BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1345
                                                                  Page  1


          Date of Hearing:   July 6, 2000

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE 
                              Roderick D. Wright, Chair
                     SB 1345 (Peace) - As Amended:  June 20, 2000

          SENATE VOTE  :   39-0
           
          SUBJECT  :  State Energy Resources Conservation and Development  
          Commission: grant program: solar energy systems.

           SUMMARY  :  Establishes a grant program to offset a portion of the  
          costs of solar and distributed generation systems, contingent on  
          funding in the Budget Act.  Specifically,  this bill  :

          1)Creates a grant program at the California Energy Commission  
            (CEC) to provide grants of up to $750 to homeowners and  
            homebuilders who install thermal solar systems or specified  
            photovoltaic solar systems in their homes.

          2)Requires CEC to determine the size of the grant based on the  
            performance and type of system.

          3)Revises the definition of "solar energy system" to include any  
            solar collector or other solar energy device whose primary  
            purpose is to provide for electricity generation, or any  
            structural design feature of a building whose primary purpose  
            is to provide electricity generation.

          4)Creates a grant program at CEC for up to $2,000 to  
            homebuilders and homeowners who install distributed generation  
            (DG).

          5)Provides that both grant programs sunset at the end of 2005.

          6)Requires the California Public Utilities Commission (CPUC) to  
            establish appropriate interconnection and safety requirements  
            and operating agreements for distributed generation.

          7)Requires CPUC to establish fair and reasonable standby rates.

          8)Makes related findings and declarations.

           EXISTING LAW  : 








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          1)Pursuant to the California Constitution, provides that active  
            solar energy systems are not assessed as "new construction"  
            for purposes of assessing state property tax.

          2)Defines "solar energy system," for purposes of provisions  
            governing property rights, to mean any solar collector or  
            other solar energy device whose primary purpose is to provide  
            for the collection, storage, and distribution of solar energy  
            for space heating or cooling, or for water heating, or any  
            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.

          3)Requires CEC to expand and accelerate development of  
            alternative sources of energy, including solar resources.

           FISCAL EFFECT  :  According to the Senate Appropriations Committee  
          this bill would incur costs of $250,000 in the initial year and  
          $400,000 in ongoing years.  $1.5 million in funding for this  
          program has been approved in this year's budget in the Energy  
          Resources Programs Account.

           COMMENTS  :   

          1)This bill is designed to encourage installation of solar and  
            distributed generation systems.  Solar systems would be  
            eligible for up to $750 and distributed generation systems  
            would be eligible for 10 percent of their costs up to $2,000.   
            The grants would be based on the performance of, or the type  
            of, the system, as determined by CEC.

          2)Existing law provides incentives to help support renewable  
            electricity generation and develop a renewable market.  AB  
            1890 (Brulte), Chapter 854, Statutes of 1996 and SB 90 (Sher),  
            Chapter 905, Statutes 1997 established measures designed to  
            increase the use of solar photovoltaic (PV) technologies  
            through the Emerging Renewables program administered by CEC.   
            Small-scale solar thermal technologies were not addressed in  
            these bills.  This bill would establish parallel, but smaller  
            incentives for small-scale thermal technologies used in water  
            heating applications, with a focus on residential  
            construction.  Additionally, qualified PV battery pack systems  
            and distributed generation systems would also be eligible for  








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            grants under this bill.

           3)Small-Scale Solar Thermal Technologies  .  Solar water heating  
            technologies are nearly cost-competitive with natural gas  
            water heaters.  Research conducted by the National Association  
            of Homebuilders Research Center indicates that when solar  
            water heaters are offered to homebuyers, a substantial portion  
            elect to purchase them.  According to the author, this bill  
            would jump start the new construction segment of the solar  
            industry, while also providing substantial environmental  
            benefits.  Solar water heaters reduce the consumption of  
            natural gas and electricity, while simultaneously reducing the  
            emissions of nitrous oxides and carbon dioxide.  According to  
            federal estimates, in most cases (except in households with  
            more than eight persons) a solar water heater installed in a  
            home reduces carbon dioxide emissions by at least 50 percent.

