BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
AB 1383 - Pavley Hearing Date: June 30,
2005 A
As Amended: June 22, 2005 FISCAL B
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DESCRIPTION
Current law establishes several programs to subsidize the cost of
photovoltaic (PV) systems used by retail electric customers. These
subsidies are up-front discounts on the installed cost of such
systems.
This bill creates a revolving loan program, administered by the
California Energy Commission (CEC), for use by affordable housing
developers to finance up to 75% of the cost of photovoltaic systems.
The program is funded out of existing funds set aside for
photovoltaic subsidies. The program sunsets on January 1, 2016.
BACKGROUND
What's a Photovoltaic System?
A photovoltaic, or PV, system has two main parts, the roof-mounted
PV panels which transform sunlight into electricity and the inverter
which transforms the direct current created by the PV panels into
alternating current which is usable in the home or on the electric
grid. The orientation of the PV panels is crucial to the success of
the system; they must be south- or west-facing. The panels must not
be shaded and should be angled to capture the most sunlight. A
typical residential PV system is 2kw - 4kw. The installed cost is
about $9000/kw so a 3kw system would cost $27,000. Rebates have
been as high as $4500/kw and are now at $2,800/kw, so the 3kw system
would today cost $18,600 after rebates. A state tax credit would
further reduce the price by 7.5% to $17,205. For commercial
customers the final after-tax cost is much lower because of greatly
accelerated depreciation and a 10% federal tax credit.
Current Subsidies
California has several subsidy programs targeted specifically at PV
systems. The CEC administers a program for residential- and small
commercial-sized PV systems that provides a rebate for a portion of
the installed cost of a PV system. That rebate was initially
$4.50/watt, or about 50% of the system cost, and has since been
lowered to $2.80/watt. This program is funded through the Public
Goods Charge (PGC), which is a surcharge on all IOU electric
customers, and is budgeted at about $30 million annually, though in
2004 the program spent $70 million on PV. The CPUC administers a
similar program for commercial-sized customer-owned generation,
including PV systems. This program, known as the Self-Generation
Incentive Program (SGIP), costs $125 million annually and is paid
for out of electric rates. The SGIP PV subsidy is $3.50/watt and is
oversubscribed.
In addition to these two subsidy programs there are numerous other
state and federal programs which substantially reduce the after-tax
cost of PV systems, particularly for commercial customers. These
include a 10% federal tax credit, accelerated depreciation, a 7.5%
state tax credit, accelerated depreciation for state taxes, and
favorable property tax treatment. By themselves these tax benefits
for commercial customers are worth more than the state subsidy,
according to CEC estimates. Other state subsidies are net metering,
which reverses the electric meter as electricity is produced, and an
exemption from exit fees.
Affordable Housing
Of the 20,000 affordable housing units built annually in California,
about 5000 are financed through tax credits. The tax credit
financing, which is administered by the California Tax Credit
Allocation Committee, an arm of state government whose voting
members include the Governor, Treasurer, and Controller, uses the
funds from the sales of tax credits to investors. The amount of tax
credits allocated to any affordable housing project is reduced by
any revenue received by the project, which includes rebates for PV
systems. For this reason solar rebates do not encourage the use of
PV systems in affordable housing projects that rely on tax credit
financing.
COMMENTS
1. Program Funding -- If SB 1 (Murray and Campbell), the
Governor's Million Solar Roofs proposal that is working its way
through the Legislature, is enacted, this program will be
funded from the same sources of funding as that used in SB 1,
the CPUC's SGIP program and the CEC's PGC-funded program. The
level of funding is determined by the CEC, but not to exceed
10% of overall funds. If SB 1 is not enacted then the CEC
determines how much is needed and obtains half each from the
CPUC program and CEC program, the total not exceeding 10% of
either programs fund balance as of July 1, 2005.
There are two technical issues regarding the funding of the
program in the event that SB 1 is not enacted. The first is
that the bill appears to require only a one-time infusion of
capital, rather than ongoing funding, and the second is that
the transfer of funds is based on the balance as of a specific
date, rather than program expenditures over a fiscal year. The
author and committee may wish to consider making these changes.
In the event that SB 1 is not enacted, the SGIP program and the
PGC program expire in 2007 and 2008 respectively, leaving this
program without a long-term funding source.
2. Program Construction -- The CEC has provided the author with
technical assistance by making this program administratively
very similar to an existing CEC revolving loan program.
3. Interest Rate -- The bill gives the CEC the authority to
establish the interest rate for this loan program. (The
interest rate for an existing CEC revolving loan program is
currently 4.5%.) The bill requires a lower interest rate for
buildings which exceed existing energy efficiency standards.
4. Vague Goal -- The program does not establish numeric goals.
It simply states that the goal is to place solar energy systems
on affordable housing units in the first year of the program.
5. Continuous Appropriation -- The funds for this program are
continuously appropriated.
6. Pending legislation -- Several PV bills are pending this
session. SB 1 establishes a comprehensive PV program and is
pending in the Assembly Utilities and Commerce Committee. SB
816 (Kehoe) expands net metering in the service territory of
San Diego Gas and Electric Company and is pending in the
Assembly Appropriations Committee.
7. Technical amendment - Page 11, lines 27 and 29. Replace
"To" with "The commission may"
ASSEMBLY VOTES
Assembly Floor (47-32)
Assembly Appropriations Committee (13-5)
Assembly Utilities and Commerce Committee (7-3)
Assembly Housing and Community Development Committee (5-1)
POSITIONS
Sponsor:
Global Green
Support:
American Federation of State, County, and Municipal Employees
Sierra Club California
Western Center on Law and Poverty
Oppose:
None on file
Randy Chinn
AB 1383 Analysis
Hearing Date: June 30, 2005