Questions? Please contact the Office of Governmental Affairs at (916) 327-3277 California Public Utilities CommissionLegislative Briefing

November 17, 2008

Distributed Generation and California Solar Initiative:

Policies, Programs, and Progress!

2

Presentation Overview

• What is Distributed Generation?• CPUC Policies & Programs

• Customer-Side Distributed Generation• Net energy metering and interconnection policies• CSI• SGIP

• Wholesale Distributed Generation• Interconnection Policies• RPS• QFs• Utility ownership• Feed-in-Tariffs

• Summary of challenges and opportunities

3

Energy Action Plan: “Loading Order”

Energy efficiency

Demand response

Distributed generation

Renewable generation

Cleanest available fossil resources

Source: http://www.cpuc.ca.gov/PUC/energy/electric/energy+action+plan/

4

What is Distributed Generation?

DG Technologies include:• Solar Photovoltaics (PV)• Solar thermal

• Electric generating• Concentrated solar power (CSP)• Stirling

• Electric displacing• Water heating and cooling• Space heating and cooling• Process heat

• Wind• Fuel Cells

• Fuel = natural gas/biogas/hydrogen• Combined Heat & Power applications

• Combustion technologies• Microturbines• Internal Combustion Engines• Fuel = natural gas/biogas/hydrogen• Combined Heat & Power applications

• Distributed storage

DG is:• Generation connected at

distribution voltage (not transmission voltage)

• Size options: 1 kW to 20 MW• Location options

• Customer-sited generation• Wholesale generation

• Merchant owned• Utility owned• Customer owned

• Can provide voltage support• Can provide local reliability &

system capacity• Can provide Transmission &

Distribution deferral option for utility

5

Why DG Matters

• Reduces GHG

• Helps meet RPS

• Can enhance grid reliability

• Empowers consumers

• Hastens the grid of the future

6

Distributed Generation Policies & Programs

DG Type Policies Programs

Customer-Side Generation

• Upfront Incentives • Projects sized to customer load• DG projects reduce demand (like EE)• RECs retained by customer (kWh user)• Exempt from many interconnection charges• Net Energy Metering

Solar: California Solar Initiative & CEC New Solar Homes Program

Self Generation Incentive Program

Emerging Renewables Program

Utility side of the Meter -- Wholesale Generation/ Utility Procurement

• Various contract paths, price depends on contract• Projects designed as net export to grid• Energy and Capacity used for utility procurement obligations• RECs owned by energy buyer •Projects interconnect with CPUC Rule 21 and/or FERC SGIP rules • Utility owned and Independently owned

Renewable Portfolio Standard• Competitive Solicitations• Bilateral Contracts• Standard Offer Contracts

Feed-In Tariffs (< 1.5 MW)• Power Purchase Agreements

Utility Ownership Proposals

Qualifying Facility Contracts• Standard Offer Contract

* Note: There are other customer-side generation programs not overseen by the CPUC; including the New Solar Homes Partnership and programs sponsored at Publicly Owned Utilities

7

Solar - Installations and Pipeline

Sources: CEC Grid Tied PV Summary (April 2008), CEC Power Plant Database (2007), CPUC Staff Progress Report on CSI (October 2008), CPUC 20% by 2010 RPS Project Tracking Spreadsheet (3rd Quarter 2008)

Solar Project Type Program Installed Identified Project Pipeline

PV CSP PV CSP

Customer -Side Generation

California Solar Initiative (CSI) 121 MW ~ 169+ MW

~

Prior programs + rest of state 271 MW ~ ? ~

Wholesale Generation/ Utility Procurement

Renewable Portfolio Standard ~ ~ 815 MW 2800 MW

Feed-In Tariffs < 1.5 MW ~ ~ ~ ~

Utility Ownership Proposals 2 MW n/a 300 + MW

n/a

Qualifying Facility Contracts ~ 356 MW ~ ~

Total (4832 MW) 750 MW 4084+ MW

• The CSI program has a 10 year CPUC goal of 1,940 MW – of which 15% of the 10 year goal has been installed or identified. • The RPS and QF solar projects and contracts noted here are mostly not DG, but are solar.

