BILL ANALYSIS SB 655 Page 1 Date of Hearing: July 12, 1999 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Roderick Wright, Chair SB 655 (Peace) - As Amended: July 8, 1999 SENATE VOTE : 28-9 SUBJECT : California Energy Commission: grant program: solar energy systems. SUMMARY : Requires the California Energy Commission (CEC) to develop a five -year program to provide grants to offset a portion of the costs of qualified solar and distributed generation installations, contingent on funding of the program in the Budget Act of 2000. Specifically, this bill : 1)Requires the CEC, to the extent funds are appropriated for that purpose in the Budget Act of 2000, to implement a grant program to accomplish specified goals, including making solar energy systems cost competitive with alternate forms of energy. 2)Provides that solar systems would be eligible for up to $750. 3)Requires CEC to adopt guidelines, as specified. 4)Revises definition of "solar energy system" to include any solar collector or other solar energy device, or any structural design feature of a building, whose primary purpose is to provide for electricity generation. 5)Requires CEC, to the extent that the funds are appropriated for that purpose, to develop and implement a grant program to offset a portion of the costs of eligible distributed generation systems, as prescribed. 6)Provides that distributed generation systems would be eligible for up to 10 percent of their cost, up to $2,000. 7)Requires the California Public Utilities Commission (CPUC) to establish operational and safety standards for distributed generation systems. 8)Requires CPUC to establish fair and reasonable standby rates. SB 655 Page 2 9)Defines distributed generation, for the purposes of this bill, as "any onsite generation, interconnected and operating in parallel with the electricity grid, that is used solely to meet onsite electric load. 10)Authorizes CEC to use up to three percent of the funds appropriated for the program to fund CEC's costs in administering these programs. 11)Makes related finding and declarations about the merits of solar technologies and distributed generation. EXISTING LAW : 1)Requires CEC to expand and accelerate development of alternative sources of energy, including solar resources. 2)Defines "solar energy system" to mean any solar collector or other solar energy device, or structural design feature of a building, whose primary purpose is to provide for the collection, storage, and distribution of solar energy for space heating or cooling, or for water heating. FISCAL EFFECT : Unknown. COMMENTS : 1)This bill is designed to encourage installation of residential, small commercial and industrial solar and distributed generation systems. Solar systems would be eligible for up to $750 dollars and distributed generation systems would be eligible for 10 percent of their costs up to $2,000. 2)This bill is also intended to encourage end-users to install environmentally superior generation systems to meet onsite load and thereby improve system reliability and environmental quality by reducing system load and reducing the need for new distribution system investments. 3)The amended bill's program start-up date is July 1, 2000. Funding for these provisions is contingent upon enactment in the Budget Act of 2000, which would take effect July 1, 2000, SB 655 Page 3 assuming the Legislature meets its constitutional budget deadline. 4)Existing law provides a number of mechanisms to support solar energy, including property tax exemptions for the installation of solar systems and grants for development and operation of some solar generation technologies. Existing law also provides a credit for the cost of solar energy systems. Proposition 7, passed by voters in a statewide referendum in 1980, exempts active solar energy systems from being assessed as "new construction" under Proposition 13's property tax requirements. 5)AB 1890 [(Brulte), Chapter 854, Statutes of 1996] provided $540 million, collected over a four year period, to operate and develop new, emerging, and existing renewable resource technologies. AB 1890 directed CEC to develop a spending plan for these funds. SB 90 [(Sher), Chapter 905, Statutes of 1997] codified CEC's proposals. The SB 90 monies are awarded according to the number of kilowatt hours produced, not on a per-system basis. Under SB 90, the grid-connected photovoltaic segment of the solar industry, which is eligible for grants under this bill, is eligible to compete for 10 percent of the $540 million, in the category earmarked for new and emerging technologies. 6)The solar water heating segment of the solar industry, which produces no kilowatt hours, is not eligible to compete for SB 90 funding because no kilowatt hours are produced, but is eligible for grants under this bill. 7)Distributed generation 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 transferred to multiple users. Distributed generation systems range from photovoltaics and fuel cells to gas turbines and diesel engines in residential, commercial, and industrial applications. Under this bill, distributed generation systems are required to be used only to meet onsite electric load, and not sell power. 8)This bill requires CPUC to establish appropriate interconnection and safety requirements, and operating agreements for distributed generation. CPUC is presently studying the issue of distributed generation. Last December, SB 655 Page 4 CPUC opened a rulemaking proceeding to consider reforms in the structure and regulatory framework governing electricity distribution service, which includes a study of issues related to distributed generation. REGISTERED SUPPORT / OPPOSITION : Support BP Solar Alternative Solar Products Alten Ameco Astro Power Aztec solar California Solar Energy Industries Association Diablo Solar services Environmental Defense Fund Environmental Solar Goldline Electronic Controls Helioco Heliotrope General Horizon Industries Independent Energy, Inc. - Parent of Goldline Electronic Controls Leveleg, Precision Solar Mounting Systems Mark Naylor & Company Morley Manufacturing Off-Line Independent Energy Systems Pacific Energy Company Potocomm, Inc. the Wireless Power Company PVI Photovoltaic & International Real Goods The Scholfield Solar Energy Company Science Applications International Corporation Sierra Pacific Home & Comfort Inc. Six Rivers Solar Connection SolarCraft Services, Inc. Solar Depot Solar Unlimited Solar Utility Solec South Bay Solar SunEarth SB 655 Page 5 Sunray Energy, Inc. SunSpot Mechanical Sun Utility Network Westburne Western Renewables Group 10 individuals Opposition None on file. Analysis Prepared by : Joseph Lyons / U. & C. / (916) 319-2083