BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
- Blumenfield Hearing Date: June 29,
2010 A
As Amended: June 17, 2010 FISCAL B
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DESCRIPTION
Current law requires the Department of General Services (DGS) to
identify state buildings where it is feasible to produce onsite
electrical generation or reduce the level of peak demand
electricity consumption using alternative energy, storage
technologies, or cogeneration.
Current Executive Order requires that state agencies,
departments, and other entities under the direct executive
authority of the Governor cooperate in taking measures to reduce
grid-based energy purchases for state-owned buildings by 20% by
2015, through cost-effective efficiency measures and distributed
generation technologies.
Current law requires investor-owned and publicly owned utilities
(IOUs and POUs) to develop a standard tariff (aka feed-in-tariff
or FIT) for all retail customers to compensate those customers
for excess renewable energy produced up to a maximum of 3
megawatts (MW). Statewide participation is capped at 1,500 MW
which is split evenly between the territories of the large IOUs
and POUs and then proportionally between the utilities. The
tariff price is based on the market price referent plus
renewable and other attributes.
This bill requires a state agency participating in a FIT to
consider the total annual amount of kilowatt hours exported to
the grid in determining whether the state agency has achieved
the policy goals and objectives established by law and executive
order.
Current law establishes the California Solar Initiative (CSI), a
$3.3 billion program to subsidize the installation of
photovoltaic (PV) systems for customers of the state's IOUs and
POUs and caps the incentives awarded per customer to
installations sized at 1 MW.
This bill expands CSI eligibility for any state agency for
incentive payments for facilities sized up to 5 MW with a cap of
26 MW.
BACKGROUND
In 2001, at the height of the energy crisis the Legislature
directed the DGS to identify and retrofit state buildings to
reduce energy consumption or produce its own electrical
generation. (ABX1 29, Kehoe, Chapter 8, Statutes of 2001-02 1st
Ex. Session)
In 2004 the Governor issued a Green Building Executive Order
(S-20-04) directing state agencies to implement a variety of
actions to reduce electricity usage in state buildings by 20
percent by 2015. These actions include the retro-commissioning
of existing state buildings to ensure that energy intensive
systems are operating optimally and the implementation of
cost-effective retrofits to achieve even higher energy savings.
The order also directed agencies to reduce grid-based energy
usage in its buildings by 20 percent by 2015. The DGS, as the
state's real estate builder, planner, and manager, is
spearheading the effort in partnership with the Green Action
Team, an inter-agency group chaired by the Secretary of the
State and Consumer Services Agency.
Solar Generation on State Buildings - California state agencies
are using on-site renewable energy at a growing number of
facilities through the use of power purchase agreements (PPAs).
Under these public-private partnerships, solar service providers
finance, build and operate the systems, while the customers pay
only for the electricity at prices equal to, or less than,
utility tariff rates. The PPA receives CSI rebates and federal
tax credits of 30%.
According to the DGS Renewable Energy Directory, 46 state
buildings have installed 13 MW of solar generation ranging in
size from 5 kilowatts to 1.6 MW. More than 8 MW is in the
planning stages at 17 state sites.
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: IOUs,
$2.167 million/1940 MW; New Solar Homes Partnership, $400
million/360 MW; and POUs $784 million/700 MW.
California now has over 736 MW of solar PV in the IOU
territories at over 43,000 residential, commercial and
governmental sites. This includes installed generation and
pending applications. The POUs have installed 26 MW of
generation at 7,712 sites and the NHSP reports 7.8 MW of solar
PV at 3,002 sites.
All CSI programs combined, California has approximately
installed 770 MW of solar generation on the customer's side of
the meter - 27% of goal.
COMMENTS
1) Author's Purpose . State government facilities are
required to reduce their grid based electricity purchases
by 20% by 2017 and greenhouse gas (GHG) emissions to 1990
levels by 2020 under legislative and executive directives.
