To: Honorable Public Utilities Board Submitted by: /s/ Barry Leska AGM Energy Resource Planning. From: Alan Hanger Approved by: /s/

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1 AGENDA ITEM NO.: 4.J.1 To: Honorable Public Utilities Board Submitted by: /s/ Barry Leska AGM Energy Resource Planning From: Alan Hanger Approved by: /s/ Senior Energy Resource Analyst Glenn O. Steiger General Manager Subject: Information Update on Alameda Municipal Power s SB1 Solar Rebate Program RECOMMENDATION For Information Only No Action Required. A series of staff reports are being presented to the Public Utilities Board (Board) over the next several months on the status of a variety of Alameda Municipal Power s (AMP) programs for renewable Distributed Generation (DG) in Alameda including: 1) the Solar Rebate Program 2) the Net Energy Metering (NEM) Program 3) AMP s development of a Community Solar Program 4) AMP s development of a DG Feed in Tariff and 5) AMP s development of a Municipal Solar Program. This specific report is intended to provide an informational update on AMP s SB1 Solar Rebate Program. BACKGROUND Original SB1 Program The Million Solar Rooftops Law, Senate Bill (SB) 1 was chaptered into the Public Utilities Code Section 2851in 2006 and became effective on January 1, An objective of the legislation was to reduce Photovoltaic (PV) manufacturing and installation costs by mandating $2.8 billion statewide spending over a 10-year period to fund solar rebates. Based on its share of statewide electric sales, AMP s share of the mandate was $4.2 million, or an average of $420,000 per year to be funded through rates from all electricity users. The SB1 program requires AMP to provide rebates for 2,127 kilowatt (kw) over the 10 years. Per statute, the program was developed and implemented using a public process. Specific requirements of the SB1 law are: Each Publically Owned Utility (POU) must offer monetary incentives for customer installations of PV systems of at least $2.80 per installed watt (W), or an equivalent performance based incentive;

2 AGENDA ITEM NO.: 4.J.2 The incentive level must decline by no less than 7 percent per year; Funding cannot come from existing low income or energy efficiency programs; Systems receiving the incentive must comply with State established standards; Systems must be located on the customer s premises; Systems must be intended to offset part or all of the customer s electricity demand; All system components must be new; Systems must have a warranty of at least 10 years; The system must be metered; and Mandatory annual reporting to customers and the State. In November of 2007, the Board approved AMP s SB1 solar rebate program. Table 1 lists the rebate schedule for the rebates paid at system completion for each alternating current (AC) kw of PV installed. Table 1 An Up-Front rebate is paid to the customer when the PV system is interconnected to the distribution grid. The total rebate is the available Up-Front rebate multiplied by the total installed AC watts after inverter losses are calculated. Rebates can be reserved for future years but cannot be paid until the year of reservation. The Funded column in Table 1 is the maximum number of AC kw that could be funded in a specific year if all the rebates were paid as an Up-Front rebate. For years 2008 and 2009, the residential set-aside was 20 kw, based on the perspective that most PV would be installed by commercial customers. Other than the set-aside for Residential installations, the rebate funds are allocated to valid rebate applications as they arrive until $420,000 is reserved for each year. As each year s rebate level is filled, projects become eligible for the next year s rebate level. A project has 180 days to show substantial progress or the project will lose its spot in the queue.

3 AGENDA ITEM NO.: 4.J.3 SB1 & AB920 Program Changes The Net Energy Metering Interconnection Agreement (IA) was updated in June 2008 to reflect changes mandated by SB1 and to include AMP s requirement for a dedicated meter to measure solar generation in addition to the net meter. Per requirements of SB1, AMP, rather than the customer, pays up to $200 for installation of this second solar meter. Originally, this second meter was for AMP to track the Renewable Energy Credits (RECs) generated by the solar system because they belonged to AMP. AB920 changed the law to give all RECs to the customer except for those associated with generation greater than the load, which go to the utility. Information from the second meter is also used to determine the amount of net generation, for the annual true-up calculation, and reporting of solar generation. Addition of Performance Based Incentive On November 18, 2009, the Board approved a Performance Based Incentive (PBI) rebate program for solar systems of 50 kw or greater. The PBI rebate program bases the rebate payment on actual project generation over a 5-year period. Under the PBI rebate program, the payment for each year is determined by multiplying the PBI rate for the project by the actual AC kilowatthour (kwh) generated. The PBI rate is set by the year in which the application for the project is approved. The annual PBI rates for the program are listed in Table 1. The PBI payment begins the year the project is interconnected and continue through the five-year period. In situations where prior projects, or projects, have reserved rebates beyond the start date of a specific PBI project, that project will be paid the PBI rate in effect when the prior project reservations end. Beginning with the PBI in 2010, the Residential set-aside was increased to 50 kw per year. The total number of Up-Front rebates and PBI rebates paid out in one year cannot exceed $420,000. A historical account of the reports and actions taken by the Board on AMP s solar program is as follows: December 7, the Board approved the original SB1 program with Resolution 3771 (Exhibit A). Staff reports referenced in the Resolution were presented on May 21, 2007 and December 7, The addition of the PBI to the solar program was approved by Resolution No (Exhibit B) on January 26, An SB1 status update was presented to the Board in July DISCUSSION AMP s solar program was designed around three major factors: 1) mandated solar rebates would be funded by all AMP customers 2) the expected payback for a residential system was 20 or 30 years and 3) large customers may install PV for other than economic reasons. The SB1 rebate is a direct subsidy to solar customers from non-participating customers. This subsidy is in addition to the indirect subsidy provided under the Net Energy Metering program where the energy charges of solar and wind customers are offset at the full retail rate while