8

• Net Energy Metering and Interconnection Policy

• California Solar Initiative

• Self Generation Incentive Program

Customer-Side Distributed Generation

9

Net Energy Metering • Net Energy Metering:

• Customers may offset utility charges with credits from onsite power production.• NEM customers are exempt from standby charges and interconnection fees.

• NEM Rates:• Full retail NEM - credit based on the full retail rate (PUC Section 2827)

• Solar up to 1MW; Wind up to 50kW • Capped at 2.5% of utility’s peak demand*

• Generation only NEM - credit based on generation portion of the rate• Wind between 50kW and 1MW (PUC Section 2827.8)• Biogas generation up to 1MW (PUC Section 2827.9)• Fuel Cells up to 1MW (PUC Section 2827.10)

Investor Owned Utility PG&E SCE SDG&E

NEM penetration (MW) 231.9 MW NA 43.6 MW

Total Peak Demand (MW) 20,258 MW NA 4,318 MW

% 1.14% NA 1.01%

*NEM penetration by Investor Owned Utility (as of 10/2008)

10

Virtual Net Metering for Multifamily Affordable Housing

•VNM for MASH: one solar system, one building, multiple tenants

•Allows for allocation of NEM benefits from a single solar system to all meters on an individually metered multifamily affordable housing property

PV

Gen Mete

r

Tenant

Tenant

Comm.

Area

Tenant

Utility Meters

How it works:

•Solar output flows to utility grid and tracked by utility

•Utility provides energy credit according to NEM rules to each individually metered account (common area and tenant)

•Credit at OAT rate for each account

11

NEM Challenges and Opportunities

Challenges:• 2.5% cap will be reached before CSI funds/goals

reached – potentially as soon as 2010• Challenges for multi-tenant properties

• Virtual Net Metering concept to be considered in CPUC proceeding for expansion beyond affordable housing

Opportunities:• Legislative action required to address 2.5% cap.

12

California Solar Initiative

Goals• 3,000 MW of new customer-owned distributed

solar • Self-sustaining solar industry free from

ratepayer funded incentives

Budget • $3.3 billion budget (2007-2016) • Split between different utility areas

Long-term policy framework• Uniform incentive eligibility guidelines

statewide• Provides incentives that encourage solar

performance• Incentives decline based on program demand• Funds customer-side PV and other solar

Other Program Components• Low Income Program• Research & Development Program• Solar Hot Water Pilot program

Photo: Don Schramm, P-H-D EnterprisesStadt, 7.74kw STC, May 06, 2008, Stevenson Ranch

13

CSI by Program Component, 2007-2016

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, IOU territories

All systems in POU areas

Audience Various Builders, home buyers

Various

Start Date January 2007 January 2007 January 2008

14

CPUC CSI Budget 2007-2016

Program CategoryBudget

($ Million)

General Market Program Subtotal $1,897

Direct Incentives to Consumers $1,707

Program Administration, Marketing & Outreach, Evaluation (10%) $190

Low-Income Programs (10%) $217

Research, Development, Deployment and Demonstration (RD&D) $50

San Diego Regional Energy Office Solar Hot Water Pilot $2.6

Total CPUC CSI Budget $2,167

• 3 CPUC Program Administrators• Pacific Gas & Electric• Southern California Edison• California Center for Sustainable Energy (CCSE) [In SDG&E territory]

• CPUC 1,940 MW Goal• 1,750 MW from general market program• 190 MW from low-income program

15

Incentives decline as demand grows:CPUC part of program has a goal of 1,750 MW

16

California installed 392 MW PV at 40,000+ sites thru October 2008

17

California Solar Initiative - 2008 Progress

Staff Progress Report available at:

www.GoSolarCalifornia.ca.gov

18

CSI Applications By IOU Territory

19

Current Incentive Levels in CA - Oct 2008

Incentive Levels• $1.90/watt - Residential

• Except SCE: $2.20/watt• $1.55/watt - Commercial • $2.30/watt - Non-Profit/Govt

• Always available at csi.trigger.com

20

CaliforniaSolarStatistics.org

21

Federal Tax Liability CARE-Eligible

($ / W)

Not CARE Eligible

$0 $7.00 $5.75

$1 - $1,000 $6.50 $5.25

$1,001 - $2,000 $6.00 $4.75

• Statewide Program Manager expected to be under contract in Nov. 2008

• Applications for incentives will be available in early 2009

Single-Family Low-Income Program

• Established by Commission decision November 2007, $108 million budget• Provides fully subsidized 1kW systems to applicants who qualify• Provides two higher incentives to other low income households, according to tax liability:

