BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 2460 Hearing Date: 6/27/2016
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|Author: |Irwin |
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|Version: |6/14/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Solar thermal systems
DIGEST: This bill extends by five years the California Solar
Initiative thermal rebate program by five years and establishes
a program funding cap of $250 million.
ANALYSIS:
Existing law:
1)Establishes a surcharge on all natural gas consumed in the
state to fund low-income assistance programs, energy
efficiency programs, and public interest research and
development programs. (Public Utilities Code §890 et seq.)
2)Establishes the California Solar Initiative (CSI) to
incentivize the installation of solar photovoltaic and solar
thermal systems for customers of the state's investor-owned
utilities and publicly owned utilities. (Public Utilities
Code §2851 et seq.)
3)Requires the California Public Utilities Commission (CPUC), if
it determines that it is cost effective for ratepayers and in
the public interest, to implement a CSI Thermal rebate program
funded by $250 million in ratepayer surcharges to promote the
installation of 200,000 solar water heating systems that
displace the use of natural gas in California homes and
businesses by 2017. (Public Utilities Code §2860 et seq.)
4)Requires the California Environmental Protection Agency to
identify "Disadvantaged communities" in order to help direct
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investments to disadvantaged communities. (Health and Safety
Code §39711 et seq.)
This bill:
1) Extends the CSI Thermal rebate program by five years,
from January 1, 2017 to July 31, 2022.
2) Establishes maximum funding for the program at
$250,000,000.
3) Reserves 50 percent of the total program budget for
installation of solar thermal systems in low-income
residential housing or in buildings in disadvantaged
communities, as defined by Health and Safety Code §39711.
4) Authorizes the CPUC to revise the percentage cited in
the preceding bullet if the budget for other types of
customers becomes depleted.
5) Requires the governing body of each publicly owned
utility providing gas service to adopt, implement, and
finance a solar thermal system incentive program.
6) Directs the CPUC, every two years, to consider revisions
to the rebate amount, taking into account the cost of
installing solar thermal systems and the price of natural
gas to end-use customers.
Background
Natural Gas Consumption in California. Natural gas is one of
the big three fossil fuels used around the world. Although it
burns cleaner than gasoline and diesel, it still releases carbon
dioxide (CO2), monoxide, and other carbon compounds in the
atmosphere, thus contributing towards the greenhouse effect.
Further, natural gas is non-renewable and will eventually be
depleted like other fossil fuels. It is not a sustainable form
of energy.
According to the California Energy Commission (CEC), natural gas
consumption is driven mostly by space and water heating,
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followed distantly by cooking and other uses. Residential water
heating alone uses 2.5 billion therms, which is equal to the
total storage capacity of natural gas in the state, including
Aliso Canyon.
Figure ES1 and Table ES1 displays the proportions of energy
consumption for each end use in the residential and commercial
sectors.
Solar Thermal Systems. Solar thermal systems are systems used
to collect solar energy to generate thermal energy or electrical
energy for use in industry, and in the residential and
commercial sectors. Solar thermal systems differ from solar
photovoltaic systems, which generate electricity rather than
heat. Thermal energy is used to heat water or other fluids, and
can also power solar cooling systems.
The CSI Thermal Rebate Program. The CSI thermal program was
created by legislation in 2007 to reduce the use of natural gas
in meeting heating demand in buildings. The program,
administered by investor-owned utilities (IOUs) under the
supervision of the CPUC, provides rebates to utility customers
who install solar thermal systems to replace water-heating
systems powered by electricity or natural gas. The CPUC did not
begin implementation of the program until 2010 and promoted
solar water heating through direct financial incentives to
retail customers, training for installers and building
inspectors, and a statewide marketing campaign.
According to the CPUC, the CSI Thermal program has reduced over
24,000 metric tons of annual CO2 emissions to date, which is the
equivalent of taking over 5,000 cars off the road.
Goal of 200,000 Solar Water Heating Systems Fell Short. In
2014, the State Auditor issued a report on California
Alternative Energy and Energy Efficiency Initiatives where it
stated that the CSI 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
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Legislature consider whether it wants to continue authorizing
the collection of ratepayers' money to fund the program.
This bill extends the program by five years but removes the goal
of installing 200,000 solar water heating systems.
Aliso Canyon. Natural gas is a highly flammable substance that
can cause significantly more damage should there be an accident.
Natural gas leaks can cause fires or explosions, if not handled
carefully. It is colorless, tasteless and odorless and cannot
be detected by smell unless an odorant is added to it.
The Aliso Canyon natural gas storage facility is an underground
storage facility near Los Angeles, CA. It is the second-largest
gas storage facility of its kind in the United States. A leak
was discovered by employees on October 23, 2015. On February
18, 2016, state officials announced that the leak was
permanently plugged.