While reducing consumption is a key strategy, energy
efficiency in and of itself will not be sufficient to meet
these reduction goals.
Increasing use of renewable energy generation is among the
accepted and encouraged practices to contribute to achieve
these reductions. However, many state agencies do not have
the necessary funding to implement renewable energy
generating technologies. The state has successfully
employed third party financing through a power purchase
agreement at no cost to the state, but is limited in the
size of the renewable energy generating system implemented
under this public-private partnership, even if the state
host facility has a larger demand and energy usage profile.
Current law limits the state in maximizing renewable
electricity generation potential at existing state
facilities that are large consumers of electricity and have
sufficient real estate for large solar photovoltaic energy
generating systems. Third party financers are willing to
finance solar PV systems only to the extent that there are
available state solar incentives. In this case, the limit
is 1 megawatt, resulting in underserved load that is not
conducive to achieving the reduction goals.
2) State's Solar Plans . The DGS wants to utilize the FIT
previously authorized by the Legislature to increase the
amount of solar generation at state facilities. They note
that some properties such as prisons have very high
electrical load and a great deal of roof and ground space -
enough to accommodate the significant footprint of large
solar arrays of up to 5 MW.
Recent PPAs secured by the state have reduced electricity
costs for those participating facilities by 20% to 40% over
traditional electric service. The solar installations are
generally less than 1 MW on an individual basis allowing
the solar contractor to secure a rebate for the full size
of the installation. The DGS reports however that the
state cannot secure a PPA for these large installations
without additional incentive payments from the CSI program
and so they are proposing to allow the state to receive
rebates for installations sized up to 5MW.
However, the DGS bases this report on anecdotal information
and has not attempted to take a large project out to bid.
Although a larger project may receive a proportionally
smaller rebate due to the 1 MW CSI cap, that is not a legal
barrier to the agreement. The inference is that the
project would not produce enough savings to the state in
its electric rates without the CSI rebate up to 5 MW.
Although the PPA can realize a savings as high as 40%,
there appears to be enough room in the savings to
accommodate a proportional reduction in the CSI rebate.
Additionally, the cost of solar has come down significantly
in the past few years and as much as 50% in the last year
alone for installations in the range of 5 MW.
3) Ratepayer Impact - Inequity . This bill proposes that
state agencies be given a special preference under the CSI
and increase rebate eligibility up to 5 MW rather than the
current cap of 1 MW. The author reports that this inequity
is justified because taxpayers would benefit from the
reduced electrical rates as a result of the project.
However the CPUC writes in opposition to the bill noting
that the current program is "customer neutral and does not
include set asides for specific customer classes." They
opine that if the state is permitted to go to 5MW then all
other customers should be as well.
The CSI program was not funded nor were the authorized
facilities sized to a level that will serve all customers'
needs. The program was provided with a limited amount of
funding, for a limited time, with a limit on capacity to
jump-start the solar industry and start to introduce
customers to self-generation.
The CPUC reports that the CSI program has seen an
unprecedented level of demand in March and April of this
year with a total of 146 MW of reservations. The opine
that "given the current demand level, there is reason to be
extremely concerned that introducing 5MW projects at this
stage in the program will allow a handful of large MW-sized
projects to 'hold a reservation, and perhaps no ultimately
get developed. If so, many subsequently smaller projects
could be forced into lower-step incentive reservations."
4) Author's Amendments . The author intends to amend the
bill to strike page 4, lines 17 to 22.
5) Technical Amendments . The definition of state agency in
this measure should be consistent with current law that
requires DGS to identify and achieve energy retrofits and
self-generation for state under Government Code Section
14710 et seq.
ASSEMBLY VOTES
Assembly Utilities & Commerce 10-0
Assembly Natural Resources 8-0
Assembly Appropriations 17-0
Assembly Floor 73-0
POSITIONS
Support:
None on file
Oppose:
California Public Utilities Commission (unless amended)
Kellie Smith
AB 2724 Analysis
Hearing Date: June 29, 2010