California s Experience with Solar Housing Complexes Simon Baker California Public Utilities Commission November 13, 2014 Mexico City 1
Presentation Overview Introduction to CPUC and California policy context California Solar Initiative (CSI) and the Multifamily Affordable Solar Homes (MASH) program Net Metering and Virtual Net Metering Other Programs of Potential Interest 2
Introduction to the California Public Utilities Commission (CPUC) President Michael R. Peevey Commr. Michael Florio Commr. Catherine Sandoval Commr. Michael Picker Commr. Carla Peterman State agency headquartered in San Francisco Regulates telecommunications, electric, natural gas, water, railroad and some transportation companies Responsible for ensuring that customers have safe, reliable, environmentally-sound utility service at reasonable rates Other state agencies have energy policy roles: Energy Commission, Independent System Operator, Air Resources Board Five Commissioners are appointed by the Governor of California and confirmed by the California Senate 3
Population: 36.6 million, 0.55% annual growth Multiple Utility Service Territories: 81% Investor-owned (PG&E, SCE, SDG&E) regulated by CPUC 19% Municipal-owned (LADWP, SMUD) 2011 Electricity Demand: 60,310 MW 277,735 GWh Electricity growth for last decade: 0.93% per year Flat on a per-capita basis since late 1970 Multi-family housing market structure Market rate, affordable housing, public housing The California Landscape SAN FRANCISCO LOS ANGELES 4
Policy Context U.S. energy policy is fragmented Federal tax incentives (ITC, accelerated depreciation) Patchwork of state policies (NEM, solar incentives, RPS, etc) Since late 1970s, California a leader in clean energy policy Successes (energy efficiency) and failures (solar in the 1980s) 2001 Energy Crisis continues to shape current policy 2006: California Solar Initiative (CSI) 2008: Global Warming Solutions Act (AB 32) 2050 Greenhouse Gas goal: 80% below 1990 levels 5
CALIFORNIA SOLAR INITIATIVE 6
California Solar Initiative (CSI) Gov. Schwarzenegger's Million Solar Roofs vision for California 3,000 MW SB 1 (2006): Legislature authorized $2.2 billion (2007-2016) funded by electric ratepayers in investor-owned utilities (IOU) territories Largest state solar incentive program in the U.S. Goals in CPUC territories: Incentivize 1,750 MW of new solar generation capacity by 2016 Create self-sustaining solar market On target to meet goals CSI program has had the intended market transformation effect But, NEM and rate reforms present uncertainty Installed Capacity (1993-2013) 7
CSI Designed to Reach All Californians Residential Customers Houses and apartment buildings $489 million (602 MW) Non-Residential Customers Businesses, Government agencies, Schools, Hospitals $1.458 billion (1,147 MW) Low-Income Residential Customers $216 million 8
Program Category CPUC CSI Budget 2007-2016 Budget ($ Million) General Market Program Subtotal $2,098 Direct Incentives to Consumers $1,948 Program Administration, Marketing & Outreach, Evaluation (10%) $150 Single-Family Affordable Solar Homes (SASH) $108 Multifamily Affordable Solar Housing (MASH) $108 Research, Development, Deployment and Demonstration (RD&D) $50 (California Center for Sustainable Energy) Solar Hot Water Pilot $3 Total CPUC CSI Budget $2,367 9
CSI Applications by Income Level Low income bracket eventually surpassed high income group 10
Non-CSI Installations Growing Rapidly (but still dependent on NEM)
MULTI-FAMILY AFFORDABLE SOLAR HOMES (MASH) 12
MASH Program History and Goals By legislation, 10% of CSI program budget set aside to fund affordable (income-qualifying) solar housing ($216 million). Political issue: wealthy people getting subsidies for solar. Funding split: $108 million for single-family program (SASH), administered by GRID Alternatives $108 million for multifamily program (MASH), administered by the IOUs + Center for Sustainable Energy (CSE) in SDG&E territory Average installations: SASH: 3kW, $18,000 incentives, 100% subsidized MASH: 75kW, $230,000 incentives, ~50% subsidized MASH Program Launched in 2008 (after SASH) Goals: solar adoption, housing quality, electricity savings, solar visibility Full subscription to program by 2013 In 2013, additional funding authorized to extend program 13
MASH Program MASH Program offers higher incentives for multifamily affordable housing residences, compared to the CSI general market program. Track A PV System Offsetting Common Area Load MASH Incentive Structure Track B PV System Offsetting Tenant Area Load $1.90 per watt $2.80 per watt Incentive rates do not ratchet down (as in the general market program) Eligibility is limited to residences where at least 20% of the residents are low-income. Participating properties must be deed restricted 2009: CPUC establishes Virtual Net Metering (VNEM) to allow virtual transfer of credits across multiple accounts to support the MASH program. 2010: CPUC expands VNM to all multi-tenant customers (regardless of income status) 14
