SR-011309-1K7~ ,
~,tY:of City Council Report
Santa Monica®
City Council Meeting: January 13,-2009
Agenda Item: ~ -
To: Mayor and City Council
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From: Dean Kubani, Director of Office of Sustainability and the Environment i_
Subject: Support. of Feed-in Tariff Legislation that Supports the Goals of Solar
Santa Monica
Recommended Action
If is recommended that the-City Council approve support of creating new State Feed-In
Tariff Legislation.
Executive Summary. ;
Dn December 2, 2008, Council directed staff to investigate and report back regarding
appropriate-steps to develop implementation strategies fora "feed-in tariff' (FIT) for
solar energy incentives. This -report responds to that direction by requesting support of =
The California Solar Act of 2009, proposed State legislation drafted by the Solar Santa
Monica Advisory. Board.
Background
Santa Monica has a commitment to reduce greenhouse gases by 2015 to a level 15%
below the 1990 baseline. Increasing the installation of solar PV generation in the urban.
environment also addresses California's Renewable Portfolio Standard (RPS)
requirement. The-RPS requires that 20% of the State's electricity be produced from
reviewable energy sources by 2010, and the state is taking steps to raise that target to
33%.by 2020. The California Solar Cities Act of 2009 will help California to go solar at
no cost to taxpayers and, at a low cost to ratepayers. It is an investment in California's.
future thafwill pay off in lower rates, less pollution, reduced greenhouse gases; and
more renewable'energy.
Solar Santa Monica's long-term goal. is to achieve greater community-wide energy
independence by maximizing. energy. efficiency and onsite solar power generation in
every building in the community and, where appropriate; using clean distributed
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.generation (microturbines, small fuel cells, and. small co-generation systems) to supply
baseload electricity. Additionally, the short-term goal is for the City to become a "net
zero electricity importer" by 2020, which would mean that the total annual electricity
demand withirr Santa Monica would be matched or exceeded by the total amount of
electricity that is locallygenerated within Santa .Monica. To accomplish this goal,
17,500 rooftops will have to carry solarsystems. Current State regulations, however,.
prevent multi-family ormulti-tenant property owners from participating in the California ~'
Solar Initiative (CSI) because the related solar system must offset only one electric
meter in the building, and it must be sized to generate no more power than is used by
that onsite meter.
Recognizing the regulatory barriers that preventafhe City from achieving its solar energy
goals, Solar Santa Mohica's Advisory Board voted to support a State FIT model that
would provide property owners with a reasonable return on solar investments: On
December 2, Council directed staff to explore implementation strategies in support of a
solar FIT.. A solar FIT allows anyone to install a solar system and receive payments for
every solar kilowatt-hour (kWh) produced for the next 20 years. An effective. FIT pays
the investor a per kilowatt-hour rate that provides a reasonable. rate of return plus a
small-profit. This approach has catalyzed a robusYsolar industry in Germany and
Spain. Last year, Spain installed eight times as much solar power generation as
California.
Discussion
To achieve its renewable energy and greenhouse gas emission reduction goals, the
City needs a solar policy thaf makes solar a sound and predictable investment for
owners of apartment buildings, multi-metered commercial buildings, institutional
...buildings, and municipal structures. In each case, the. owners of solar photovoltaic. (P~ .
systems need to earn an easily understandable and reasonable profit. The attached
.draft California Solar Cities Act of 2009 provides FITs for onsite. PV generation. The
draft Act limits the size of FIT installations to no larger than one megawatt capacity,
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.`specifically available for solar PV systems that are attached to (or part of) buildings,
which are the installations most relevant to Santa Monica.
.The Proposed California Solar Cities Act
The proposed draft Act creates a very simple system. Based on the. methodology
.presented in the Act, the California Public.Utilities Commission (CPUC).will determine
the average installation cost and .electricity production levels of various types. of PV
systems in various regions in California. Except for tax exempt and governmental
entities, the cost basis for FIT computation is reduced by the amount of federal tax.
.credit available at the time the system is operational. The CPUC would then adopt. FITs
for each region designed to produce a reasonable return on the property owner's
investment.
California utilities would be required to buy each kWh delivered to the grid by
participating solar systems, measured through a separate, onsite output -meter at thee.
