BILL ANALYSIS 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1345 - Peace Hearing
Date: April 11, 2000 S
As Introduced: January 10, 2000 FISCAL
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DESCRIPTION
Current federal law provides a credit equal to 10% of the
cost of energy property placed in service during a given
tax year.
The California Constitution was amended in 1980 to clarify
that active solar energy systems would not be assessed as
"new construction" under Proposition 13's property tax
limitations.
This bill creates a grant program at the California Energy
Commission (CEC) to offset a portion of the cost of
eligible solar energy systems. The amount of each grant
may be up to $750 and requires the CEC to determine the
size of the grant based on the performance and type of
system. The grant program sunsets at the end of 2005.
This bill establishes a grant program to offset a portion
of the costs of eligible distributed generation (DG)
systems. This grant shall not exceed the lesser of 10% of
the cost of the system, or $2,000, and is available only to
the owner of the system, not an owner-builder or
owner-developer. The grant program sunsets at the end of
2005.
This bill requires the California Public Utilities
Commission (CPUC) to develop appropriate interconnection
and safety requirements and operating agreements for
distributed generation technologies.
KEY QUESTIONS
1.To what extent will the grant program established by this
bill induce new investment in systems and to what extent
will it simply subsidize activity that would take place
without a grant program?
2.Does this bill inadvertently allow solar system
purchasers to receive grants from both the program in
this bill and the SB 90 (Sher), (Chapter 905, Statutes
of 1997) grant program?
3.The grants awarded under the DG program are capped at
$2,000 or 10% of the cost of the system, whichever is
less, but the solar grants can be up to $750, regardless
of the cost of the system. Should the grants awarded
under the solar program be capped at $750 or 10% of the
system, whichever is less?
4.Should DG systems be precluded from offering their power
for sale and be restricted to operating solely to meet
onsite electrical needs?
BACKGROUND
Existing law provides a variety of mechanisms to support
and encourage the development of solar energy programs,
including property tax exemptions for installation of solar
systems and grants for development and operation of some
solar generation technologies.
AB 1890 (Brulte), (Chapter 854, Statutes of 1996), provided
$540 million, collected over four years, to operate and
develop new, emerging and existing renewable resource
technologies. The 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 - the portion designated for new and emerging
technologies. Photovoltaics, or PV systems, include the
traditional panels and other types of receptors that take
in sunlight and provide electricity for residential and
industrial use.
Distributed generation (DG) is a growing industry that has
been receiving quite a bit of attention as the state's
energy needs continue to grow. With recent energy
shortages during peak demand periods, uncertainties about
the future competitive marketplace and new power plant
generation still two to three years from completion, DG
systems are reaching more and more commercial customers -
with residential systems in the advanced development
stages.
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 that can operate in
conjunction with, or independent of, the electricity grid.
COMMENTS
1. Can One System Receive Two Grants? As noted in the
"Background" section, the grid-connected photovoltaic
segment of the solar industry is eligible to compete for
10% of the $540 million available through the SB 90
program. Page 4, Lines 26-35, of this bill appears to
allow those same systems to qualify for grants under the
program established by this measure as well, if they
include adequate battery storage as determined by the CEC.
The author and Committee may wish to consider whether this
provision will allow one system to potentially receive two
grants and, if so, whether that's appropriate.
2. Can A DG Solar System Receive Additional Consideration?
A solar system eligible for a maximum $750 grant under the
first portion of this bill would also be eligible for a
$2,000 grant under the DG provision of this bill on Page 9,
Line 21, where "solar dish stirling engine" technology is
defined as an "eligible distributed generation system."
The author and Committee may wish to consider whether a
solar system should be able to qualify for grants under
both programs created by this bill and perhaps under three
programs when the SB 90 grant program described in Comment
1 is accounted for.
3. Solar Water Heaters & Pool Heaters . The new and emerging
technologies money that is awarded under SB 90 is currently
done so according to the number of kilowatt hours produced,
not per system. As a result, the solar water heating
segment of the solar industry isn't eligible to compete for
this funding because solar water heaters don't produce
kilowatts - sunlight is transformed to heat, not electrons.
This bill would allow the solar water heating and the
solar pool heating industries to receive grants.
4. Should The Grant Be A Percentage Of The System's Cost?
The maximum $750 grant available under the program created
by this bill was also found in SB 116 (Peace) of 1998 and
SB 655 (Peace) of 1999, both of which were vetoed.
According to Horizon Industries, one of the bill's
supporters, a builder's cost of putting a solar water
heating system into a house could be as little as $2,000,
while the cost of installing a solar swimming pool heater
is about $4,000. Therefore, if a system is awarded the
maximum $750 grant permitted by this bill, it would cover
37.5% and 13.8% of those costs, respectively. The author
and Committee may wish to consider whether the amount of
the grant should, in addition to being capped at a maximum
of $750, also be capped at 10% of the system price,
whichever is less.
5. Are Businesses Already Making "Business Decisions" To
Install DG Systems? Some businesses, such as hospitals and
others that can't afford to have their power systems shut
down in the event of an outage, are already installing DG
systems to ensure they can keep the lights on. Given this,
the author and Committee may wish to consider whether the
DG grant program established by this bill will actually
drive people to install DG systems who otherwise wouldn't
or whether it will simply reduce the price for those who
are going to install such a system anyway.
6. Should DG Sales Be Precluded? Section 5 of this bill
requires the CPUC to establish interconnection, safety
requirements, and operating agreements in order to allow DG
plants to operate in California.
However, Page 10, Line 1 appears to preclude any DG
operator from being able to sell power that's generated and
Page 10, Lines 19-23 appear to restrict DG facilities to
simply generating power to meet onsite electrical demands.
The author and Committee may wish to consider the pros and
cons of banning power sales from DG plants, as well as the
pros and cons of restricting CPUC-authorized DG plants to
meeting onsite electrical loads.
7. CPUC Study . The CPUC is in the process of studying
various aspects of DG, including the effect and importance
it will have on the traditional power grid system, along
with some consideration of how DG should be regulated. In
light of the fact that the CPUC report is expected sometime
in June, the author and Committee may wish to consider
whether Section 5 of the bill, which gives the CPUC
specific direction as to how a DG regulatory program should
be created, is premature.
8. Prior Legislation . This bill is similar to SB 655
(Peace) of 1999, which was approved by this committee but
vetoed by the Governor. The Governor's veto message reads:
"While I am supportive of efforts to promote emerging
solar and distributed generation technologies, this
bill establishes a new grant program without
establishing the source or amount of funding. This
program, while important, should compete with other
priorities in the annual budget process."
This bill is also similar to SB 116 (Peace) of 1998, which
established a grant program for solar systems, but not
distributed generation 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." The property
tax exemption provisions of SB 116 were reinstated by AB
1755 (Keeley), (Chapter 855, Statutes of 1998).
POSITIONS
Sponsor:
Author
Support:
California Manufactures & Technology Association
California Solar Energy Industries Association
Clean Power Campaign
ESDI, Inc.
Environmental Solar Design, Inc.
Goldline Electronic Controls
Heliocol Solar
Horizon Industries
Independent Power Providers
New Energy
Off Lined Independent Energy Systems
Renewable Energy Concepts, Inc.
San Diego Regional Energy Office
Sierra Club
Solar Depot
Solar Roofs. Com
SUN Utility Network
USAN
Various individuals
Oppose:
Enron Corporation
Anna Ferrera
SB 1345 Analysis
Hearing Date: April 11, 2000