MASH Program Achievements MASH + VNM did not initially take off Solar developers and low-income MF property owners were initially unaware of the benefits of VNM and the MASH Program. New third-party financing structures (e.g., power purchase agreements) and solar leases stimulated the market. Financial innovation (generous MASH incentives + tax benefits) Demand for MASH incentives eventually outgrew available funding. MASH Project Figures by Program Administrator MASH Program 95% Reserved Number of Systems Completed or Reserved Total PV Capacity [kw, CEC- AC] Total Incentive Amount [$] Total System Costs [$] California Center for Sustainable Energy 41 2,602 $9,746,363 $16,624,156 Pacific Gas & Electric 207 13,768 $39,929,502 $85,043,782 Southern California Edison 140 12,652 $40,593,216 $78,563,024 MASH Total 388 29,022 $90,269,081 $180,230,962 15
Installed Cost Trends 16
Job Training Co-benefits (in the SASH Program) GRID Alternatives (SASH program administrator) provides opportunities for job trainees and local volunteers to assist with installations. Goal: Engage disadvantaged communities, participate in the California solar market GRID reserves at least 20 percent of all SASH installations for solarinstaller job trainees, often targeting low income communities. Double benefit: GRID recruits job trainees from the same communities that the SASH Program aims to serve. The SASH Program: Filled over 29,800 workday positions with volunteer participants Dedicated an additional 4,200 workday positions specifically for job trainees. Job training benefits emphasized in new legislation reauthorizing the lowincome CSI program 17
MASH Future Directions On October 7, 2013, Assembly Bill (AB) 217 was signed into law. This bill: Extends the SASH and MASH programs until the exhaustion of up to $108 million or the end of 2021, whichever occurs earlier. Requires the Commission to ensure the program is designed to maximize overall benefit to ratepayers (but not required to be cost-effective) Requires the Commission to ensure the program provides job training and employment opportunities in the solar and energy efficiency sectors. Requires CPUC to ensure the program requires that eligible participants enroll in the utility low income energy efficiency program. Sets a combined capacity goal of 50 MW of new solar PV on low income residential housing. 18
MASH Challenges Moving Forward Do more with less $ Dial back incentives without collapsing the market Landlord-tenant split incentive Developers will need to continue innovating financial models
NET ENERGY METERING 20
Benefits of NEM to the Customer What is NEM? One customer meter to one renewable generation system (virtual NEM is an exception) Retail credit based on otherwise applicable rate schedule Customer generation exported to the grid receives a bill credit to offset the cost of their electric usage (meter runs backwards ) Eliminates the need for batteries (and associated cost and maintenance) Ensures a constant supply of electricity. Reduces or eliminates utility energy charges (per kwh charges) Minimum charges, customer charges, meter charges and demand charges still apply. 21
Net Energy Metering (NEM) Eligible Technologies: Solar, wind, biomass, geothermal, renewable fuel cells, small hydroelectric generation, digester gas, municipal solid waste conversion, landfill gas, hydro technologies. Solar is large majority (>90%) Export/Import: NEM customer-generator export to the grid, and import (consume) from grid Only pay for the net on a billing period basis. Credits: NEM customers can rollover excess bill credits up to a year. Bill credits offered at the bundled full-retail rate. 2010 (AB 920): NEM Customers paid Net Surplus Compensation for any net excess kwh sent to utility on an annual basis. Onsite Load: Facilities must be sized to serve onsite electricity needs, no greater than 1 MW. Program Cap: July 1, 2017, or the date on which a utility reached 5% of aggregate (non-coincident) customer peak demand. 22 22
Form of Compensation Pricing Quantity NEM Program Elements Bill credit Full Retail Credit based on Otherwise Applicable Tariff Net exports Interconnection application and distribution upgrade fee exemptions Secondary Program Elements Faster interconnection processing times Rate component exemptions (departing load charges, standby charges, etc.) Renewable Energy Credits Coupled energy storage systems Variations to NEM Virtual Net Energy Metering (VNEM), NEM Aggregation, Fuel Cell NEM (NEMFC), and the Renewable Energy Self-Generation Bill Credit Transfer Program (RES-BCT) 23 23
