BILL ANALYSIS Ó
SB 1121
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Date of Hearing: June 23, 2014
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 1121 (De Leon) - As Amended: June 10, 2014
SENATE VOTE : Not relevant
SUBJECT : California Climate Technology and Infrastructure
Financing Bank
SUMMARY : Establishes the California Climate Technology and
Infrastructure Financing Act (Act) to create a financing program
for eligible greenhouse gas (GHG) emissions reduction projects.
EXISTING LAW :
1)Establishes the California Global Warming Solutions Act of
2006 (AB 32), which:
a) Requires the California Air Resources Board (ARB) to
adopt regulations requiring the reporting and verification
of statewide GHG emissions;
b) Requires ARB to adopt a statewide GHG emissions limit
equivalent to 1990 emissions levels, to be achieved by
2020; and,
c) Authorizes ARB to use market-based compliance mechanisms
to comply with the regulations.
2)Under California's Renewables Portfolio Standard (RPS),
requires retail sellers of electricity (investor owned
utilities, energy service providers, and community choice
aggregators) to achieve specified renewable energy targets:
a) 20 percent on average from January 1, 2011 to December
31, 2013;
b) 25 percent by December 31, 2016; and,
c) 33 percent by December 31, 2020 and each year
thereafter.
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3)Establishes the GHG Reduction Fund Investment Plan and
Communities Revitalization Act, which requires the Department
of Finance, in consultation with ARB or other relevant state
agencies, to submit a three-year investment plan to achieve
GHG emission reductions and other "complementary" goals. The
complementary goals include maximizing public health benefits,
job creation, air quality improvements, and investment in
disadvantaged communities.
4)Establishes subsidy programs for the installation of solar
photovoltaic systems administered by the Public Utilities
Commission (PUC) and the California Energy Commission (CEC).
These programs, known collectively as the California Solar
Initiative (CSI), are to provide $3.2 billion in subsidies
over 10 years in the form of rebates for the installation of
photovoltaic projects. CSI authorizes the PUC to award $101
million in subsidies for solar thermal and solar water heating
devices.
5)Requires the CEC to adopt an integrated energy policy report
(IEPR) every two years. The objective of the IEPR is to
evaluate market trends and develop energy policies that will
"conserve resources, protect the environment, ensure energy
reliability, enhance the state's economy, and protect public
health and safety." The IEPR includes "progress toward
statewide renewable energy targets and issues facing future
renewable development; efforts to increase energy efficiency
in existing and new buildings; progress by utilities in
achieving energy efficiency targets and potential; improving
coordination among the state's energy agencies; streamlining
power plant licensing processes; results of preliminary
forecasts of electricity, natural gas, and transportation fuel
supply and demand; future energy infrastructure needs; the
need for research and development efforts to support statewide
energy policies; and, issues facing California's nuclear power
plants."
6)Under the California Constitution and the General Obligation
Bond Law, authorizes the Legislature to issue general
obligation bonds for specified purposes with a two-thirds vote
of both houses. These bonds only become enacted if they are
approved by a majority vote of the state's electorate. State
law authorizes specified state agencies to issue revenue bonds
and other credit instruments without voter approval.
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7)Authorizes the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) to provide
financing for facilities that use alternative energy sources
and technologies. CAEATFA can issue revenue bonds (without
voter approval), make loans, loan loss reserves, and loan
guarantees to develop and commercialize advanced
transportation technologies that conserve energy, reduce air
pollution, and promote economic development and jobs. State
law limits CAEATFA's total debt to $1 billion.
THIS BILL :
1)States legislative findings and declarations relating to
barriers to the "widespread adoption and commercial scale
deployment" of GHG reducing technologies.
2)Defines terms used in the bill, including "greenhouse gas
emissions reduction projects" (projects) as a project,
product, service, function, or measure, or an aggregation of
these, that avoids or reduces GHG emissions, including, but
not limited to:
a) Clean agriculture projects;
b) Clean energy infrastructure projects;
c) Demand response projects;
d) Energy efficiency projects;
e) Innovation energy technology projects;
f) Land-based GHG sequestration projects;
g) Low-carbon transportation projects;
h) Renewable energy projects; and,
i) System efficiency projects.
