BILL ANALYSIS
SB 107
Page A
Date of Hearing: July 7, 2003
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 107 (Bowen) - As Amended: May 5, 2003
SENATE VOTE : 37-0
SUBJECT : Independent System Operator (ISO): report: demand
management: renewable, ultra-clean, low emission distributed
generation resources.
SUMMARY : Replaces the existing Self-Generation Incentives
Program (SGIP) with a new program, with specified, narrowed
parameters. Specifically, this bill :
1)Requires the California Public Utilities Commission (PUC) to
establish an incentive program to succeed SGIP for "renewable
and ultra-clean and low emission distributed generation
resources."
2)Requires PUC, in establishing the incentives, to consider the
amount and duration of existing incentives.
3)Sunsets the provisions on January 1, 2007.
4)Repeals an obsolete code section requiring a report to the
Legislature from ISO that was completed in 1998.
EXISTING LAW requires PUC to adopt energy conservation
demand-side management incentives to reduce load during peak
demand times, including:
1)Incentives for distributed generation to be enhance system
reliability, and
2)Differential incentives for renewable and super clean
distributed generation resources.
FISCAL EFFECT : Unknown.
COMMENTS : In the summer of 2000 California got its first taste
of the energy crisis as the retail rate freeze was lifted in San
Diego and electric prices skyrocket. In response, the
Legislature passed several measures to ease the situation
SB 107
Page B
including AB 970 (Ducheny), Chapter 329, Statutes of 2000, which
expedited permitting for new power plants and required PUC to
adopt incentives for energy conservation and demand-side
management in order to reduce load during peak demand periods.
PUC was to provide incentives for load control and distributed
generation (DG) to enhancing system reliability and differential
incentives for renewable or "super clean" distributed generation
resources.<1> While AB 970 requires a differential incentive
program for "super clean" DG, the Legislature provided no
definition for "super clean."
Distributed (or self-) generation resources are small-scale
power generation technologies, located on the customer's side of
the utility meter, to provide a portion or all of that
customer's electric needs. In theory, DG helps reduce peak
demand for electricity and improve grid stability by providing
alternative sources for power for DG customers and reducing
their need for electricity from the grid.
Pursuant to this statute, PUC implemented incentives for DG by
creating SGIP.<2> SGIP offers $125 million of financial
assistance per year through 2004 for installation of
photovoltaics, fuel cells, and certain gas-fired resources up to
one megawatt in size. The incentives were given on a tiered
structure with renewable generation receiving the greatest
incentives. Non-renewable DG, which qualified as "super clean,"
received lower incentives. Finally, internal combustion engines
and micro-turbines using waste heat recovery (i.e.
co-generation) receives the lowest incentives. Under PUC's
decision, the program expires in December 31, 2004.
In 2002, SPIG funded DG projects resulted in a reduction of 6.7
megawatt (MW) in peak demand. Micro-turbines and internal
combustion engines accounted for 82% of this total system peak
impact while receiving 27% of the in SPIG funds.
In 2002 the Legislature approved SB 1038 (Sher), Chapter 515,
Statutes of 2002, authorized PUC when setting rates or fees, to
encourage insulation of "ultra clean and low emission
distributed generation". Ultra clean and low emission
distributed generation is defined as generation technologies
that produce zero emissions or emissions that meet or exceed
2007 State Air Resources Board (ARB) emission limits.
---------------------------
<1> Public Utilities Code 379.5 (b).
<2> PUC Decision D.01-03-073.
SB 107
Page C
This bill replaces SPIG with a new program that grants
incentives only for renewable DG and DG that meets the ultra
clean definition in SB 1038. Consequently, PUC would be
prohibited from providing incentives to DG that is not renewable
or does not meet the ultra clean definition in SB 1038.
Supporters of this bill state that the intent of the revamped
program is to provide incentives for commercialization of
cutting-edge distributed generation technologies. Additionally,
they argue that rate based incentives are only appropriate where
the ratepayers receive a commensurate benefit and assuring
subsidized DG projects exceed current emission rules provides
such a benefit.
Opponents to this measure argue that limiting the scoop of
eligible DG technologies will result in fewer installations of
new DG in the state and less reduction in peak loads. The
design of the current program creates flexibility to allow
customers to install DG that is most appropriate to their own
power needs. Opponents argue that in some cases ultra clean DG
may not be effective (photovoltaics will not meet power needs in
places where there is not sufficient espouser to sun). In these
instances, a more flexible incentive program will enable the
state to still promote DG.
The manufactures of micro-turbines and internal combustion
generators which do not meet the ultra-clean definition, argue
that the incentives they receive under the current program are
needed to continue deployment of the current technology and to
fund the development of new systems that will meet the 2007 ARB
emission standards.
What incentives are available:
Under the current SPIG, photovoltaics, wind turbines and fuel
cells operating on renewable fuels receive an incentive of
$4.50/watt and fuel cells operating on non-renewable fuel
receive $2.50/watt in incentives. Other technologies such as
Micro-turbines, internal combustion engines and small gas
turbines, which would not be eligible for incentives under this
bill because they will not meet the "ultra-clean" definition,
receive $1.00/watt in incentives. Under this tiered structure,
SB 107
Page D
in 2002, 73% of the self-generation funds went to renewable and
low emission technologies.
Additionally, under a March 2003 PUC decision DG less than 1
megawatt in size that is eligible under SPIG will also be exempt
from exit fees to cover electricity procurement costs incurred
by the investor owned utilities and DWR. Under the same
decision, ultra-clean and low-emission DG over 1 megawatt in
size will be exempted from a smaller portion of the exit
fees.<3>
Other Legislation
AB 1685 (Leno) which passed this committee 11-0, extends SGIP in
its current form until 2008.
REGISTERED SUPPORT / OPPOSITION :
Support
California Coalition of Fuel Cell Manufactures
Clean Power Campaign
Pacific Gas & Electric
Sierra Club
Southern California Edison
Opposition
California Manufactures and Technology Association (CMTA)
California Power Partners
Capstone Turbine Corporation
Carrier Corporation
Clarus Energy
CoGen Equipment Solutions, Inc.
Edward B. Ward Company
Gas Turbine Association
LM Electric
PUC (oppose unless amended)
Valley Detroit Diesel Allison
Viron Energy Services
United Technologies Corporation
J M Electric
Engine Manufacturers Association
Bowen Power Systems
---------------------------
<3> PUC Decision D.03-04-030.
SB 107
Page E
Renewable Energy Investments
US Airconditioning Distributors
San Leandro Branch of Carrier Corporations
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083