The CPUC is in the rulemaking process to complete a proposed
action plan to reprioritize the CSI Thermal Rebate program to
mitigate natural gas supply shortage due to the Alison Canyon
natural gas leak in 2015. On May 6, 2016, the CPUC Energy
Division approved temporary additional program incentives in
SoCal Gas' service territory.
More time, more money? As briefly described above, the CPUC did
not begin implementation of the rebate program until 2010.
Market conditions - namely the great recession, the extreme drop
in the price of natural gas, and a failure to see significant
decreases in the costs to install solar thermal systems -
diminished program activity. The CPUC has revised the program
several times in recent years, including rejiggering rebate
amounts and allocations across program sectors. The program has
been more active very recently than in past years, yet, it
sunsets on January 1, 2018. Given the recent uptick in program
activity, it makes sense to extend the program, as this bill
does.
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This bill also specifies a total program budget through its
duration at the end of 2022 shall not exceed $250 million. This
approach - capping the program budget - differs from the
approach of past legislation, which directed the CPUC to
establish the surcharge on IOU natural gas customers at an
amount needed to achieve a statutorily specified goal:
installing 200,000 solar water heating systems, or the
equivalent output of 200,000 solar water heating systems, on
homes, businesses, and buildings or facilities of eligible
customer classes receiving natural gas service in California by
2017. The amount in this bill, however, corresponds the
original program budget identified by CPUC needed to meet the
statutory program goals. Because the program has already paid
out $40 million, this $250,000 cap represents an increase over
the initial program budget. It is not clear why such a budget
increase is needed when their remains available from the given
program budget $115 million for rebates in general.<1>
Prior/Related Legislation
AB 1470 (Huffman, Chapter 536, Statutes of 2007) created the CSI
Thermal rebate program, a $250 million incentive program to
promote the installation of 200,000 solar water heating systems
that displace the use of natural gas in California homes and
businesses by 2017.
AB 2249 (Buchanan, Chapter 607, Statues of 2012) directed the
CPUC to complete a review of whether the rebate levels
established in the CSI Thermal rebate program will be sufficient
to reach the goal of 200,000 solar water heating systems by
2017, and to report the results of the review to the
Legislature.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
California Solar Energy Industries Association (Source)
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<1> http://csithermalstats.org/
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ACR Solar International Corp.
All Valley Solar, Inc.
Ameco Solar
Aztec Solar, Inc.
Brightline Defense Project
California Solar Thermal, Inc.
Center for Sustainable Energy
Coalition for Clean Air
Environment California
Environmental Defense Fund
Environmental Solar Design, Inc.
FAFCO, Inc.
Heliodyne, Inc.
International Association of Plumbing and Mechanical Officials
Mercy Housing
Promise Energy
Sierra Club California
Solar Forward
SolarCraft Services, Inc.
Sol-tek
SunChiller, Inc.
SunEarth, Inc.
Sun Light & Power
Suntrek
SunUp Solar Systems, Inc.
SunVapor
The Greenlining Institute
UMA Solar
OPPOSITION:
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT: According the author:
Solar thermal is a proven technology to significantly
reduce natural gas use for heating water in homes and
businesses. In the context of the Aliso Canyon natural gas
leak, solar thermal is about helping move the state off of
its heavy reliance on natural gas, meeting our climate
change goals while also protecting residents. As part of
our state's programs that target the reduction of our
overall use of natural gas, the recently revamped CSI
Thermal program should be continued.
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Importantly, low-income residents should be a central focus
of the state's growing solar water heating market.
Low-income residents spend proportionately more of their
income on energy, meaning the rebates will go further to
help those households. Demand for solar thermal in
low-income multifamily housing buildings is high,
accounting for nearly half of the applications in 2015. As
of December 2015, the $25 million in funding for low-income
customers is fully exhausted. The CSI Thermal Program
Administrators recently stated low-income projects are
crucial to maximizing the CSI Thermal Program's
effectiveness.
AB 2460 will extend CSI Thermal program funding for ten
years through 2027, and target significant resources for
solar thermal on low-income housing and buildings in
disadvantaged communities. This bill will also ensure that
the maximum rebate cap works for industrial customers,
enabling solar thermal systems for the largest users of
natural gas. This bill will also improve the effectiveness
of the incentives by directing the CPUC to review the
incentive levels every two years to adjust for natural gas
price fluctuations.
The CSI Thermal Program Administrators are Pacific Gas and
Electric Company, Center for Sustainable Energy, and
Southern California Gas Company. Advice Letter sent to
CPUC on Feb 26, 2016.
ARGUMENTS IN OPPOSITION: The Howard Jarvis Taxpayers
Association contends this bill extend yet another wasteful
program.
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