BILL ANALYSIS �
AB 2409
Page 1
Date of Hearing: April 23, 2012
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 2409 (Allen) - As Amended: April 18, 2012
SUBJECT : Energy efficiency
SUMMARY : Requires the California Energy Commission (CEC), in
collaboration with the Public Utilities Commission (PUC), the
Treasurer's Office, the Air Resources Board (ARB), and the
California Infrastructure and Economic Development Bank, to
review and make recommendations based on emerging technology
financing models for purposes of helping California meet its
clean technology goals.
EXISTING LAW :
1)Designates CEC as the state's primary energy policy and
planning agency.
2)Directs CEC to undertake a continuous assessment of trends in
the consumption of electrical energy and analyze the social,
economic and environmental consequences of those trends;
implement energy conservation measures; and recommend to the
Governor and Legislature new and expanded energy conservation
measures.
3)Authorizes and directs CEC to collect from electrical
utilities, gas utilities, fuel producers and wholesalers, and
other sources forecasts of future supplies and consumption of
all forms of energy.
4)Authorizes and directs CEC to carry out, or cause to carry
out, under contract or other arrangements, research and
development into alternative sources of energy, improvements
in energy generation, transmission, and siting, fuel
substitution, and other topics related to energy supply,
demand, public safety, ecology, and conservation.
5)Authorizes and directs CEC to adopt standards, except for air
and water, to be met in designing or operating facilities to
safeguard public health and safety.
THIS BILL requires CEC, in consultation with PUC, the
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Treasurer's Office, ARB, and the California Infrastructure and
Economic Development Bank, to review and make recommendations
based on "emerging technology financing models used in other
states to finance energy efficiency technology deployments and
services with the goal of maximizing private sector investment."
Authorizes CEC to additionally consult with an investment
advisory group, as specified. Requires CEC to consider the
following:
1)Long-term financing options, including, but not limited to,
establishing, facilitating, or improving the ability to issue
tax exempt bonds, private activity bonds, or private
investment bonds;
2)Potential financing models for implementing shared savings
agreements between purchasers and sellers of energy efficiency
technologies;
3)Potential financing models for energy efficiency improvements
for state infrastructure and equipment; and,
4)Potential financing models for residential and business energy
efficiency improvements.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill: According to the author, "AB 2409 simply requests
all of the major state agencies currently involved in energy
efficiency financing and program management? to
collaboratively review emerging financial markets and models
that have minimal or no public or investor-owned utility
financial investment in an effort to procure the capital
investment needed to achieve California's aggressive energy
efficiency goals."
California has some of the most aggressive energy efficiency
goals in the nation. The author states that, "by 2015, the
state wants to reduce energy consumption in existing homes and
local governments by 20%. By 2020, the state has set goals
for ensuring all new houses constructed in California will
reach 'zero net energy' performance, reducing energy
consumption of existing homes and local governments by 40%,
making energy efficiency certification and benchmarking
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standard practice for businesses, and reducing agricultural
sector production intensity by 15% from 2008 levels for
non-renewable energy."
According to a 2011 assessment released by the PUC, achieving
these goals will require a capital investment of approximately
$4 billion per year, nearly double current investments.
The author argues that, "aggressively and collaboratively
exploring existing financing models and, if needed,
redesigning them to fit California's needs using the expertise
and experience already present in the multitude of state
agencies implementing energy efficiency financing and programs
is the only practical mechanism for acquiring the financial
capital needed to achieve California's efficiency reductions
goals, emissions reductions as mandated by AB 32, and to put
thousands of Californians back to work."
2)Emerging public finance models for energy efficiency : The
following is a sample of emerging public finance models being
discussed or deployed in jurisdictions around the U.S.:
a) The Clean Energy Development Administration (CEDA) or
the Green Bank : The concept of the Green Bank is to
establish an independent, government-sponsored bank to
support clean technology financing through loan guarantees,
credit enhancements, debt instruments, and equity. In
practice, the bank would partner with private financial
institutions that would not otherwise expose themselves to
the clean technology sector because of perceived risk.