4 AGENDA ITEM NO.: 4.J.4 AMP continues to provide distribution and energy when the sun doesn t shine. The current PV rider collects $.00150/kWh from all customers, except street-lighting and rate schedule MU-1 municipal customers, to fund the solar rebate program. When AMP s SB1 program was designed, system costs were $9-$10/watt with the upfront costs in the tens of thousands of dollars that resulted in a project payback time of around 30 years. To preserve a rebate for residential PV systems, a 20 kw set-aside for residential customers was included in the original program guidelines. Contrary to staff expectations, residential installations have exceeded the 20 kw set-aside each year from As the cost of PV systems fell, the rebate program attracted increasing interest and all of the annual 50 kw set aside for residential has been reserved through Given AMP s low residential rates and the high percentage of renewables in AMP s supply mix, more commercial PV applications were expected from Commercial customers. Commercial customers can offset up to 75 percent of a system s installed cost through 1) AMP s SB1 rebate 2) a 30 percent tax credit or payment and 3) accelerated depreciation on State and Federal taxes. Since inception of the Solar Rebate Program, 14 commercial projects ranging in size from 15 to 756 kw have been constructed. Table 2 provides a yearly breakdown of rebate amounts for projects that have been completed and/or reserved through the end of the SB1 program in Table 2 SB1 Rebates Paid / Reserved Residential Commercial Total Spent / Reserved Available SB1 Annual $ Cumulative Expenditure Balance 2008 $ 176,792 $ 548,385 $ 725,177 $420,000 ($305,177) ($305,177) 2009 $ 140,564 $ 150,336 $ 290,900 $420,000 $129,100 ($176,077) 2010 $ 164,128 $ 154,920 $ 319,048 $420,000 $100,952 ($75,125) 2011 $ 292,385 $ 82,106 $ 374,491 $420,000 $45,509 ($29,617) 2012 $ 173,771 $ 144,651 $ 318,422 $420,000 $101,578 $71, $ 87,747 $ 239,303 $ 327,050 $420,000 $92,950 $164, $ 89,177 $ 286,099 $ 375,277 $420,000 $44,723 $209, $ 72,662 $ 286,099 $ 358,762 $420,000 $61,238 $270, $ 64,438 $ 286,099 $ 350,538 $420,000 $69,462 $340, $ 51,153 $ 404,368 $ 455,521 $420,000 ($35,521) $304, Total $ 1,312,819 $ 2,582,367 $ 3,895,186 $ 4,200,000 $ 304,814 Total % 31.3% 61.5% 92.7% 100.0% As shown in Table 2, the residential class has received or has reserved $1,312,819 (31.3 percent) and the commercial class has received or reserved $2,582,367 (61.5 percent) of the $4,200,000 SB1 PV rebate dollars through A division of SB1 rebates into 33 percent residential and 67 percent commercial represents an equitable funding split between the commercial and residential rate classes based on each class energy sales. Table 3 shows the total amount of kw installations or reservations by class through Again, the residential and commercial split is comparable to class sales and only 73.1 kw

5 AGENDA ITEM NO.: 4.J.5 remains from SB1 s total of 2,127 kw. More rebate funds remain than kilowatts of solar to be installed. This is most likely due to actual PBI generation varying from projected generation, possibly rounding of the PBI rate to two digits, and cancelled projects being replaced by projects farther down the queue and having lower rebates. Table 3 SB1 Rebates Paid / Reserved Residential Commercial Total Spent / Reserved Available SB1 Annual kw Expenditure Cumulative Balance (213.8) (213.8) (162.7) (150.3) (147.2) (117.2) (592.8) (710.0) (535.6) (333.1) (109.6) Total , , , Total % Currently, all residential installations and a portion of commercial projects are now constructed under a solar lease arrangement. A solar lease requires no initial outlay by the customer who agrees to pay to the lessor, a fixed (or slowly increasing) rate for each kwh generated by the solar system, which has sparked increased interest in the solar program. Residential rebates were closed to new applicants in April of 2013 when one third of the $4,200,000 rebate funds had been paid out, or reserved, by residential customers through But, a number of customer cancellations reduced the residential percentage to the current 31.3 percent. Over 40 customers have installed 160 kw of solar systems without the SB1 rebate. All of these projects were constructed under a solar lease arrangement. The residential rebate percentage will again reach 33 percent as those customers in the queue fill out the application to qualify for the solar rebate. All current SB1 customers will continue under the Net Energy Metering rate for twenty years. Until the 3.6 MW Net Energy Metering cap for AMP is reached, all new solar customers will also be on the Net Energy Metering rate even though they won t receive a rebate. All rebates are completed or reserved for residential and only 73 kw, or $304,814, is set-aside for the commercial reservations that remain eligible for SB1 solar rebates. Completion of the Solar Rebate Program will occur in the near future.