           4)PV Battery Pack Systems  .  This bill would also provide  
            incentives for the addition of battery storage to  
            grid-connected PV systems, which would enable these systems to  
            operate independently of the electricity grid.  Without  
            battery backup, PV systems become inoperable in the event of  
            an electrical outage.  This bill would provide a modest  
            incentive to install such backup capability, thereby allowing  
            greater grid independence and improving system reliability.

           5)Distributed Generation  .  Generally defined as a plant of 20  
            megawatts (MW) or less located in or close to a load center or  
            on a customer's premises that produces electricity at  
            distribution system voltage, distributed generation includes  
            the following technologies: microgeneration, wind turbines,  
            gas turbines, fuel cells, solar dish stirling engines, and  
            reciprocal internal combustion engines.  Under this bill,  
            distributed generation systems would be eligible for 10  
            percent of their costs up to $2,000, and would be required to  
            meet the same emission standards as central station power  
            plants.  Additionally, CPUC would be required under this bill  
            to establish interconnection and safety requirements, and  
            operating agreements, as well as fair and reasonable standby  
            rates for distributed generation end-users.

           6)Recent Headlines Underscore the Need for New Generation, and a  
            Reliable Electric Grid  .  AB 1890 established a competitive  
            electric generation market.  The reliability of the electric  
            grid depends on an adequate supply of new generation, but  








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            since the enactment of AB 1890, demand growth has outpaced new  
            generation additions.  (Three new "merchant" plants are  
            projected to come on-line late next summer, in 2001).  The  
            California Independent System Operator, which manages the  
            state's transmission grid and ensures system reliability, has  
            issued numerous "alerts" in recent weeks and curtailed power  
            to non-firm, or interruptible, customers on numerous occasions  
            to maintain system reliability in light of the high demand and  
            generation shortfalls.  A number of electrical outages have  
            occurred as well.  The purpose of this bill, according to the  
            author, is 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.

           7)Prior Legislation, and the 2000-2001 State Budget .  This bill  
            is similar to SB 655 (Peace), which was approved by this  
            committee but subsequently vetoed by Governor Davis.  In his  
            veto message, the governor expressed support of efforts to  
            promote emerging solar and distributed generation  
            technologies, but expressed concern that the bill established  
            a new grant program without establishing the source or amount  
            of funding.  The recently enacted State Budget, signed into  
            law last week, includes a $1 million appropriation for solar  
            and distributed generation technologies.  The funds come from  
            the Energy Resources Program Account.    

           REGISTERED SUPPORT / OPPOSITION  :

           Support  

          AstroPower
          Aztec Solar
          California Solar Industries Association (CAL SEIA)
          California State Association of Electrical Workers
          Clean Power Campaign
          Environmental Defense Fund
          Environmental Solar Design, Inc.
          ESDI, Inc.
          Goldline Electronic Controls (Independent Energy, Inc.)
          Helicol
          Horizon Industries
          Independent Power Providers
          Kyocera Solar, Inc.








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          Off Line, Independent Energy Systems
          Pacific Solar Company
          Plug Power Inc.
          Politico Group - National Electrical Contractors Association
          Politico Group - California Legislative Conference of the  
          Plumbing Heating & Piping Industry
          Renewable Energy Concepts (REC)
          Sacramento Municipal Utility District (SMUD)
          San Diego Regional Energy Office
          Science Applications International Corporation (SAIC)
          Sierra Club California
          Sierra Pacific
          Sempra Energy
          Solar Depot - Sacramento
          Solar Depot - Photovoltaic Power Systems
          Solar Roofs.com
          Southern California Edison
          Sun Utility Network
          USAN
          3 constituents

           Opposition  

          None on file


           Analysis Prepared by  :    Joseph Lyons / U. & C. / (916) 319-2083