22

•Established by Commission decision October 2008, $108 million budget•Goals:

•Stimulate adoption of solar power in the affordable housing sector•Decrease electricity use and costs w/o increasing monthly expenses

•Two approaches to receive solar incentives through MASH:•Track 1 - $/watt incentives that vary depending on whether the system offsets common area usage of the property or individual tenant usage:

• Track 2 – competitive grant process for higher incentives for innovative projects that demonstrate direct tenant benefits

Multifamily Affordable Solar Housing (MASH)

Track 1A:PV System OffsettingCommon Area Load

Track 1B:PV System Offsetting

Tenant Load

$3.30/watt $4.00/watt

23

Research, Development and Deployment (RD&D) Program

• CSI RD&D Program:• $50 million budget • CSI RD&D is a portfolio based grant-making program that

focuses on overcoming technological barriers to the widespread adoption of solar distributed generation

• RD&D Program progress to-date and timeline:• Selected Itron, Inc. as Program Manager• Next steps:

• Finalize RD&D grant-making strategy (Q4 of 2008)• Stakeholder meeting (Q1 of 2009)• First RD&D grant RFP released (Q3/Q4 2009)

• note that all above dates are targets not set deadlines

24

Solar Water Heating - CSI Pilot

• Current• Solar Water Heating Pilot Program in San Diego Gas & Electric

Area (Administered by CCSE)• Budget of $1.5 million; Target of 750 systems• Funds gas and electric displacing solar water heating systems

• Future• Further CPUC policy decisions that will be informed by evaluation

of current pilot• Gas Displacing Systems

• AB 1470 (Huffman, 2007) authorizes the CPUC to develop a statewide Solar Water Heating incentive program

• Budget of $250 million; Target of 200,000 systems• Funded by gas ratepayers

• Electric Displacing Systems • CSI program could fund SWH under “Non-PV” portion of CSI• Funded by electric ratepayers

25

Solar Water Heating – AB 1470

• Evaluation of Solar Water Heating Pilot• CCSE and Itron Inc. have completed a white paper

outlining analytical methods of evaluation of Solar Water Heating Pilot Program

• Interim evaluation report to be released late-November

• Next Step is for CPUC to assess cost-effectiveness of statewide solar water heating incentives

• CPUC and AB 1470• CPUC will issue a staff proposal on AB 1470 • CPUC will hold a public workshop to consider staff

proposal and AB 1470 implementation

26

Self Generation Incentive Program

Overview• One of the largest DG incentive programs in US

• Represents over $1.5 billion in total project costs• 320 MW of installed capacity • 1,200+ clean DG systems

• Provides capacity-based incentives for clean DG at customer sites

History• Started in 2001 in response to CA peak demand problems • Solar PV moved from SGIP to CSI in 2007 • AB 2778 (Lieber, 2006) extended SGIP through 2011,

limited technologies to only wind and fuel cells as of 2008• Incentive cap increased from 1 MW to 3 MW (April ‘08)• Storage (bundled with wind or fuel cells) included (Nov. ‘08)

27

SGIP Technologies

SGIP Technology Fuel Type Eligibility Status

Fuel cell Natural Gas/ Biogas Currently Eligible

Wind turbines Wind Currently Eligible

Internal-combustion engines Natural Gas/ Biogas Removed from SGIP 1/1/2008

Microturbines Natural Gas/ Biogas Removed from SGIP 1/1/2008

Small gas turbines Natural Gas/ Biogas Removed from SGIP 1/1/2008

Solar PV Sun Moved from SGIP to CSI 1/1/2007

•Eligible technologies include both renewable and fossil fuel powered systems

•Currently, only wind and fuel cells are eligible for SGIP, per statute

28

SGIP – Greenhouse Gas Emissions Impacts

TechnologyTons of CO2 eq.

