BILL ANALYSIS
SB 1
Page 1
SENATE THIRD READING
SB 1 (Murray)
As Amended August 31, 2005
Majority vote
SENATE VOTE :30-5
UTILITIES AND COMMERCE 7-0
APPROPRIATIONS 13-4
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|Ayes:|Levine, Baca, Pavley, De |Ayes:|Chu, Bass, Berg, |
| |La Torre, Jerome Horton, | |Calderon, Karnette, |
| |Montanez, Jones | |Klehs, Leno, Nation, |
| | | |Oropeza, Laird, Saldana, |
| | | |Yee, Mullin |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Sharon Runner, Emmerson, |
| | | |Nakanishi, Walters |
| | | | |
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HOUSING & COMMUNITY DEVELOPMENT 6-1
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|Ayes:|Mullin, Garcia, Baca, | | |
| |Hancock, Salinas, Torrico | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|La Suer | | |
| | | | |
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SUMMARY : Establishes the Million Solar Roofs Initiative (MSRI),
the goal of which is to place one million solar energy systems,
or the equivalent 3,000 megawatts (MW) of capacity, on new or
existing residential and commercial buildings by 2018.
Specifically, this bill :
1)Requires the California Energy Commission (CEC) to develop,
implement, and fund the MSRI, and establish an incentive
program for solar energy systems, as follows:
a) The incentives shall not exceed the subsidy level in
existence on January 1, 2006 ($2.80/watt, or $7,000 for a
2.5kW residential system). The incentives will decline by
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7% per year until the rebate is zero in 2016;
b) The incentives can be increased by 50% for zero energy
homes or zero energy commercial structures;
c) The incentives can be increased by 25% for solar energy
systems that are installed on structures that exceed the
CEC's established energy efficiency building standards;
and,
d) By 2010, 50% of all incentive money shall be spent on
performance incentives that are based on the actual output
of the solar energy system.
2)Requires CEC to develop eligibility criteria for solar energy
systems to qualify for the rebate, including:
a) That the incentives only be used for distributed
generation installations and not for large facilities
that are owned by the electric utility or by companies
that sell the electricity directly to the utility;
b) The solar energy system must have at least a 10-year
manufacturer's warranty; and,
c) Monetary incentives from the MSRI to commercial
customers shall is a "public works."
3)Requires that at least 10% of the funds from the MSRI be spend
on affordable housing.
4)Requires the California Public Utilities Commission (PUC) to
open a new proceeding to determine the level of additional
funding needed to finance the MSRI. Requires cost of this
program to be recovered from all investor owned utilities'
(IOUs) ratepayers, except ratepayers participating in the
California Alternate Rates for Energy (CARE) program and the
Federal Electric Rate Assistance (FERA) program. (To be
eligible to participate in CARE the household income must be
below 175% of the federal poverty level (FPL). To be eligible
for FERA the household income must be below 225% of the FPL.)
5)Caps the total amount of money that can be collect from
customers of the three largest IOUs to fund the program at
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$1.8 billion.
6)Requires PUC to require time-variant pricing for all
ratepayers with a solar energy system.
7)Raises the net metering cap from 0.5% to 2.5%.
8)Requires CEC to issue an assessment of the success of the MSRI
to the Legislature by January 1, 2009, and every third year
thereafter.
9)Requires sellers of production homes, as defined, to offer
solar energy systems on new homes for which tentative
subdivision maps are completed on or after January 1, 2010.
10)Requires CEC to commence a proceeding by July 1, 2006, and
conclude that proceeding within three years, to consider if
and when solar energy systems should be required on new
residential and commercial buildings.
11)Requires municipal utilities to adopt a similar program with
proportionate expenditures.
EXISTING LAW :
1)Requires the implementation of a public goods surcharge to
fund energy efficiency; renewable energy; and research,
development and demonstration programs from January 1, 2002,
to January 1, 2012. The surcharge is a nonbypassable element
of the local distribution service and collected on the basis
of usage.
2)Establishes a net metering program whereby residential and
other customers can receive credits to their monthly
electricity bills for up to 12 months for producing and
placing electricity on the grid from photovoltaic (PV) or
other renewable sources as specified in statute.
3)Establishes incentive programs for PV technologies within CEC
and PUC. These programs offer varying degrees of incentive
payments per kilowatt-hour for residential or commercial
customers purchasing certain types of renewable technology
like PV cells.
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4)Establishes tax exemptions for property tax, interest on
loans, or personal or corporate income tax credits for
customers as a result of increasing energy efficiency or
purchasing renewable technology like solar or wind.
5)Requires IOUs to increase their existing level of renewable
resources by one percent of sales per year until a portfolio
of 20% renewable resources is achieved by no later than 2017.