FIT price fixed for 20 years: After 20 years, the utility would pay a discounted rate for
the power it receives: The power purchased by the utilities under the Act will be credited
toward the utilities' Renewable Portfolio Standards (RPS) requirements, and the utilities
will own the renewable energy certificates (RECs.)
The added cost. of the FIT payments and aIF of the other program costs would be spread
arnong all ratepayers, maintaining utilities' profit margins. Successful FIT programs
have. caused very small rate increases; in Germany, the program costs the average
homeowner about the. cost of a loaf of bread per month. As solar prices fall and
cdnventional prices rise,-the premiums will decline and will ultimately be eclipsed. The
Act. also requires that the CPUC .establish a simple, fast; low-cost and efficient
application process, standard contract and overall administration.
The draft Act promotes solar energy for the urban environment and will help the City
achieve its sustainable energy and greenhouse gas emission reduction goals: Not
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supporting. a FIT vvilt likely result.. in the City not achieving its solar or greenhouse gas
emission goals.
Financial Impacts & Budget Actions
There- is no direct budget or financial impact to the City for supporting this new
California Solar Cities Act legislation.
Prepared by:
Susan Munves, Energy and Green Building Programs Administrator
Approved: Forwarded to Council:
F~
Dean Kubani, Director amont E e
City Manager
Attachments:
A. The California Solar Cities Act
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1212 Fifth Street, First Floor, Santa Monica, California 90401, (310) 458-4992, fax 395-
2138
DRAFT
The California Solar Cities Act of 2009
Solar for the Urban Environment
By the Solar Santa Monica Advisory Board FIT Subcommittee
AI Rosen, Ted Flanigan, Craig Perkins; Susan Munves, and Angie Brooks
November 26, 2008
Introduction
The purpose of this bill is to accelerate the local installation and use of solar
photovoltaics (PV) and to augment the current electric power system with "distributed
generation" to fulfill national, state, local, and individual goals for energy security and
climate change protection.
The California Solar Cities Act:.
• is targeted on solar energy for the urban environment;
• is supplemental to utility-scale solar generation;
• complements the California Solar Initiative (CSI), reaching markets that are not
served by the CSI; and
• builds a "solar synergy" of forces to meet energy and climate objectives.
This Act creates opportunities for owners of certain types of buildings (more common in
urban areas) who have been precluded from making solar investments. Net-metering
has been successful in supporting some solar investments, but does not work for
others: multi-metered buildings in the urban environment and other properties with on-
site rate and consumption limitations cannot make sound solar investments using the
CSI.. As a result, highly attractive rooftops are not being utilized.
Through the simple and transparent Feed-In Tariff (FIT) mechanism that has been
proveri in many countries, notably Germany and Spain, this Act provides a clear and
consistent means of harvesting distributed solar generation and aggregating urban solar
opportunities to a very significant scale. In California, the potential for safe and secure
distributed solar generation is on the order of 45 GW, over 75% of current statewide
power demand.
Benefits of Solar in the Urban Environment
National Security: Local power generation from renewable energy resources is a clear
pathway to energy independence and security for our future.
Power System Resiliency: Distributed generation will enhance reliability. Solar systems
can support "smart grids" that can operate in emergencies. Solar also provides power
during peak periods.
Environmental Protection: Distributed solar installations bring the opportunity for
renewable power generation to the local level, avoiding the environmental costs of
large-scale, carbon-based, centralized power generation..
Job Creation: The booming German solar energy industry has created over 50,000 jobs
in less than five years, with the entire renewable energy industry creating as many as
200,000 jobs; Spain boasts 25,000 solar energy workers. Californians will benefit from
sustainable business creation.
Sound Investments: Fundamentally, this Act presents a market mechanism to spur the
solar industry within our communities. It provides a simple and transparent means for
solar investments to earn reasonable and reliable returns, allowing capital to flow into
clean and renewable energy systems in California cities. While initially more expensive,
these investments will, in the near future, result in sustainable green povver sources that
will deliver electricity to utilities at lower energy costs than conventional generation.
State and Local Mandates
This Act, promoting solar for the urban environment, will help California achieve the
Million Solar Rooftops vision. It squarely addresses a number of other state and local
mandates, including:
The California Global Warming Solutions Act of 2006 (AB 32) mandates reducing
carbon dioxide emissions to 1990 levels by 2020, a reduction of 30% compared to
business as usual. Solar in California cities -using the "built environment" to generate
clean, renewable electricity -- will help achieve the AB 32 goals, powering homes,
businesses, and cars.
