program for low-income residential housing
consistent with the requirements of Chapter 5.3 (commencing
with Section 25425) of Division 15 of the Public Resources
Code.
SEC. 12. Section 2867.4 of the Public Utilities Code is
repealed.
SEC. 13. Section 2867.4 is added to the Public Utilities Code,
to read:
2867.4. This article shall become inoperative on August 1,
2027, and, as of January 1, 2028, is repealed, unless a later
enacted statute, that becomes operative on or before January
1, 2028, deletes or extends the dates on which it becomes
inoperative and is repealed.
REGISTERED SUPPORT / OPPOSITION:
Support
Aztec Solar
California Solar Energy Industries Association
Center for Sustainable Energy
Environment California
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Fafco
Mercy Housing
Solartek
UMA Solar
Opposition
None on file.
Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083