BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 412 - Kehoe Hearing Date:
April 21, 2009 S
As Introduced: February 26, 2009 FISCAL B
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DESCRIPTION
Current law requires the California Public Utilities Commission
(CPUC) to administer the Self-Generation Incentive Program
(SGIP) for fuel cells and wind distributed generation
technologies through 2012.
This bill extends the SGIP program one year to 2013 and permits
the CPUC to provide incentives for any distributed generation
resources that the commission determines will support the
state's goals for reductions of emission of greenhouse gases and
requires the commission to make technologies available to all
ratepayers in the program.
This bill exempts all residential customers participating in the
California Alternate Rates for Energy (CARE) program from the
SGIP surcharges.
BACKGROUND
SGIP History - During the 2000-01 energy crisis the CPUC was
directed to create a program of incentives for renewable and
super clean, gas-fired distributed generation resources to
reduce electricity demand. As a result, the CPUC established
the SGIP in March 2001 which has offered rebates for
installation of technologies such as photovoltaics, wind, fuel
cells, waste gas, and ultra-clean and low emission gas-fired
distributed generation (combined heat and power, CHP).
Legislation adopted in 2004 eliminated CHP from the program as
of January 1, 2008. In 2006 photovoltaic incentives were moved
out of the SGIP to the California Solar Initiative (CSI)
effective January 1, 2007. Beginning in 2008 only fuel cell and
wind technologies are eligible for incentives.
According to the CPUC 270 MW of distributed generation was
complete and online by the end of 2007. Note that this includes
photovoltaics that, as of 1/1/07 are out of the SGIP and funded
separately as part of the California Solar Initiative (CSI).
Through 2007 installed capacity under SGIP was:
Fossil fuel (CHP) 145.6 MW (54%)
Renewable fuel CHP 11.8 MW ( 4%)
Non-Renewable Fuel Cells 6.3 MW ( 2%)
Renewable Fuel Cells .8 MW (>0%)
Photovoltaic 104.6 MW (39%)
Wind 1.6 MW (>0%)
SGIP Funding - For 2009 SGIP will provide $83 million of
financial assistance for the installation of wind and fuel
cells. Incentive payments are $1.50 per watt for wind turbines,
$4.50 for biogas fuel cells, and $2.50 for natural gas. The
maximum size for eligible technologies is 5 MW in capacity;
incentives are capped at 3 MW of installed capacity for fuel
cells and wind turbines.
The program is funded by a charge on all ratepayers which is
reflected in the distribution charges paid in each billing. The
CPUC reports that the average monthly electric bill impact for
the SGIP is:
PG&E SCE SDG&E
-------------------------------------------------------
|Residentia| $ 0.25| $ 0.16| $ 0.36|
|l | | | |
|----------+--------------+--------------+--------------|
|Commercial| $ 0.72| $ 0.46| $ 1.03|
| | | | |
|----------+--------------+--------------+--------------|
|Industrial| $ 106.38| $ 64.94|$ |
| | | |142.19 |
-------------------------------------------------------
The average monthly gas bill impact for the SGIP is:
PG&E SGE SDG&E
-------------------------------------------------------
|Residentia| $ 0.14| $ 0.17| $ 0.27|
|l | | | |
|----------+--------------+--------------+--------------|
|Commercial| $ 1.05| $ 1.35| $ 3.04|
| | | | |
|----------+--------------+--------------+--------------|
|Industrial| $ 211.32| $ 2.79|$ |
| | | |3.04 |
| | | | |
-------------------------------------------------------
COMMENTS
1. Follow the Bouncing Distributed Generation - Since
authorization of the SGIP, the Legislature has modified the
technologies eligible for SGIP funding several times. At
each introduction of this issue, different technology
representatives have solicited the Legislature's support to
add additional technologies not yet evaluated or accepted
by the CPUC or reflected in the many different bills on
this subject. Next year's legislation could bring more
technologies to the fore. In the meantime, the CPUC must
continually retool the program to respond to legislative
program changes each year.
As originally structured the CPUC had the broad authority
to establish a program for "renewable distributed
generation resources." The author is proposing to return
this authority to the CPUC and eliminate specific
technologies and permit the inclusion of any technologies
that meet the state's GHG goals. This would be new
criteria for the program which was designed during the
energy crisis to bring as much new generation to the grid
as soon as possible. The author opines that the
legislature should set broad energy and environmental goals
but place the selection of individual technologies in a
forum where a thorough analysis can be done for technical
viability, commercial readiness, cost and environmental
impacts, and overall value for distributed generation
incentives.