Installed NEM Generation Solar Interconnections and Solar NEM Customers by Utility Total MWs Interconnected Total Customers Interconnected MWs on NEM tariffs Customers on NEM Tariffs PG&E 1,109 MW 114,639 1,039 MW 114,619 SCE 786 MW 77,266 674 MW 77,155 SDG&E 247 MW 31,997 246 MW 31,963 Total 2,142 MW 223,902 1,959 MW 223,737 Data is through March 2014. Includes CSI, NSHP, ERP and SGIP data, but not POU or RPS data. Progress Towards the 5% NEM Cap MWs Interconnected on NEM Tariffs Aggregate Customer Peak Demand Progress towards 5 Percent NEM Cap PG&E 1,050 MW 48,177 MW 2.18% SCE 704 MW 44,807 MW 1.57% SDG&E 270 MW 12,134 MW 2.23% Data is through March 2014. Includes all NEM-eligible systems. 24 24
2013 NEM Ratepayer Impacts Evaluation Cost-Benefit Analysis (compares the reduction in NEM customer bills to the reduction in utility costs), a.k.a the Ratepayer Impact (RIM) test: NEM generation currently results in a net cost to other ratepayers of $79-$252 million per year, reaching $370 million - $1 billion per year in 2020 with a complete build-out to the 5% NEM cap. Cost of Service Analysis (compares the resulting bills of NEM customers to their full cost of service after accounting for NEM generation): On average, NEM customers pay slightly more than their cost of service. Customers installing NEM systems have an average median household income of $91,210, compared to the median income in California of $54,283 and in the IOU service territories of $67,821. 25 25
Assembly Bill 327 (Perea, 2013) Directs the Commission to establish a new successor tariff or standard contract to NEM by December 31, 2015. The Commission must: Ensure that customer-sited renewable distributed generation continues to grow sustainably Include alternatives designed for the growth of distributed generation among residential customers in disadvantaged communities Ensure that the successor tariff is based on the costs and benefits of the renewable electrical generation facility, and that the total benefits of the tariff to all customers and the electrical system are approximately equal to the total costs Allow distributed generation projects sized to customer load that are greater than 1 MW in size Also allows changes to residential rates: Increased fixed charges (up to $10 per month) Tier collapse (from 4 tiers) and redistribution of cost recovery from lower tiers 26 26
VIRTUAL NET ENERGY METERING 27
Virtual Net Metering (VNEM) VNEM is a utility tariff that allows output from a NEM-eligible system to be allocated across individual tenant meters. Allows building owners to install a single NEM-eligible system for common and tenant areas and apply utility bill credits to building owner and tenants VNEM helps solve the issue of how tenants receive financial benefits from of NEM-eligible generation, but is complicated. Energy is fed back to the grid; the utility meters and calculates energy credits, allocating these credits to tenant accounts per customer s allocation agreement. Allocations based on square footage. Examples: apartments, condos, townhouses, shopping centers 28
VNEM Statistics 2011: CPUC expands VNEM to all multi-tenant, multi-meter properties As of January 2014, over 8,600 tenant units had taken service under VNEM tariffs through the MASH program As of March 2014: Takeaway: Without MASH incentives, VNEM has been very slow to take off 29
VNEM Configuration Solar PV example VNEM requires the generator account and all benefitting accounts to be at the same Service Delivery Point (SDP). Net Generator Output Meter (NGOM) is physically tied to the generator and records solar production Generator Account has no customer load (except for that associated with the generator) 30
SERVICE DELIVERY POINT: Where utility's Service Facilities are connected to either Applicant's conductors or other service termination facility designated and approved by utility. Prevents wheeling, the uncompensated use of a utility s electric system facilities. Service Delivery Point utility 31
How is VNEM Different from Other NEM Arrangements? Master-Metered NEM 2-Unit Building Individually NEM-Metered 2-Unit Building Virtual NEM Does not need NEMV One generator for whole building 1MW limit No separate tenant bill RPS-eligible gen Utility NET Billing Meter & Inverter Netting master metered A generator for each tenant 1 MW limit per tenant Tenants get a NEM bill RPS-eligible gen Utility NET Billing Meters & Inverters No Service Delivery Point (SDP) limit Individual netting meters Utility Load account Billing Meters One generator per SDP, limited to same SDP Individually metered tenant load accounts 1 MW limit RPS-eligible gen Dual metering (Net generating output + load meters) 32