Municipal electric utilities are not subject to these
standards, but are required to implement and enforce their own
renewable resource procurement programs.
FISCAL EFFECT : Unknown
COMMENTS : This is the Governor's MSRI. It establishes the
ambitious goal of installing solar energy systems on one million
residential and commercial properties by 2018. Additionally,
the bill requires builders of new production homes to offer
solar energy systems on all homes at some point after 2010.
This bill creates a declining rebate program that grants rebates
on the installation of solar energy systems starting at $2.80
per watt and requires that the rebates decline by 7% a year
until they reach $0 in 2015. Additionally the bill requires
that at least 50% of the rebate money ultimately be used on
performance based incentives that are based on the actual output
of solar energy systems. The concept behind this rebate program
is to provide significant sums of money in the early years of
the program to kick start the solar industry, but require the
rebate to rapidly decrease so that the industry can become self
sufficient and the cost of solar energy systems rapidly
decrease. A similar program in Japan has resulted substantial
increase in solar production in the country while the price of
installing rooftop solar energy systems has declined
dramatically.
In California today, a typical residential PV system is between
2kW - 4kW in size. The installation cost is about $9,000/kW
($9/watt), so a 2.5 kW system would cost $22,500. With the
current rebate of $2,800 per kW ($2.80/watt) the rebate would
bring the cost of the system to $15,500. A 7.5% state tax
credit would bring the system cost down to $14,338. The state
tax credit is set to expire at the end of this year.
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Under the current rebate structure and the net metering program
(which credits consumers' electric bills for selling excess
electricity back to the utility) over the life of a solar energy
system the customer should break even on their investment. For
commercial customers, the final after-tax cost is much lower
because of greatly accelerated depreciation and a 10% federal
tax credit which does not apply to residential installations. As
the rebates decline under the MSRI, the customer costs may
increase. However, the proponents of the measure believe that as
the solar market grows, prices will decrease and even with the
smaller rebates customers will continue to break even on their
investments.
While SB 1 caps the amount of funds that can be raised from IOU
ratepayers to support the MSRI at $1.8 billion over the life of
the program, the total costs of the MSRI are indeterminable, and
depend on a number of factors, such as participation; mix of
residential to small commercial and industrial; and the future
costs of solar energy systems. The costs will not only include
the direct incentive programs created in SB 1 but also
potentially include other indirect subsidies such as net
metering which requires the utilities to credit customer bills
for excess power produced at a rate that will far exceed the
utility's generation costs. Actual estimates on costs offered
by supporters and opponents of the bill range from between $2
billion and $7 billion over the life of the program.
Advocates for SB 1 argue that solar power will benefit all
Californians because of its ability to meet peak demand. They
argue that because solar power is most abundant at the times of
the year when the weather is hot and demand for electricity is
highest and consequently costliest, installing solar power will
ultimately lead to lower rates for all ratepayers. The solar
panel will replace the need to procure peaking power, which
generally comes from the most expensive power plants that only
operate at times of peak demand.
Today, most solar panels in California are installed to maximize
total electricity production (generally facing south) and not to
maximize production at the time of day power is needed the most.
A solar panel facing south will produce more total electricity
than any other configuration, but it will not maximize
electricity when the state needs it the most, at times of peak
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demand.
SB 1 now requires at least 50% of all MSRI funds be used for
performance based incentives that will place a higher value on
production at times of peak demand and will require that all
solar customers are billed on a time-of-use basis. This
provision will create strong incentives for customers to
optimize their solar panels for peak load production.
Builder's Must Offer Mandate: This bill requires all builders of
new home developments with 50 or more units (production homes)
to give potential home buyers the option of purchasing a solar
energy system when the customer purchases the house (a
must-offer requirement). The author believes this must-offer
requirement will work in the same way new home buyers choose
what type of flooring or cabinets to have installed: when they
buy the house they will go down a list of optional features in
the house, and solar energy will be one of the options.
Currently, this bill provides that the must-offer requirement
applies to all production homes for which a subdivision
tentative map is completed on or after January 1, 2010. A
subdivision tentative map must be approved before construction
can begin and it can be years after a subdivision tentative map
is approved before a production home is offered for sale. While
the time lag can vary, on average it takes three years between
the approval of the map and the first production home being
offered for sale. This average time lag means that the must
offer provision in the bill will not go into full effect until
2013, 7 years after the MSRI is implemented and only four years
before the incentives will terminate.
For a more detail discussion of this bill and more information
on the current rebate programs in California, other states, and
other counties please refer to the July 6, 2005, Assembly
Utilities and Commerce Committee analysis.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0012840