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 : SB 1345 Page 2 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 SB 1345 Page 3 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 SB 1345 Page 4 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. SB 1345 Page 5 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