BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 2249 - Buchanan Hearing Date:
July 3, 2012 A
As Amended: May 25, 2012 FISCAL B
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DESCRIPTION
Current law establishes the California Solar Initiative (CSI), a
$3.6 billion program which provides incentives for the
installation of solar photovoltaic (PV) and solar thermal
systems for customers of the state's investor-owned utilities
(IOUs) and publicly owned utilities (POUs). The measure
allocated $100.8 million for solar thermal technologies that
displace electric use.
Current law establishes the Solar Water Heating and Efficiency
Act of 2007 to provide incentives for customers of IOUs to
displace their natural gas use by installing solar water heating
(SWH) systems under the California Solar Initiative-Thermal
(CSI-Thermal) program and funded by $250 million in ratepayer
surcharges.
Current law defines "solar water heating systems" as any solar
energy device that has the primary purpose of reducing demand
for natural gas through water heating, space heating, or other
methods of capturing energy from the sun to reduce natural gas
consumption in a home, business, or any building receiving
natural gas that is subject to the surcharge and that meets or
exceeds the eligibility criteria and specifically excludes solar
pool heating systems.
This bill expands the definition of solar water heating systems
eligible to receive incentives under the CSI-Thermal program to
include multifamily residential, governmental, educational, and
nonprofit solar pool heating systems.
Current law expresses legislative intent that the solar thermal
incentives be a cost-effective investment by non-participating
gas customers to customers who pay for this subsidy through
their rates.
This bill eliminates the requirement that the investment be
cost-effective to ratepayers and instead expresses legislative
intent that the program participants benefit from reduced solar
systems prices.
BACKGROUND
California Solar Initiative (CSI) - In January 2007, the CPUC
launched the CSI, a $2.16 billion ratepayer-funded incentive
program with a goal of installing 1,940 megawatts (MW) of new
solar generation and creating a sustainable solar industry by
2016.
In early 2006, the Commission, in collaboration with the
California Energy Commission, established the California Solar
Initiative (CSI), a $2.5 billion incentive program to promote
solar development through 2016, to be funded from the
distribution rates of gas and electric ratepayers. At that
time, the CPUC stated its intent to consider incentives for
solar water heating (SWH) as part of the CSI program, and
directed San Diego Gas & Electric Company (SDG&E) to contract
with California Center for Sustainable Energy (CCSE) to
administer a pilot program for SWH incentives in the SDG&E
territory. Subsequently, with the passage of Senate Bill (SB) 1
in August of 2006, funds for CSI were limited to $2.16 billion
and could no longer be collected from gas ratepayers. At the
same time, SB 1 included a provision allowing $100.8 million of
total CSI funds to be used for incentives for solar thermal
technologies, such as SWH. With CSI funding now limited to
collections from electric ratepayers, the CPUC concluded that
although CSI would include as part of its total budget $100.8
million for incentives to solar thermal technologies, CSI should
only pay incentives to solar thermal technologies that displace
electric usage.
The SWH pilot in the SDG&E territory, budgeted at $3 million,
was allowed to proceed to provide useful information on SWH
incentives in general. In February 2007, the CPUC approved the
SWH pilot budget of $2.59 million and the pilot began operation
in the SDG&E territory, with a scheduled end date of December
31, 2008. The CPUC later extended the pilot to December 31,
2009 or until the budget was exhausted, whichever occurs first.
In late 2007, the legislature adopted AB 1470 (Huffman) which
authorized the creation of a $250 million incentive program to
promote the installation of 200,000 SWH systems in homes and
businesses that displace the use of natural gas by 2017. The
statute required the CPUC to evaluate data from the SWH pilot
and determine whether an SWH program was "cost effective for
ratepayers and in the public interest" before designing and
implementing an incentive program for gas customers.
In early 2010 the CPUC established the CSI Thermal Program to
provide incentives to promote the installation of solar water
heating systems in the territories of PG&E, SCE, SDG&E), and
Southern California Gas Company (SoCalGas). The CSI Thermal
Program was funded by $250 million in collections from gas
ratepayers, pursuant to AB 1470 and up to $100.8 million in CSI
for solar thermal projects such as SWH. Monies collected under
AB 1470 from gas ratepayers fund incentives to SWH that displace
natural gas usage, while funds collected through CSI from
electric ratepayers will fund electric displacing solar water
heating systems. The single-family residential program was
launched in May 2010, the commercial/multi-family program in
October 2010, and the low-income program in March 2012.
Program Goals - The CSI-Thermal Program is designed to
significantly increase the adoption rate of SWH technologies in
the California marketplace. The program strategy and design
principles are intended to address the barriers to growth,
namely installation costs, lack of public knowledge about SWH,
permitting costs and requirements, and a potential shortage of
experienced installers. The primary goals of the CSI-Thermal
Program include the following: 1) Significantly increase the
size of the SWH market in California by increasing the adoption
rate of SWH technologies; 2) Support reductions in the cost of
SWH systems of at least 16 percent through a program that
increases market size and encourages cost reductions through
market efficiency and innovation; 3) Engage in market
facilitation activities to reduce market barriers to SWH
adoption, such as high permitting costs, lack of access to
information, and lack of trained installers; and 4) Increase
consumer confidence and understanding of SWH technology and its
benefits.
