The California Solar Initiative The California Solar Initiative (CSI) has a goal to create 3,000 MW of distributed solar generation in California while creating a self-sustaining solar industry free from ratepayer subsidies by 2017. Retail Electricity providers in California. Investor Owned Utilities (IOUs) (aprox 70% of state load) Pacific Gas & Electric Southern California Edison San Diego Gas and Electric Rates for IOUs are decoupled Municipal Utilities/Publicly Owned Utilities (POUs) ( aprox 30% of state load) Largest two are Los Angeles Department of Water and Power and Sacramento Municipal Utility District History of Solar in California Prior to Creation of CSI: o California Energy Commission (CEC) ran a solar rebate program for residential and small commercial customers. o The California Public Utilities Commission (CPUC) ran a solar rebate program for larger commercial and industrial customers. o Programs did not appear to lead to increased demand for solar or decreases in retail prices. o Already had net metering program. Credit offered to solar customers under net metering was retail price of electricity. In 2004, Governor announces Million Solar Homes Initiative and sponsors Legislation to create the program in last weeks of Legislative Session. Bill fails vote in policy committee due to last minute nature of the proposal. In January 2005, CPUC opens a proceeding asking parties how to best design a solar initiative. The proceeding leads to staff white paper issued in June of 2005. In 2005, Governor sponsors legislation (SB 1) to create the Million Solar Roofs Initiative. As SB 1 moves through the process much of the CPUC staff white paper is incorporated into SB1. SB 1 does not make it out of Legislature in 2005 due to numerous concerns members had with the bill impacts on low income customers, true benefits to ratepayers, and labor issues.
CPUC then creates the CSI which was similar to SB 1 but with key differences. One key issue was that the CPUC does not have authority to require municipal utilities to implement a solar program. On August 21, 2006, SB1 is approved. SB 1 applied CSI to municipal utilities, codifies much of the CPUC program and made other changes to the CSI. o SB 1 was based on calculations and arguments made by the solar industry that if California creates a large solar rebate program today, the money will help create a market for solar power and ultimately lower retail prices for solar to the point that no state subsidies will be needed. o Much of SB 1 is about codifying those promises so that the industry will be forced to following their commitments and lower prices. o Rebates required to decline by an average of 7% a year. o Total program costs are capped at $3.2 billion over 10 years. The cost cap started at $1.8 billion but was increased in the final version of the bill. o If these requirements limit the amount of solar power in California, the industry will be required to come back to the Legislature and justify why more money is needed. Issues Considered in Passing Solar Program 1) Why is solar a good thing? a. Environmental Attributes b. Grid stability c. Lower marginal/peak price for electricity d. Added installed capacity -- Can get 3,000 MW of install peak load capacity where the ratepayer is only paying for a third of the costs. The above goals can all be meet as effectively on commercial or residential, thus the bill intentionally did not favor one customer class over another. The benefits will go to the class that can install solar most cost effectively. 2) Need to protect ratepayers goal was not solar at any costs since ratepayers will pay all of the subsidies costs. 3) Need to make sure Solar is a peak resource to get true economic benefit to all ratepayers. 4) Energy Efficiency is still the most cost effective way to meet grid stability and green power grids. 5) Need to hold the industry to their promises that prices will drop and industry will become self sustaining.