Increasing the installation of solar PV generation in the urban environment also
addresses California's Renewable Portfolio Standard (RPS) requirement. The RPS
requires that 20% of the State's electricity be produced from renewable energy sources
by 2010, and the state is taking steps to raise that target to 33% by 2020. Existing
programs, many of which have merit, are not sufficient to reach California's renewable
goals on schedule. The. California Solar Cities Act of 2009 links production with
progress.
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Many California cities have made additional commitments to mitigate climate change.
Santa Monica has a commitment to reduce greenhouse gases to a level 15% below the
1990 baseline by 2015. The goal of its Community Energy Independence Initiative is to
be energy neutral (net zero electricity demand) by 2020. Palm Desert has committed to
cutting electricity use 30% citywide by 2012. Both cities seek the tools to expand solar
production capacity to achieve their goals. While progress is being made, many
California cities realize that ah additional solar policy instrument is required.
The Solar Feed-In Tariff Mechanism
In Germany, the FIT has created a major solar industry and over 1,000 MW of solar
capacity per year in recent years. Spain's FIT has made it a "solar powerhouse," with
over 1,000 MW installed in the past 18 months. These successes highlight a major
opportunity for California.
This Act presents a highly attractive form of Feed-In Tariff that will dramatically increase
renewable power generation,. promote solar manufacturing and installation, create
"green collar" jobs, and provide a secure clean energy source for ourfuture. It
establishes the Solar FIT incentive mechanism for solar systems on buildings. The
Solar FIT requires utilities to buy electricity from distributed PV installations at a price
designed to provide reasonable and reliable returns for 20 years.
Just as ratepayers will share in the costs of solar installations, they will also benefit,
locking in fixed solar electricity prices for the long term, while the price of electricity
produced from conventional fuels rises. This Act is a ratepayer investment, which will
provide excellent returns over time -concurrently fulfilling environmental mandates and
economic objectives.
Section 1. Purpose
It is the policy of the State of California to encourage the rapid and sustainable
development of electricity from renewable sources, particularly from smaller, widely
distributed solar PV installations, by the adoption of a Solar Feed-In Tariff. These Solar
FITs will contribute to the following goals:
(a) Reducing air pollution;
(b) .Protecting California's environmental quality and its natural resources;
(c) Helping to reduce global warming and climate. chahge;
(d) Providing equitable opportunity to all of California's citizens and
businesses,. including the owners of multi-tenant and multi-metered
properties and properties that use very little electricity and/or pay very
low electric rates to participate in the generation of renewable solar
energy and meeting the state's renewable energy goals;
(e) Providing utilities and their ratepayers with secure, clean and .green
powecsources at a fixed price for 20 years that will likely cost less than
conventional generation within the next 5 to 10 years;
(f) Moderating the near-term impact on ratepayers, while reducing volatility
and long term rates relative to other sources of power;
(g) Ensuring that utilities are justly compensated for the higher prices they
are. required to pay for electricity they purchase under the provisions of
this Act and other atypical costs imposed on them by this Act;
(h) Encouraging widely distributed solar PV generation;
(i) Stimulating the development of new technologies, and jobs and industry
in California;
Q) Operating as a complement and supplement to the. CSI and California's
RPS;
(k) Simplifying and expediting the documentation, metering, payments and
administration of the generation of electricity from solar PV sources, and
increasing the transparency and equity of the system;
(I) Encouraging energy conservation by requiring a separate new meter to
measure the amount of solar PV electricity produced on site, while
retaining the meter that measures the total amount of electricity used on
site;
(m) Giving property owners an investment opportunity, while supporting local,
state; national, and international energy and climate protection goals.
Section 2. Definitions
(a) "Solar energy generator" or "Solar energy plant" or "Plant" or "Solar
energy system" shall mean, interchangeably, any solar energy device that
has the primary purpose of providing for the collection and distribution of
solar energy for the generation ofelectricity which produces at least 1
.kilowatt and not more than 1 megawatt of alternating current rated peak
electricity and which is permanently affixed to, and/or integrated with, a
building structure. A plant includes the inverters; access ways and grid
connections, as well as the measuring, administrative and control
facilities that may or may not be technically required for its operation.