2. Combined Heat & Power (CHP) - One of the technologies
previously funded in the SGIP program was CHP. Also
referred to as cogeneration, CHP generates electricity and
useful thermal energy in a single integrated system. This
contrasts with the common practice of separate heat and
power where electricity is generated at a central power
plant, while on-site heating and cooling equipment is used
to meet non-electric energy requirements. The thermal
energy recovered in a CHP system can be used for heating or
cooling in industry or buildings. Because CHP captures the
heat that would otherwise be rejected in traditional
generation of electric power, the total efficiency of these
integrated systems is much greater than from separate
systems.
Amendments to the SGIP statute made late in the 2006
legislative session eliminated CHP eligibility for the
program. The basis for this action is not fully known but
appears to be due to a philosophical objection to any
subsidies for technologies that rely on fossil fuel.
This bill would allow the CPUC to reinstate CHP for SGIP
eligibility. The technology is widely recognized as a
valuable energy efficiency tool. The American Council for
an Energy-Efficient Economy includes CHP as a means of
energy efficiency and includes the technology in its state
scoring of state energy efficiency policies and programs.
The California Air Resources Board (CARB) has called for
4,000 megawatts to meet the state's GHG reduction goals.
The CARB scoping plan reports that that the "widespread
development of efficient CHP systems would help displace
the need to develop new, or expand existing, power plants."
Additionally, federal law now provides for a 10 percent
investment tax credit for CHP through 2016.
3. SGIP Evaluation - Legislation in 2006 mandated that the
California Energy Commission provide a cost-benefit
analysis on ratepayer subsidies for renewable and fossil
fuel "ultraclean and low-emission distributed generation"
for inclusion in the Integrated Energy Policy Report. The
consultant report developed for the CEC found that "the
environmental benefits of the SGIP, although small,
indicate that systems operating with clean and renewable
fuels, particularly those in efficient combined heat and
power applications, do provide air quality benefits and GHG
reductions. The benefits of these applications to date are
small, however, this is primarily a reflection of the
installed capacity of clean and renewable sources of DG."
The consultant report recommended "re-instating the
eligibility of internal combustion engines, microturbines,
and small gas turbines with requirements that these
technologies meet ultra clean and low emission targets
using appropriate fuels (e.g., renewable fuels or natural
gas) and that they are used in efficient combined heat and
power applications." This bill does not specifically
reinstate those technologies but the CPUC would have the
discretion to do so.
4. Ratepayer Impact - This bill does not increase funding
for the SGIP (currently $83 million annually) which is
derived from a surcharge on all ratepayers except
residential ratepayers who limit usage to tiers 1 and 2.
The CPUC has the broad authority to establish the
surcharge; this bill does not change that authority.
However, because the bill exempts all CARE customers from
the surcharge there would be a negligible shift of the
surcharge from CARE customers to the remainder of the
residential ratepayer class.
5. Residential Ratepayers - TURN writes in opposition to
this bill expressing concern that the SGIP primarily
benefits commercial and industrial customers since the
technologies available under the program are generally not
used in a residential setting. In response the author has
directed the CPUC to ensure that technologies are made
available in the program for all ratepayers but TURN still
argues that "the funding for the SGIP program should be
collected in direct proportion from the customer classes
that utilize the incentives" which the CPUC does not do for
any other ratepayer program. All surcharges are assessed
across the board regardless of direct benefit to the
ratepayer class. For example, large business is assessed
to support low-income residential ratepayers and the CSI
program yet they receive little or no direct benefit. It
would be a slippery slope to start carving out surcharges
based on direct benefit. CPUC programs are generally
thought to have a broader, indirect benefit for all
ratepayers which warrant charges across all rate classes.
POSITIONS
Sponsor:
Author
Support:
BluePoint Energy LLC
California Baptist University
California Clean DG Coalition
Capstone Turbine Corporation
Caterpillar California Counsel
DE Solutions, Inc.
Engine Manufacturers Association
EPS Corp.
Hawthorne Machinery Co.
Holt of California
Industrial Environmental Association
Nong Shim Foods, Inc.
Northstar Power
Onsite Energy Company
Pierce College
QUALCOMM
Quinn Power Systems
Sempra Energy
SDP Energy
Water and Energy Management Co. Inc.
Oppose:
The Utility Reform Network
Kellie Smith
SB 412 Analysis
Hearing Date: April 21, 2009