BILL ANALYSIS
AB 1383
Page 1
GOVERNOR'S VETO
AB 1383 (Pavley)
As Amended September 2, 2005
2/3 vote
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|ASSEMBLY: |47-32|(June 1, 2005) |SENATE: |23-13|(September 8, |
| | | | | |2005) |
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|ASSEMBLY: |46-32|(September 8, | | | |
| | |2005) | | | |
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Original Committee Reference: H. &.C.D.
SUMMARY : Creates a grant to facilitate the installation of
solar energy systems in low-income housing.
The Senate amendments :
1)Create a revolving loan program, administered by the
California Energy Commission (CEC), for use by affordable
housing developers to finance up to 75 percent 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.
2)Require the California Energy Commission (CEC) to evaluate the
level of funding needed and provides that a certain amount of
moneys would be transferred from the Emerging Renewable
Resources Account and the self-generation incentive program
for distributed generation resources.
3)Require CEC to collect a fee for each application for an
allocation. Establish requirements for repayment of the
allocations.
4)Require CEC to submit a report, by October 31, 2007, and
annually thereafter, to the Legislature on the portfolio of
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loans, the condition of the fund, and the anticipated demand.
CEC would also be required to report by January 1, 2006 on the
estimated amounts needed to be transferred to the fund from
various specified sources, upon appropriation of the
Legislature.
EXISTING LAW :
1)Provides $135 million annually to the Renewable Resource Trust
Fund from investor-owned utility (IOU) customers' rates to
provide rebates and credits for renewable energy programs.
2)Provides subsidies for photovoltaic (PV) solar energy systems
which total about $30 million annually, accounting for roughly
half of the installed cost of a system.
3)Establishes a separate program for the installation of PV
energy systems on affordable housing projects. The subsidy
for these systems is capped at 75% of the installed cost.
AS PASSED BY THE ASSEMBLY , this bill allowed CEC to increase the
maximum allowable rebates for installation of solar energy
systems on affordable housing projects from 75% of the installed
costs to a level of up to 100% of the total installed costs to
stimulate increased participation in the current rebate program
from affordable housing.
FISCAL EFFECT : According to the Senate Appropriations
Committee, AB 1383 transfers funds from the Emergency Renewable
Resources Account and the fund identified (and unnamed) in
subdivision (a) of Chapter 329 (Statutes of 2000), or from the
funds appropriated in SB 1 (Murray and Campbell), the Million
Solar Roofs Initiative.
COMMENTS :
1)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.
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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.
2)Current subsidies: California has several subsidy programs
targeted specifically at PV systems. 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
Public Utilities Commission 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.
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3)Affordable housing: Of the 20,000 affordable housing units
built annually in California, about 5,000 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.
GOVERNOR'S VETO MESSAGE :
Solar energy offers all Californians a great
opportunity to increase our peak energy production
with safe reliable renewable energy. This is why I
developed the "Million Solar Roofs Initiative" which
is an aggressive comprehensive solar plan that will
result in the creation of 3,000 mega watts of clean
energy by the year 2018. Recognizing the initial
capital investment for solar can be an impediment for
some Californians, my plan included several incentives
for those individuals including an exemption from the
surcharge for all customers that participate in the
state and federal rate reduction programs and a
mandate that at least 10 percent of the funds spent
under that program go to affordable housing projects.
This is in addition to existing law that provides an
additional 25 percent increase in the amount of
incentive for qualified low wealth applicants.
This bill creates the Low Income Housing Development
Revolving Loan Program to help finance solar systems
on affordable housing projects. As demonstrated by
inclusion in my comprehensive plan, this is a concept
I strongly support, however there are significant
flaws with this bill. The funding sources identified
as seed money for the program are the Emerging
Renewable Resources Account (ERRA) at the California
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Energy Commission and the Self Generation Incentive
Program (SGIP) at the California Public Utilities
Commission. The ERRA has a zero balance and will not
have any additional funding through December 31, 2008
and the SGIP program is limited to commercial and
industrial projects. Additionally, the SGIP program
is a reimbursement program for the Investor Owned
Utilities; no funding is ever collected making it
unclear how any seed money would be available.
I encourage the Legislature to pass my "Million Soar
Roof Initiative" which guarantees access to affordable
solar energy for all Californians, including those
with limited financial means.
Analysis Prepared by : Hubert Bower / H. & C.D. / (916) 319-
FN: 0013399