6 AGENDA ITEM NO.: 4.J.6 FINANCIAL IMPACT None, this is an informational report. LINKS TO BOARD POLICY AND OBJECTIVES Strategy 2: Ensure utility financial health is preserved through short and long-term risk management and planning. Strategy 10: Manage short-term and long-term power supply reliability and cost, while maintaining a loading order of efficiency and demand response, renewable energy resources, and clean and efficient fossil generation. EXHIBITS A. Resolution No Approving the Solar Photovoltaic Rebate Program B. Resolution No Approving the Solar Photovoltaic Performance Based Incentive Rate

7 CITY OF ALAMEDA ALAMEDA POWER & TELECOM RESOLUTION NO APPROVING THE SOLAR PHOTOVOLTAIC REBATE PROGRAM WHEREAS, during its 2006 session the California State Legislature passed Senate Bill 1 (SB1), the law which requires the governing body of each Publicly Owned Utility (POU) like Alameda Power & Telecom (Alameda P&T) to adopt, implement, and finance a solar initiative program by January 1,2008; and, WHEREAS, the goal established by SB1 is for POUs as well as the investor owned utilities to offer rebates in proportion to their share of statewide electric sales; and, WHEREAS, Alameda P&T s share has been determined to be $4.2 million over the next ten years, or an average of $420,000 per year; and, WHEREAS, SB1 requires that the specific structure of the POU program be developed through a public process; and, WHEREAS, Alameda P&T has been engaged in that public process for the past six months, including its initial plan presented to the Public Utilities Board in May 2007, its public workshop held in September 2007, and its dialogue with all stakeholders throughout the past half year; and, WHEREAS, Alameda P&T believes its revised plan incorporates many of the suggestions of its stakeholders and is fair to all stakeholders, including the voters of California whose legislative representatives enacted SB1, and honors not only the letter of the law but also the spirit of the law. NOW, THEREFORE, BE IT RESOLVED by the Public Utilities Board that the Solar Photovoltaic Rebate Program, as set forth in the accompanying Administrative Report, be authorized and adopted for use effective November 26, AYES: NOES: ABSENT: Commissioners Holmes, McCahan, Hamm, City Manager Kurita, and President McCormick None None IN WITNESS WHEREOF, I have set my hand on this 7 th day of December G\Resolutions\4771 Girish Balachandran Secretary

8 CITY OF ALAMEDA ALAMEDA MUNICIPAL POWER RESOLUTION NO APPROVING THE SOLAR PHOTOVOLTAIC PERFORMANCE-BASED INCENTIVE RATE WHEREAS, Alameda Municipal Power (AMP) established a solar photovoltaic (PV) rebate program in November 2007, making available $4.2 million in rebates over the ten year period from 2008 through 2017; and, WHEREAS, AMP has provided up-front rebates for all sizes of photovoltaic systems, based on the kilowatts installed, and paid on a $/watt basis, during calendar years 2008 and 2009; and WHEREAS, a performance based incentive program is paid over a multi-year period based on the kilowatt-hours produced, rather than kilowatts installed; and WHEREAS, AMP recommended, and the Public Utilities Board authorized, implementation of a performance-based incentive program for customer-owned PV installations 50 kilowatts and larger in size in November NOW, THERFORE, BE IT RESOLVED that the Public Utilities Board of the City of Alameda authorizes the payment of performance-based incentives for solar PV installations 50 kilowatts and larger in size, at the rate and term as set forth in the accompanying Administrative Report, effective January 25, 2009; and BE IT FURTHER RESOLVED that the Public Utilities board of the City of Alameda authorize that up-front rebate funds be reserved for 50 kilowatts of residential solar PV installations for each calendar year. AYES: NOES: ABSENT: Commissioners McCormick, Holmes, McCahan, and President Hamm None Interim City Manager Gallant IN WITNESS WHEREOF, I have set my hand on this 26th day of January Date /s/ Girish Balachandran, Secretary Public Utilities Board