ReducedAnnual EnergyImpact (MWh)

CO2 eq. Factor(tons/MWh)

Combustion Technologies - Renewable 38,127 44,071 0.87

Solar 96,621 161,770 0.60

Wind 1,454 2,426 0.60

Fuel Cells - Renewable 602 5,540 0.24

Fuel Cells - Nonrenewable 11,098 49,599 0.22

CHP Combustion Technologies – Nonrenewable -26,492 460,852 -0.06

Total 121,410 724,258 0.17

2007 GHG reductions (tons CO2 equivalent) from all installed SGIP systems

29

Advanced Energy Storage (AES)

• Recent CPUC Proposed Decision to add AES to SGIP • AES must be bundled with wind or fuel cell

generating technology• AES would receive $2/watt incentive

AES as a Distributed Energy Resource:•Renewables support – enables supply to be coincident with demand•Permanent Load Shifting – shifts demand from on peak to off peak•Economic – replaces high cost power with low cost power

30

SGIP Challenges and Opportunities

Challenges:• SGIP limitation in statute excludes biogas generation and

other clean distributed energy resources (DER)• AES has potential as stand alone DER and also as

compliment to solar

Opportunities:• Flexibility to determine eligibile technologies for SGIP would

encourage development of clean distributed energy resources• SGIP could support biogas generation, stand alone AES, clean

CHP, other clean DG

• Ability for CSI to support solar coupled with AES

31

• Renewable Portfolio Standard

• Qualifying Facility contracts

• Feed-in-Tariffs

• Utility ownership proposals

Wholesale Distributed Generation

32

California’s Renewables Portfolio Standard (RPS)

• All retail electricity sellers (utilities & ESPs) must procure renewables• 20% renewables by 2010 – by law• 33% renewables by 2020 – as a policy goal

• CPUC oversees IOU RPS procurement and compliance• Builds upon California’s strong history of renewables

procurement through QF Std. Offer contracts in 1980s• e.g. 356 MW of concentrated solar installed in early 1980s

• RPS is technology neutral • No specific solar goal • Many solar projects are in pipeline• And in 2007 – we saw large increase in solar projects bidding on

RPS contracts

33

RPS resource mix shifting: more bids and contracts from solar thermal and PV

IOU RPS Bids by Fuel Type

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2003 RFO 2004 RFO 2005 RFO 2006 RFO 2007 RFO

En

erg

y (

GW

h/y

r)

Other Small Hydro Biogas Biomass Geothermal Wind Solar

34

Solar RPS Projects

Approved Contracts Status IOU Min MW Technology Location

Original Online Date

Bethel Solar #1 Delayed SDG&E 49 solar thermal Fillaree Ranch, Imperial Valley 6/1/08Bethel Solar #2 On schedule SDG&E 49 solar thermal Fillaree Ranch, Imperial Valley 12/1/08Stirling Solar One On schedule SCE 500 solar thermal San Bernardino County 1/31/09Stirling Solar Two On schedule SDG&E 300 solar thermal Imperial Valley 12/31/10Solel On schedule PG&E 554 solar thermal Mojave Desert 1/1/11Green Volts On schedule PG&E 2 solar PV Byron 10/1/08CA Sunrise #1 On schedule SCE 1 solar PV California City 1/1/09CalRenew America On schedule PG&E 5 solar PV Mendota 4/1/09FSE Blythe 1 On schedule SCE 7.5 solar PV Blythe, CA 10/23/09Ausra Pending approval PGE 177 solar thermal San Luis Obispo County 8/31/10San Joaquin Solar 1 & 2 Pending approval PGE 106.8 solar thermal Coalinga, CA 6/30/11BrightSource Pending approval PGE 900 solar thermal Mojave, CA and NV 12/31/11Gaskell Sun Tower (eSolar) Pending approval SCE 175 solar thermal Kern County, CA 4/1/12

• 9 Solar Thermal - 2800 MW• 1450 MW Approved• 1350 Pending Approval

• 6 Solar PV = 815 MW• 15 MW Approved• 800 MW Pending

Source: CPUC RPS Website; http://www.cpuc.ca.gov/PUC/energy/electric/RenewableEnergy/

35

RPS Procurement Process

IOU issues solicitation and

reviews bids

IOU negotiates contracts with short-

listed developers

IOU submits contract for approval

CPUC approves contract

PermittingBarrier to 17% of 2010 RPS Energy Deliveries

• Municipal Agencies (authority to construct, re-zoning)• County Agencies (conditional use permit, air permits, water permits, re-zoning, CEQA)• Energy Commission (RPS certification, thermal facility certification, CEQA)•BBureau of Land Management and other federal agencies (Use permits, NEPA)

