BILL ANALYSIS
AB 1536
Page 1
Date of Hearing: April 20, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 1536 (Blakeslee) - As Amended: April 14, 2009
SUBJECT : Clean technology incentive program.
SUMMARY : Expands eligibility for Self-Generation Incentive
Program (SGIP) rebates to include energy storage facilities.
EXISTING LAW :
1)Authorizes the California Public Utilities Commission (PUC) to
administer the SGIP to provide rebates for distributed
generation electricity generators.
2)Restricts SGIP-eligible technologies to wind and fuel cells
distributed generation technologies that meet or exceed
specific emissions standards.
3)Requires the California Energy Commission (CEC), on or before
November 1, 2008, in consultation with the Air Resources Board
(ARB), to evaluate the costs and benefits of providing
ratepayer subsidies for renewable and specific fossil fuels,
and make recommendations for the changes in the eligibility of
technologies and fuels under the program and whether the level
of subsidy should be adjusted.
4)Defines a heat corporation as certain corporations or persons
owning, controlling, operating, or managing any heating plant
for compensation, exempts those that generate heat for their
own use or its tenants' use, and exempts those that employ
landfill gas technology for its own use, for its tenants' use,
or for the sale to a public agency.
THIS BILL :
1)Changes the name of the SGIP to the Clean Technology Incentive
Program (CTIP).
2)Expands the eligibility for grants from the SGIP/CTIP to
include energy storage facilities that meet any of the
following requirements:
a. The facility stores energy generated from a
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renewable energy resource.
b. The facility is capable of responding to commands
from the California Independent System Operator (CalISO)
to absorb or dispatch electricity.
c. The facility is capable of providing frequency
control to integrate intermittent eligible renewable
resources.
d. The facility stores energy during off-peak periods
and dispatches electricity during peak periods.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, the purpose of this bill is
to create incentives for merchant-owned energy storage
facilities. The author believes these energy storage facilities
will be necessary for California to meet its renewable energy
goals since they can store energy produced by wind and solar
facilities at times that electricity is not needed to be used at
peak periods when demand for electricity is high.
1) Why do we need energy storage facilities : California law
requires all retail sellers of electricity to meet at least 20%
of the retail sales using electricity from renewable resources
by 2010 - a Renewable Portfolio Standard (RPS). ARB has
identified an advancement of the RPS to 33% by 2020 as one of
the key actions needed to be taken in order to meet the
greenhouse gas (GHG) reduction goals of AB 32 (Nunez), Chapter
488, Statutes of 2006. Two bills have been introduced this
legislative session to create the 33% RPS goals: AB 64
(Krekorian) and SB 14 (Simitian).
While several studies have determined that a 33% RPS is
achievable, it can only be met with a heavy reliance on wind and
solar energy. The problem is that both resources are
intermittent. They only produce electricity when the wind is
blowing or the sun is out. This intermittency could create
reliability problems for the electricity grid since the grid
managers cannot count on the solar and wind energy being
available at the same time there is demand for electricity.
One way to resolve this reliability problem is to build more
electric generation facilities that are capable of turning on
and off quickly and can be available when the renewable energy
facilities are not operating. These facilities are referred to
as "peaker plants." They generally run on natural gas. They are
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also relatively expensive to operate compared to other
generating facilities that operate around the clock.
Another approach would be to find ways to store the electrical
output of renewable facilities to use hours later. The storage
devices could help take the place of peaker plants.
2) What is energy storage : Energy storage devices are devices
that can take electricity and convert the electricity into some
other form of energy so it can be stored and converted back to
electricity at some later point. The most common form of energy
storage device in use today is batteries. However, there are no
commercially available batteries that could cost-effectively
store the large amounts of electricity that can be produced by
large-scale wind farms or solar facilities. Another form of
electricity storage that is already in use in California is pump
storage, where water is pumped into a reservoir at night and
then released through turbines during the day to produce
electricity. Additionally, there is research taking place to
develop other storage devices using compressed air, flywheels,
fuel cells, and other innovative technologies.
This bill defines storage systems to include any device that
stores energy generated from an eligible renewable resource
during off-peak periods and dispatched the energy during on-peak
periods. The device must also be capable of storing energy for
at least two hours and must be able to respond to orders from
the transmission grid managers to absorb or dispatch energy.
3) The SGIP : The SGIP provides rebates for certain electricity
generation systems sized up to 5 megawatts (MW). Currently, the
SGIP is limited to wind and fuel cells that meet specified
emissions standards.
All energy ratepayers are subject to the SGIP surcharge.
According to the PUC, most residential customers typically
install small-scale solar PV, which is funded out of the
California Solar Initiative. As such, only commercial and
industrial entities apply for SGIP funds.
In September 2005, the PUC issued the SGIP Preliminary Cost
Effectiveness Evaluation Report which measured costs and
benefits of SGIP during 2004. The Report concluded that the
SGIP is cost-effective for participants only (owners and
operators of the generation facilities); however,
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cost-effectiveness declines significantly when viewed from the
non-participant (ratepayers) and societal (all members of
society) perspective. The report calculated the benefit-cost
ratios for non-generators (the group that pays for it) "?are
substantially less than one." The non-participant or ratepayer
evaluation measured what happens to customer bills or rates due
to changes in utility revenues and operating costs caused by the
program.
A number of parties commented that the Cost Effectiveness report
failed to consider all the benefits of the SGIP. In response to
this concern, the Legislature required the CEC to prepare a new
report on the effectiveness of the SGIP. That report was
released in the fall of 2008. Based on the data in the report,
the CEC recommended that the SGIP should provide incentives for
energy storage technologies, since these technologies provide
capacity benefits.
5) Storing Benefits : On March 23, 2009, the Utilities and
Commerce Committee approved AB 44 (Blakeslee) which created a
different set of incentives for energy storage facilities. AB 44
allows investor owned utilities (IOUs) to earn a higher rate-of
return on storage facilities the IOUs owns and operates and
creates an incentive for customer-owned storage facilities by
requiring the PUC to develop a time-of-use tariff that allows
storage facilities operators to "buy" the electricity from the
utility when it is at the lower rate and then "sell" the
electricity back to the utility when it is more expensive.
RELATED LEGISLATION :
AB 44 (Blakeslee) creates incentives additional incentives for
energy storage facilities.
SB 412 (Kehoe) expands the eligibility of the SGIP to include
all to distributed generation resources that the PUC determines
will support state goals for the reductions of emissions of
greenhouse gases pursuant to the California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section
38500) of the Health and Safety Code).
REGISTERED SUPPORT / OPPOSITION :
Support
AB 1536
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None on file.
Opposition
None on file.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083