Using guarantees, letters of credit and other credit
enhancement tools, the Green Bank would provide private
investors with the security they need to make clean
technology investments.
b) Clean Energy Victory Bonds or Green Bonds : The Victory
Bond concept was used during World War II when the federal
government sold bonds to the public to finance the war
effort. Green Bonds use a similar model in that they use
public bonds to raise capital for purposes of financing
clean energy projects. In 2008, The World Bank, in
partnership with Scandinavia, issued $350 million in Green
Bonds denominated in Swedish Kronor to fund carbon emission
reduction projects in the third world. In 2009, the Bank
issued its first U.S. dollar denominated bond, which was
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subsequently purchased by the California State Treasury.
Similarly, the European Investment Bank issued ?1 billion
euros worth of "Climate Awareness Bonds" in 2007 to finance
renewable energy and energy efficiency project lending.
c) General Federal Bonds : The federal government offers
several types of bonds that award bondholders tax credits
partially or fully in lieu of interest payments. Two
classes of these bonds, Clean Renewable Energy Bonds
(CREBs) and Qualified Energy Conservation Bonds (QECBs),
have been used with considerable success to drive clean
technology investments. CREBs were created by the Energy
Policy Act of 2005 to finance certain renewable energy and
clean coal facilities. To date, over 900 clean-energy
projects have been financed with $1.2 billion in CREB
proceeds. QECBs were launched in 2008 and are extremely
versatile instruments that can be used to fund a wide
variety of projects.
d) Federal Loan Guarantees : Established in 2005, the U.S.
Department of Energy's Loan Guarantee Program guarantees
loans for a range of clean-energy related projects. The
program has come under considerable criticism given its
decision to fund Solyndra, a California-based developer of
thin-film solar products that has since declared
bankruptcy.
e) City Funds : A relatively new model, U.S.
city-administered loan funds have been emerging across the
country, including Berkeley, Portland, Cambridge, and
Boulder. Under this model, a city raises capital through
municipal bond issuances and then uses the capital to offer
moderate-sized loans (between $5000 and $25,000) to
homeowners for purposes of financing home energy
improvement upgrades.
1)Relevant State Reports on Energy Efficiency and Financing : In
2005, CEC released a report on potential energy efficiency
measures that could be adopted in existing commercial and
residential buildings. The report found that cost effective
energy efficiency measures could reduce statewide consumption
of electricity and natural gas by 15 to 18 percent.
In 2009, the Legislature enacted AB 758 (Skinner, Chapter 470,
Statutes of 2009) directing the PUC to investigate the ability
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of electric and gas utilities to provide energy efficiency
financing options to their customers. In its report to the
Legislature, the CPUC concluded that:
Achieving levels of efficiency consistent with California's
goals will require a capital investment of approximately $4
billion per year. However, current levels of energy
efficiency investment in California appear to be
approximately one-half that amount. Consequently, the rate
of adoption of energy efficiency technologies, and the
capital to finance that up-take, must increase for
California to achieve its goals. Along with other market
solution mechanisms, appropriate cost-effective financing
for energy efficiency can play a significant role in
achieving these investment goals.
2)The clean technology financing landscape: California does not
have the public resources to independently finance the level
of energy efficiency projects required for the state to meet
its renewable energy goals. As such, California must
proactively lure investment capital from around the world. To
assess the ability of the state to do that, we must first
understand the clean technology investment landscape.
Investments in clean technologies reached a record high in
201, with $260 billion invested worldwide, a 5 percent
increase compared to 2010 and a fivefold increase over the
$53.6 billion invested in 2004. Geographically, 2011 saw the
reemergence of the U.S. as the leader in clean technology
investments, moving past China for the first time since 2008,
according to an analysis by Bloomberg New Energy Finance.
At a regional scale, the U.S. secured $4.9 billion in clean
technology venture funding in 2011. This figure was down 4.5
percent compared to 2010, but represented a 29 percent
increase from 2009. Among U.S. states, California continued
to lead the nation in attracting cleantech venture funding
with $2.8 billion secured. In the fourth quarter of 2011
alone, California secured $629.5 million in venture funding
across 26 deals, representing 67 percent of all cleantech
dollars invested in the U.S., according to an analysis by
Ernst & Young.
3)Double Referral : This bill was passed out of the Assembly
Jobs, Economic Development, and the Economy Committee on April
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17th with a vote of 4-2.
REGISTERED SUPPORT / OPPOSITION :
Support
Tensleep Advisory
Opposition
None on file
Analysis Prepared by : Elizabeth MacMillan / NAT. RES. / (916)
319-2092