Site ControlBarrier to 14% of 2010 RPS Energy Deliveries

Bureau of Land Management, Other Federal Land Management Agencies may grant right-of-way/use permits based on studies (e.g., NEPA)

OR Lease/ownership contract with private party

Transmission Barrier to 31% of 2010 RPS Energy Deliveries

•CCAISO Generator Interconnection (Apply & enter queue; CAISO/utility performs studies; sign Interconnection Agreement) •CCAISO Develops Overall Transmission Plan (CAISO-utility-stakeholder process; CAISO Board approval)•CPUC Approval (CEQA, CPCN)

Equipment Procurement & Construction

Barrier to 2% of 2010 RPS Energy Deliveries• Shortage of equipment (turbines, etc.)• Escalating commodity costs (steel, concrete)

FinancingBarrier to 17% of 2010 RPS Energy Deliveries

• Extension of Production and Investment Tax Credits needed

Project Development Process

RPS Procurement + Development Process

36

Qualifying Facilities Program

• QF program started in early 1980s • Provided contracts to over 8,000 MW of CHP and

renewables at CPUC adopted avoided cost

• QF contracts have been “expiring”, therefore: • Decision in September 2007 revised avoided cost

formula, i.e. set a new price for QFs • Focus was on existing sites, but decision opened

QF contract to new facilities• IOUs are expected to have one uniform standard

offer QF contract• Contract has been in negotiations since 9/07 so not yet

available

37

AB 1613 – Feed In Tariff on CHP

• AB 1613 (Blakeslee, 2007) requires CPUC to adopt terms and conditions for utility procurement of Combined Heat and Power distributed generation via a Feed-in-Tariff

• Fixed or variable price to be determined by the CPUC • Eligibility:

• CHP up to 20MW• CHP systems must be sized to meet customer’s thermal load. • Only new CHP systems (installed after January 1, 2008) are

eligible. • NOX emissions limit of 0.07 pounds per MWh

• CPUC Rulemaking (R.) 08-06-024 currently open is considering pricing, terms and conditions for feed-in-tariff

38

Small Renewables Feed-in-Tariff

• Originally only for water/wastewater customers, expanded to include all customers

• All eligible RPS technologies, including solar• Projects up to 1.5 MW; Considering expansion to 20 MW• Price set by law at “market price referent” (MPR)

• Reference point of MPR is a new combined cycle gas plant• MPR is adjusted for time and season

IOU MPR Solar *PG&E $0.09 $0.11SCE $0.09 $0.13SDG&E $0.09 $0.11

Annual Average ($/kWh)

*Solar produces largely on peak so receives a slightly higher average rate

39

Small Renewables Feed-in-Tariff –Challenges and Opportunities

Challenges:• Price may be too low for some technologies (solar)

• Statutory change required

• Current size cap (1.5MW) may limit participation by small generators that can’t compete in RPS

• Expansion up to 20MW currently being considered in CPUC proceeding

Opportunities:• FiT could provide a “bridge” between customer-side DG and larger

scale wholesale renewables procurement • FiT that includes pricing flexibility could attract more renewable

generation at a cost neutral for ratepayers• Locational value – DG provides benefits to grid if sited appropriately• Renewable value – Price should reflect that capacity counts toward

utility RPS requirements

40

Utility Owned DG Proposals

• In March 2008, SCE requested approval to spend $875M to install 250 MW of utility owned distributed rooftop solar • Would be SCE owned

• Would serve its load at the distribution level ($3.50/Watt)

• Would use leased roof space

• Would contribute to RPS as utility procurement

• Would be included in ratebase

• Would be first of its kind utility scale investment

• Requires CPUC approval• If approved, SCE would go out to bid to see if any suppliers

could meet the price

• In July 2008, SDG&E filed similar application for 77 MW of solar.

41

Summary of Challenges and Opportunities

NEM• Consideration of 2.5% cap

SGIP• Focus on distributed energy resources to provide

technology flexibility• Advanced Energy Storage coupled with solar

Small Renewables Feed-in-Tariff• Possible Expansion of AB 1969 FiT

• Price flexibility• System size cap