COMMENTS
1. Author's Purpose . The author reports that "AB 2249
will include non-residential solar pool heating systems
in the types of solar water heating systems eligible to
receive installation incentives as part of the existing
California Solar Initiative (CSI) Thermal Program. AB
2249 will help encourage the installation of solar hot
water systems by expanding the current program to include
non-residential pools. This will remove the upfront cost
barriers that currently prevent municipalities, schools
and non-profits from using solar to heat their swimming
pools. Budget cuts have severely impacted schools and
municipalities and pool closures are becoming the norm.
Solar heating systems can significantly lower the
astronomical operating costs associated with heating
swimming pools. These cash-strapped organizations would
benefit from significant savings associated with heating
their pools while also greatly reducing their emissions
of greenhouse gases and other criteria pollutants."
2. A Languishing Program . The primary goals of the
CSI-Thermal Program include installing natural
gas-displacing systems that displace 585 million therms
(equivalent to 200,000 single-family residential systems)
and installing electric-displacing SWH systems that
displace 275.7 million kilowatt hours (kWh) per year
(equivalent to 100,800 single-family residential
systems).
Since program inception, 488 projects have been completed
for a total cost of approximately $9.7 million.
Administration, Market Facilitation, and Measurement &
Evaluation costs totaled more than $5.7 million, whereas
incentives paid to program participants totaled $3.99
million. These figures demonstrate the ineffectiveness of
the program thus far. According to the sponsor, CALSEIA,
the program's weakness can be attributed to the lack of a
marketing campaign. The CPUC reports that a state-wide
marketing campaign launched on April 16, 2012, but the
effects of the marketing campaign are unknown. To ensure
funds are fully utilized this bill expands program
eligibility to include swimming pools in non-residential
and non-commercial buildings and multi-family dwellings.
To date more program funds have been spent on
administrative expenses than technology incentive
payments. This bill would require the CPUC to spend yet
more money on program administration to develop program
incentive payments and other program requirements with an
unknown result in participation.
3. Fundamental Issues . According to the author, funds
established by the CSI-Thermal program have remained
largely unused for several reasons: First, natural gas
rates have remained at historically low rates in recent
years, creating little incentive for ratepayers to invest
in gas displacing alternatives. Second, solar water
heating has not enjoyed large federal tax subsidies and
the ease of financing that exists for the solar PV
market. The CPUC cites a lengthy permitting process and
installation/maintenance costs associated with solar as
deterrents for many customers. Lastly, the sponsor cites
an overall lack of awareness for the CSI-Thermal program
caused by the slow uptake of a marketing campaign. The
program expires in 2017 and currently has an unspent
balance of approximately $240 million in the gas thermal
program.
4. SWH Pool System Costs . Cost recovery for installing
solar water heating systems occurs in 4-8 years and
certified systems are guaranteed to last 20-25 years.
Installing an SWH system on an average competition-size
pool in California is expected to result in savings of
$20,000 to $30,000 in operating costs annually, along
with reduced greenhouse gas emissions. Even without an
incentive, installing solar water heating systems on
pools is cost-effective for most business, non-profits,
and educational facilities. As is, ratepayers are
subsidizing a step that facilities could already be
taking to achieve cost-effectiveness and best practice.
Due to the current condition of school budgets, it is
possible that even with incentives many schools will be
unable to afford the upfront costs required to install
solar water heating systems.
5. Ratepayer Impact . This bill eliminates legislative
intent that systems be cost-effective for all ratepayers.
Striking this requirement is inconsistent with other
market support programs at the CPUC which require
ratepayer benefit such as the Self Generation Incentive
program and energy efficiency programs. The Division of
Ratepayer Advocates has expressed its opposition to
eliminating the cost-effective requirement recommends
that it be reinstated noting that "current law
appropriately recognizes that such incentives should be a
cost-effective investment to nonparticipating customers
who pay for this subsidy through their rates." The
committee may wish to consider amendments that reinstate
the requirement that the program be cost-effective.
6. Clarifying Amendments . The 2007 legislation
establishing SWH incentives for system that displace gas
use required a pilot project before it was expanded
statewide which has been completed. This bill retains
the pilot project language and therefore the bill could
be interpreted as requiring a pilot program for the
inclusion of SWH for pools. To ensure that the pilot
program is not mandated again, the committee may wish to
consider amendments to strike this provision from current
law.
ASSEMBLY VOTES
Assembly Floor (69-9)
Assembly Utilities and Commerce Committee (14-0)
Assembly Appropriations Committee (17-0)
POSITIONS
Sponsor:
California Solar Energy Industries Association
Support:
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|All Valley Solar, Inc. | |
|AMECO Solar | |
|Aquatherm Industries | |
|Aztec Solar, Inc. | |
|California Park & Recreation Society | |
|California State Association of Electrical | |
|Workers | |
|California State Pipe Trades Council | |
|City of Sacramento | |
|City of Santa Monica | |
|Coalition for Adequate School Housing | |
|Coalition of California Utility Employees | |
|County School Facilities Consortium | |
|East Bay Municipal Utility District | |
|Environment California | |
|FAFCO Solar Water Heating | |
|Los Angeles Unified School District | |
|Pacific Gas and Electric Company | |
|School Energy Coalition | |
|Sierra Pacific Home & Comfort, Inc. | |
|Skyline Innovations | |
|Solar Electrical Systems | |
|Sun Light & Power | |
|Suntrek Industries, Inc. | |
|UMA Solar | |
|Western States Council of Sheet Metal Workers | |
| | |
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Oppose:
Division of Ratepayer Advocates, unless amended
Erlin Sweeney and Kellie Smith
AB 2249 Analysis
Hearing Date: July 3, 2012