3)Requires CAEATFA, in consultation with the ARB, to develop and
administer the California Climate Technology and
Infrastructure Financing Program (Program) to provide
financial assistance for projects.
4)Requires that the Program earn a net positive return and
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maximize net GHG emissions reductions for each dollar provided
by "focusing financial support on filling demonstrated
financial gaps that are the key barriers to greater investment
or market transformation."
5)Requires the projects eligible for funding to demonstrate:
a) Reduction in net GHG emission reductions;
b) Partnership with a private financial institution or
lender;
c) Ability for the project to meet applicable permitting
requirements;
d) Ability to create jobs in the state;
e) Technological viability;
f) Ability to pay back the financial assistance provided
over time;
g) The existence of a financial gap that is a barrier to
project implementation or market growth; and,
h) Other requirements deemed necessary by CAEATFA.
6)Requires CAEATFA to establish a "portfolio approach" to the
types of financial assistance provided.
7)Requires CAEATFA to establish guidelines for the program and
project eligibility that are consistent with the requirements
of AB 32 and the GHG Reduction Fund Investment Plan and
Communities Revitalization Act, as specified.
8)Requires that priority be given to projects that demonstrate
the ability to increase private investment in otherwise
commercially viable projects not currently able to obtain
financing in the capital markets at a reasonable cost with a
reasonable rate of return; increase private investment in
projects located in disadvantaged communities; and, maximize
economic, environmental, and public health benefits to the
state.
9)Requires CAEATFA to appoint an executive officer to oversee
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and implement the program, as specified.
10)At least twice each year, requires CAEATFA to convene an
advisory stakeholder group consisting of clean energy
stakeholders with expertise in clean energy financing or
technological expertise and requires the stakeholder group to
provide specified information to CAEATFA.
11)Requires CAEATFA to prepare a three-year guiding document
outlining planned financial assistance categories and how the
financial assistance will reduce GHG emissions. The guiding
document shall establish priorities for investments and
describe how funding will complement existing public and
private investments and identify gaps in existing programs.
12)Requires CAEATFA to convene and consult with a climate and
energy incentive coordination advisory body consisting of:
a) The chair of ARB;
b) The chair of CEC;
c) The president of the PUC;
d) The Treasurer;
e) The director of the Department of Water Resources;
f) Two members appointed by the Speaker of the Assembly;
and,
g) Two members appointed by the Senate Committee on Rules.
13)Requires CEC to submit an annual report to the Legislature,
beginning July 30, 2016, on the progress of the financial
assistance provided under the Act, how the financial
assistance has supported the goals of the Act, and how the
financial assistance has been coordinated with other state
incentive programs.
14)Establishes the Climate Technology and Infrastructure Finance
Fund (fund) within the State Treasury. Upon appropriation by
the Legislature, specifies that the fund be a repository for
moneys transferred from the GHG Reduction Fund and other
moneys including, but not limited to, revenues from bonds and
other securities issued by CAEATFA, fees collected pursuant by
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CAEATFA generally (not limited to the Act), and gifts and
grants.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the bill . According to the author:
Although the market for clean, low-carbon technologies has
continued to expand, cleaner, cheaper, and more reliable
energy remains unavailable to many California consumers and
businesses. A state financing institution, sometimes
called a Green Bank, would use a portion of cap-and-trade
revenue proceeds to promote widespread deployment of
low-carbon technologies by leveraging private investment,
so that each public dollar goes further. The entity, which
would be housed at the Treasurer's office, would coordinate
with and enhance existing energy programs to achieve the
state's greenhouse gas reduction goals set forth in AB 32
and beyond.
