BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 655| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 655 Author: Peace (D) Amended: 4/28/99 Vote: 21 SENATE ENERGY, U. & C. COMMITTEE : 8-0, 4/13/99 AYES: Bowen, Baca, Brulte, Kelley, Mountjoy, Peace, Solis, Speier NOT VOTING: Alarcon, Hughes, Vasconcellos SENATE APPROPRIATIONS COMMITTEE : 9-4, 5/27/99 AYES: Johnston, Alpert, Bowen, Burton, Escutia, Karnette, McPherson, Perata, Vasconcellos NOES: Johnson, Kelley, Leslie, Mountjoy SUBJECT : California Energy Commission: grant program: solar energy systems SOURCE : Author DIGEST : This bill establishes a grant program to increase consumer investment in solar and low-pollution distributed generation systems. ANALYSIS : Existing law provides a variety of mechanisms to support solar energy. These include property tax exemptions for installation of solar systems and grants for development and operation of some solar generation technologies. CONTINUED SB 655 Page 2 Since 1976, California tax law has provided a credit for the cost of solar energy systems installed in California. Existing federal law provides a credit equal to 10% of the cost of energy property placed in service during the year. In 1980, the California Constitution was amended by initiative (Proposition 7) to provide that active solar energy systems would not be assessed as "new construction" under Proposition 13's property tax requirements. AB 1890 (Brulte), Chapter 854, Statutes of 1996, provided $540 million, collected over four years, to operate and develop new, emerging and existing renewable resources technologies. The California Energy Commission (CEC) was charged with developing a spending plan for these funds, as well as others dedicated in AB 1890 for various public purpose programs. The CEC spending plan was codified by SB 90 (Sher), Chapter 905, Statutes of 1997. Under SB 90, the grid-connected photovoltaic segment of the solar industry (which is potentially eligible for grants under this bill) is eligible to compete for 10% of the $540 million, which is the portion designated for new and emerging technologies. That money is awarded according to the number of kilowatt hours produced, not on a per-system basis. As a result, the solar water heating segment of the solar industry is not eligible to compete for this funding because no kilowatt hours are produced. And, by definition, the non-grid-connected photovoltaic segment is also not eligible. Distributed generation (DG) is small scale production of electricity at or near the point of use, as opposed to central generation, where electricity is produced in large quantities at a remote site and transmitted to multiple users. DG systems range from photovoltaics and fuel cells to gas turbines and diesel engines in residential, commercial and industrial applications. They can operate in conjunction with, or independent of, the electricity grid. Under this bill, solar and DG systems are required to be interconnected with the electricity grid to be eligible for grants. DG systems are further required to be used only to meet onsite electric load, and not sell power. SB 655 Page 3 This bill requires CEC, until January 2004, to develop a program to provide grants to offset a portion of the costs of qualified solar and DG installations, contingent on funding of the program in the annual Budget Act. Solar systems would be eligible for up to $750 and DG systems would be eligible for 10% of their cost, up to $2,000. This bill further requires the CEC to establish operational and safety standards for DG systems. This bill also expands the purpose of a "solar energy system" to include "electricity generation" for the Civil Code's definition of a "solar easement." The bill requires CEC, subject to PUC review and approval, to establish appropriate interconnection and safety requirements and operating agreements for DG systems. Prior Legislation This bill is similar to SB 116 (Peace) of 1998, which established a grant program for solar systems, but not DG systems. In addition, SB 116 reinstated a property tax exemption for the installation of solar systems. SB 116 was vetoed by Governor Wilson, who objected to the grant program, stating a preference for "fair and open market competition without government subsidization of one particular industry." Governor Wilson had already reinstated the solar property tax exemption by signing AB 1755 (Keeley), Chapter 855, Statutes of 1998. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No Senate Appropriations Committee staff estimates the CEC will have the following fiscal impacts: 1.Consultant contracts totaling $180,000 one time to evaluate the various distributed generation technologies and develop performance standards. 2.Consultant contracts estimated at $200,000 to develop the operating agreement criteria, guidelines, and SB 655 Page 4 requirements. 3.To the extent interim requirements are needed, one CEC PY may be needed to accomplish this task. 4.Consultant contract estimated at $120,000 to assist the CEC with establishing fair and reasonable standby rates. The CEC will likely need one-half PY to work with the California Public Utilities Commission in establishing these rates. 5.Unknown, probably two to three PY to develop and administer the grant program. SUPPORT : (Verified 5/27/99) Ackler & Associates, Sacramento Alten, Palo Alto Alternative Solar Products, Los Angeles Ameco, Long Beach Astro Power, Walnut Creek Aztec Solar, Sacramento BP Solar California Solar Energy Industries Association, Rio Vista California Manufacturers Association California State Council of Laborers Diablo Solar Services, Martinez Environmental Defense Fund, Oakland Environmental Solar, North Hollywood - 15 letters Goldline Electronic Controls, La Mesa Helioco, Napa Heliotrope General, Spring Valley Horizon Industries, Escondido Independent Energy, Inc. - Parent of Goldline Electronics Controls, La Mesa Leveleg, Precision Solar Mounting Systems, San Diego Mark Naylor & Company, San Diego Morley Manufacturing, Cedar Ridge New Energy Ventures, Inc. (NEV) Off-Line Independent Energy Systems, North Fork Photocomm, Inc. the Wireless Power Company, San Diego PVI Photovoltaic & International, Sunnyvale Real Goods, Ukiah Schofield Solar Energy Company, San Buena Ventura - 2 SB 655 Page 5 letters Science Applications International Corporation, San Diego Six Rivers, Eureka Solar Connection, Morro Bay SolarCraft Services, Inc. Novato Solar Depot, Sacramento Solar Depot, San Rafael Solar Unlimited, Burbank Solec, Carson South Bay Solar, San Jose SunEarth, Ontario Sunray Energy, Inc., Daggett, California SunSpot Mechanical, Escondido Sun Utility Network, Los Angeles Westburne, Escondido Western Renewables Group, Mission Viejo Numerous individual letters NC:cm 5/28/99 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****