[See Public Resources Code Section 25781 (e)]
(b) "Eligible solar energy generator" shall mean any individual or entity,
except an electrical corporation, which owns, operates and/or controls the
property upon which the plant is installed. Plants which received payments
from the CSI or other net-metering program are not eligible to become
solar energy generators under this Act.
(c) "Commissioning" shall mean the first time a plant is put into
operation following establishment of operational readiness.
Commissioning shall also include the modernization of a plant (which plant
has not received payments from the CSI), if modernization costs are at
least 50 per cent of the total cost to build a completely new plant, including
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all building structures and installations technically required for its
operation.
(d) "Capacity" of a plant shall mean its alternating current rated peak
electricity production. In step with the CSI, this Act defines capacity using
the CEC-AC rating methodology.
(e) "Grid system" shall mean all the interconnected facilities used for
the transmission and distribution of electricity for general supply.
(f) "Grid system operators" shall mean the operators of all types of
voltage systems for general electricity. supply.
(g) "The Solar FIT" shall mean the rate paid in dollars per kilowatt-hour
of generation delivered to the grid under the terms of a standard contract
as provided in this Act.
(h) "Commission" shall mean the California Public Utilities
Commission.
(i) "Adequate renewable energy development" shall mean the rate of
development needed to accomplish the renewable energy objectives in
California's RPS, as it may be modified, including any interim objectives
and/or other objectives set by the state.
Q) "Electrical corporations" are defined as investor owned utilities that
sell power to the public at regulated rates.
(k) "Renewable Energy Credit' or "REC" shall mean a market
instrument that places a determined value on each megawatt-hour of
renewable energy generated.
(I) "System installation cost" shall mean, for entities exempt from
federal income taxation, including governmental entities, the total installed
costs necessary to install a solar energy plant.. For all other entities,
system installation cost shall mean all of the solar plant's necessary costs,
less the federal tax credit available when the plant is ready to be
commissioned.
Section 3. Obligation to Connect
(a) An eligible solar generator shall provide the electrical corporation to
which it will be interconnected with a notice of intent to connect not less
than 60 days prior to the generator becoming operational
(b) The electrical corporation shall file an advice letter with the Commission,
not later than 30 days after receipt of an interconnection notice.
(c) The Commission, within 30,days of the filing, shall approve a proposed
tariff or specify conforming changes.
(d) When construction is. complete and a solar generator is operational, a
solar generator shall request interconnection with the electrical
corporation.
(e) An electrical corporation shall connect an eligible solar energy generator
to its distribution system upon the terms and conditions set by the
Commission, but in no case more than 60 days after receipt of a request
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for connection. In the event that the electrical corporation does not provide
interconnection within this time frame, the electrical corporation will be
required to begin Solar FIT payments on the 61S` day after receipt of the
interconnection request, calculated based on nameplate capacity.
(f) The Commission shall apply, in a nondiscriminatory manner, established
standards for the interconnection of solar energy generators to the grid.
Interconnection standards should ensure the reliability of electric service
to all customers, and the safety of customers, the grid operators'
employees, and the public
(g) Every kilowatt-hour of electricity purchased under this Act shall count
toward the electrical corporation's annual RPS procurement targets and
earn Renewable Energy Credits and any related Emission Reduction
Credits for the electrical corporation.
(h) All electrical corporations shall prepare, publish and apply transparent,
objective and non-discriminatory rules for connecting eligible solar energy
plants to the grid. All costs associated-with the interconnection of solar
energy generators, including direct interconnection costs, distributioh
system enhancements, and electrical corporation compliance costs, shall
be paid by the electrical corporation and included among the costs to be
considered by the Commission under Section 6 of this Act.
Sectiorr4. Standard Contract
(a) The Commission shall develop and approve a standard contract of 20
years duration to be used for all Solar FIT payments under this Act.
(b) The contract shall include the Solar FIT amount to be paid for each
kilowatt hour generated and the duration of the contract.
(c) The contract shall provide that the solar generator must sell and the
electrical corporation must purchase all of the power produced by the
solar plant.
(d) The contract shall be written in simple, clear language.
(e) Contracts under this Act shall be transferrable and may be used as
security for loans.