2)Cap-and-trade funding . The resources trailer bill, SB 862
(Budget and Fiscal Review), which was approved by the
Legislature on June 15, allocates cap-and-trade revenues for
the 2014-15 fiscal year and establishes a long-term plan for
the allocation of cap-and-trade revenues beginning in fiscal
year 2015-16. SB 862 continuously appropriates 35 percent of
cap-and-trade funds for investments in transit, affordable
housing, and sustainable communities. Twenty-five percent of
the revenues are continuously appropriated to continue the
construction of high-speed rail. The remaining 40 percent
will be appropriated annually by the Legislature for
investments in programs that include low-carbon
transportation, energy efficiency and renewable energy, and
natural resources and waste diversion. The total amount
appropriated under SB 862 is $872 million. SB 862 has not yet
been acted upon by the Governor. Funding for this bill would
be appropriated from the 40 percent of cap-and-trade revenues
that will be annually appropriated by the Legislature.
3)California's green bank . The financial assistance program
proposed by this bill is generally referred to as a green
bank. Green banks are publicly funded financing institutions
that leverage limited public sector funds through the use of
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various financial mechanisms to attract private investment in
low-carbon clean energy projects. This bill would establish
this type of financial institution in California.
In 2011, Connecticut established its Clean Energy Finance and
Investment Authority (CEFIA) with the intent of moving the
state away from grants, rebates, and other subsidies toward
low-cost financing of energy efficiency and renewable energy
projects. Among other actions, CEFIA has provided credit
enhancements, including loan loss reserves, interest rate
buy-downs, and third-party insurance to attract private
capital investment. CEFIA offers a variety of funding
mechanisms for business owners and institutions interested in
clean energy sources, technology innovators and entrepreneurs
working to develop and commercialize new clean energy
technologies, and real estate developers who want to
incorporate clean energy sources. The program provides
specific information for commercial property assessed clean
energy, anaerobic digestion, combined heat and power, and
renewable energy and energy efficiency projects. CEFIA also
offers financial assistance for residential projects and
community projects.
4)CAEATFA background . CAEATFA provides financing for facilities
that use alternative energy sources and technologies. CAEATFA
can issue revenue bonds, make loans, loan loss reserves, loan
guarantees, and other financial instruments to develop and
commercialize advanced transportation technologies that
conserve energy, reduce air emissions, and promote economic
development and jobs. CAEATFA's board consists of the
Treasurer, Controller, Director of Finance, Chair of the CEC,
and President of the PUC, which determines which projects
receive funding. Current law limits CAEATFA's total debt to
$1 billion.
5)Suggested amendments . In the definitions for the types of
projects eligible for funding under the Act, this bill is
inconsistent regarding whether or not the projects have to
achieve GHG emission reductions. The committee may wish to
amend the bill to clarify that all projects eligible for
funding must result in GHG emission reductions.
In order to avoid confusion with regard to which types of
renewable energy projects are eligible for funding, the
committee may wish to amend the definition to make it
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consistent with the definition of the types of projects that
are eligible under the state's RPS.
To ensure that the bill is consistent with other CAEATFA
programs, the committee may wish to strike the references to
"insurance" and "portfolio insurance" on page 4, line 5.
The committee may wish to amend the bill to ensure that
financial assistance provided to demand response projects must
result in reductions in electrical energy usage, rather than
changes to electrical energy usage.
Due to a drafting error, this bill requires CEC, rather than
CAEATFA, to complete the annual report to the Legislature.
The committee may wish to amend the bill to replace the word,
"commission" with "authority" and make other technical and
clarifying amendments.
REGISTERED SUPPORT / OPPOSITION :
Support
Agrion
Bernheim and Dean, Inc.
California Clean Energy Fund
Chargepoint
CleanTECH San Diego
Coalition for Green Capital Action Fund
DBL Investors
Environmental Defense Fund
EV Communities Alliance
Mosaic
Natural Resources Defense Council
Off the Grid Design
Passive House Alliance US
Passive House Alliance US - San Francisco Chapter
Presidio Graduate School
Silicon Valley Leadership Group
SolEd Benefit Corp
Sonoma County Water
Sungevity
SunRun
Village Power
Opposition
SB 1121
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None on file
Analysis Prepared by : Elizabeth MacMillan / NAT. RES. / (916)
319-2092