What the CSI/ SB 1 Actually Does 1) Creates rebate/ monetary incentive program for solar energy systems. Solar energy systems included any device that is between 10 kw and 1.5 MW in size that converts the sun s energy into electricity. The incentives will be funded by a surcharge on all electricity ratepayers (except low income ratepayers). The estimated bill impact of the program is approximately 56 cents per month for the average residential customer. The incentives: a. Must decline by an average of 7% per year until the rebate is zero in 2017; b. Are not capacity based but are performances based. This rewards customers for optimally-sited and maintained systems. Pay for expected or actual solar performance, not installed capacity, not percent of cost. Because residential customers have more problems with upfront financing CPUC issues incentives differently for larger customers than for smaller customers. Performance-Based Incentive (PBI): Initially systems >100 kw; phase-in smaller systems by 2010 Paid monthly over 5 years based on metered output Can return higher incentive than EPBB Expected Performance Based Buydown (EPBB): Initially <100kW Incentive is paid in full as an up-front payment based on site-specific installation aspects using an agreed upon solar calculator. c. Due to conflicting jurisdictions, program will be overseen by three separate entities Program Authority California Public Utilities Commission California Energy Commission Publicly Owned Utilities (POU) Budget $2,167 million $400 million $784 million Solar Goals (MW) 1,940 MW 360 MW 700 MW Scope All systems in IOU areas except new homes New homes in IOU territories All systems in POU areas Begins January 2007 January 2007 January 2008 2) In order to be eligible for the incentives customers must undergo an energy efficient audit and make reasonable and cost effective energy efficiency improvements to their buildings. The utilities administer separate energy programs that will subsidize the energy efficiency improvements. 3) Requires time-variant pricing for all ratepayers with a solar energy system. This provision was updated in 2007 by AB 1714 to delay implementation of mandatory time variant pricing until each utility has completed its next general race case. This delay will allow the utilities to design a solar rate that appropriately values solar power at times of peak demand. The reason for this requirement is to reward customers for installing solar energy systems in a
manner that maximizes production during times of the utility s peak demand. 4) Requires the CEC to develop eligibility criteria for solar energy systems that qualify for the rebates. The intent of this requirement is to develop criteria that ensure optimum performance of the solar energy systems, but the statute also allows the CEC to look at other factors such as the energy efficiency of the building where the systems are installed. 5) Increases a cap on how many customers can participate in an existing net metering program to accommodate expected increased demand for the program, but leaves new cap at a level that would be insufficient to meet 3,000 MW goals. The lower cap will allow for Legislative review half way through the program. 6) Requires municipal utilities to adopt a similar program with proportionate expenditures. The CPUC does not have direct authority over municipal utilities. 7) Caps the total cost of CSI statewide at $3,350,800,000. 8) SB 1 also had a separate section to require sellers of production homes to offer solar energy systems on new homes that are constructed after January 1, 2011. Success and Failures of CSI to Date California has had reservations for more solar power in the first nine months of this year, than the state has had in the last 15 years combined (130 megawatts). It appears that most of the growth is in the commercial sector. Installers believe residential sector has actually dropped off in the new program. 1) Commercial Sector is making use of third party power purchase agreements where a third party installs and owns the solar energy system and sells the electricity production back to the customer. The third party takes the rebates and tax incentives. 2) Problem with program complexity: a. Complaints that new paper work and difficulty in calculating EPBB are increase costs and delaying projects. b. Complaints that EPBB means that installers cannot tell customers what their final outof-pocket expenses will be until after the units are installed and customers are not willing to install the system without knowing the final costs. 3) Problem with some rates not being solar friendly : a. Statutory requirement that all solar customers be on a dynamic pricing tariff resulted in a small number of customer s electricity bills increasing once they installed solar panels. i. Intent of requirement was to reward placement of panels to maximize production during time of day when the local utility has its peak demand.
ii. At least 90% of customers will actually see greater savings on time variant pricing. The problem appears to be the result of a rate design issue in Southern California Edison territory. iii. Legislature has delayed this requirement until utilities can design new solar rates. b. Tiered rate structure makes solar very economic for residential customers that consume large amounts of electricity since the solar offsets the high marginal costs of electricity. However, makes solar uneconomic for smaller customers who remain in the lowest cost tier. 4) Possible problem with energy efficiency requirements a. CEC is requiring all buildings that want the solar rebates to be upgraded to current state energy efficiency standards plus 15%. This could add so much cost to the home owner that solar no longer looks reasonable. 5) Problems with local building permits. 6) Some installers believe that the rebates have been set too low and due to increased material costs the rebates should be reset to higher level.
California s Renewable Portfolio Standard State law requires that by 2010 20% of all retail sales of electricity come from renewable sources of power. Moving to a 33% by 2020 requirement. This is a technology neutral program. There are no set aside percentages for one form of renewable power over another. o For investor owned utilities, they issue an RFP for needed renewable power. After bids are review by the utility and a procurement review group, the utility accepts contracts for the bids that best meet the portfolio needs of the utility and are least cost. There is a cap on the amount of money they utility would be required to spend on renewable power that costs more than the market costs for all electricity (as determined by the CPUC). Currently, the cost cap is making some solar technologies less desirable than wind power because the high price of solar may bust the cost cap. o Even so, there are proposed contracts for over 1,000 MW of large scale solar projects in California. Program allows for utilities to count Renewable Energy Credits (RECs) toward their RPS obligations, but only if the REC is associated with electrons that are delivered to California. The RPS is not just aimed at GHG, but also at local air quality issues. o The utilities do not own the RECs of the distributed generation solar funded under the CSI and thus they cannot count it toward their RPS. Feed in Tariffs California has a very limited feed in tariff program that allows water companies to sell all renewable power they generate to the utility at a preset price determined by the CPUC. The Governor vetoed a bill that would have expanded this program to apply to all customers it appears the veto had to do with issues of REC ownership and not with opposition to a feed in tariff. CPUC may expand this program on their own without additional legislation.