Section 5. Solar Feed-In Tariffs
(a) Upon application, electrical corporations shall enter into Solar FIT
agreements to purchase all of the electricity generated by eligible solar
energy generators located in California, that are connected to the grid, for
a term of not less. than 20 years from the date of commissioning.
(b) Electrical corporations shall pay the Solar FITs established by the
Commission. In determining the Solar FIT payment schedule, the
Commission shall determine an average cost and average production for
each investor owned utility's service area, in each of three size
categories: less than 10 kW; from 10 to 100 kW; and over 100 kW. The
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Commission shall provide for a premium to cover the average additional
cost of building integrated PV systems.
(c) The Commission shall ensure that the Solar FITs are sufficient to provide
a reasonable and reliable return to solar generators. A reasonable return
is defined as an annual payment equal to 12% of the average net system
cost for each category, fixed for 20 years. To equalize returns, the
Commission shall provide one schedule for tax exempt entities and
another for taxable entities.
(d) The Solar FITS established in this Act shall be reviewed and modified
every two years by the Commission.. In its periodic review, the
Commission shall take into consideration the Act's success in
encouraging the installation of solar PV plants and any changes (up or
down) in the:
i. Actual average system costs and production of each type and size
and location of plant;
ii. Inflation and interest rates;
iii. The determination of a reasonable and reliable return; and
iv. Electric rates paid by rate payers.
(e) After the expiration of the 20-year contract period, the solar power
generator shall offer and the electric corporation shall purchase all of the
electricity produced by participating plants at a price 10% below the
wholesale cost for renewable energy at that time.
Section 6. Statewide Equalization of Costs across All Customers
In all rate setting proceedings, the Commission shall include and consider all of the
costs borne by electrical corporations under this Act (including the additional cost of
power and other atypical costs) in the same manner the Commission considers all of
the electrical corporations' other costs. Those costs shall be reduced by the value of the
RECs received by electrical corporations. Low-income ratepayers -defined as those on
CARE rates -are exempt from the costs of the Solar FIT.
Section 7. Administration
The Commission shall establish simple, fast, efficient and inexpensive procedures for
the administration of this Act, including:
(a) Developing a simple, clear application form, requiring identification of the
system owner and the installer, the precise location, and the type and
size of the system;
(b) Requiring applications be processed in less than 30 days;
(c) Requiring that solar energy generators commission their systems within
one year after their application is approved;
(d) Not requiring system inspection beyond what is required by local
governmental entities with jurisdiction over building code enforcement;
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(e) Complying with the current statewide electrical code and fire safety
standard for PV systems and providing training programs for local
inspectors;
(f) Requiring the installation and use of a separate, dedicated meter to
measure the production of solar PV systems operating under the
provisions of this Act and requiring electrical corporations to read that
meter at no cost to the solar energy generator.
Section 8. Requirement to Provide Information
Solar energy generators and electrical corporations shall annually provide the
Commission with any information that may be relevant to the Commission's
performance of its duties under this Act, including but not limited to, assessment of
project development costs, equipment costs, electricity production costs;
interconnection costs,. automatic rate adjustments, and compliance costs, capacity
installed, and electricity generated. The Commission shall prepare a simple form to
collect this information.
Section 9. Compatibility with Existing Renewable Energy Policy
It is the intent of the legislature that this Act shall operate in parallel with California's
RPS and CSI. Therefore, nothing in this Act shall be interpreted to reduce, impede, or
conflict with California's RPS or the CSI.
Section 10. Periodic Review and Reporting
Every year, the Commission will prepare an annual report describing and summarizing
the Solar Feed-In Tariff program's progress in California.
Every two years, the Commission shall review the implementation of this Act for
compliance with the intent of the Act. The Commission shall file a report with the
governor and the legislature that shall include all of the following:
(a) The number and generation capacity of new solar energy plants in the
state and the environmental effects of the addition of those plants;
(b) The capability of the program in delivering the solar energy generation
required under California's RPS and other renewable energy
objectives;
(c) Actions taken by the Commission to implement this Act and to use the
Solar FITs herein to achieve California's RPS objectives;
(d) Revisions of the Solar Feed-In Tariffs to reflect inflation, changes in
technology, and the increased or decreased costs of solar energy
generation, such that the Solar FITs continue to be sufficient to pay for
the costs of solar energy installations plus a reasonable return;
(e) The impact of the program established by this Act on electrical rates;
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