VNEM Illustration 33
OTHER PROGRAMS OF POTENTIAL INTEREST 34
CSI-Thermal Program Program launched in 2010 Like CSI general market program, a declining incentive structure Multi-family sector is having most success Applications as of March 31, 2014 35
SB 43: Green Tariff Shared Renewables Statutory Goals: Expand access to all eligible renewable energy resources to all ratepayers who are currently unable to access the benefits of onsite generation; Facilitate a large, sustainable market for offsite renewable energy resources; Fairly compensate utilities for the services they provide, while ensuring nonparticipating ratepayer indifference Implementing regulations under development at CPUC. Key issues: Carve-outs for disadvantaged communities, etc Ratepayer indifference Incremental RPS procurement Fixed vs. floating premium price 36
More Information CPUC Distributed Generation website: www.cpuc.ca.gov/puc/energy/distgen/ CPUC CSI website: www.cpuc.ca.gov/puc/energy/solar/ GoSolar California consumer website: www.gosolarcalifornia.ca.gov/ California Solar Statistics website: www.californiasolarstatistics.ca.gov/ 37
APPENDICES
NEM Requirements Generator must be no larger than 1 Megawatt per utility Account Generator must be located on the customer s owned, leased, or rented premises. Any credits can only apply to that same premises. Generator size (kw) must be intended primarily to offset part or all of the customer s own electrical requirements typically a customer should sizes PV system to no more than ~80% of annual energy (kwh) consumption Customer must be on a regular utility electric rate schedule for which it is eligible called the otherwise applicable rate schedule or OAS. Customer may take service from a CCA or ESP NEM is available until total rated generating capacity used by net energy metered customer exceeds 5% of utility s aggregate customer peak demand. 39
NEM Credits NEM Customers receive generator benefits in 5 ways: 1.Directly offset load behind the meter at time of generation (utility never sees this) 2.Spin the meter backwards - decrease kwh - during the day, and spin the meter forwards at night - increase the kwh back up. (This does not show up on the bill.) 3.Within a month, receive a monetary credit for the value of net electricity exported during the month At annual true-up, excess $ credit from months with a surplus are used to offset months with net kwh charges. Any remaining monetary credit is zeroed out at true-up. 4.Receive Net Surplus Compensation (NSC - AB 920) monetary credit for excess generation the net kwh exported over the whole year valued at ~$0.04 per kwh. 5.Receive compensation for Renewable Energy Credits (RECs) for NSC portion of generation valued at ~$0.0183 per kwh. 40
Net Surplus Compensation (AB 920) Separate from the monthly NEM bill is a second crediting provision: Net Surplus Compensation If a customer generates more kwh than they use for a true-up period, the customer is eligible for credit based on that net kwh The credit is based on the average DLAP pricing during solar hours and is approximately 4 cents per kwh. This credit is different than the NEM bill credit which is still zeroed out at end of the year. Customers can have a NEM bill credit and not have any net surplus compensation owed, if they are on a TOU rate. DLAP (Default Load Aggregation Point) price is the price that the CAISO charges for load served off the CAISO grid. 41
NEM True-up Makes no difference what time of year you interconnect Pay annually vs. pay monthly Residential and Small Commercial have options vs. CIA customers must pay monthly: 12 Billing Cycles Or upon account closure Or upon Change party Or Change to or from Direct Access (ESP) / Community Choice Aggregation (CCA) from or to utility bundled service But NOT for change of rate schedules (no true-up) 42
VNEM: Allocation of Credits At the time of interconnection, applicant will designate the Benefiting Accounts and their percentage of kwh allocation. The kwh credits are allocated as designated (by TOU period if applicable) each month to each benefitting account corresponding (TOU) usage kwh. Each Benefitting account then is essentially treated like a regular NEM account. 43
VNEM: True Up Effectively, trued-up every month, except credits carried forward At the end of 12-billing-month period any remaining credits are zeroed out. One benefitting account may true-up at a different time than another AB 920 applies to each Benefitting Account if allocated kwh > BA usage kwh, customer receives Net Surplus Compensation under AB920. Change of parties / closed accounts will true-up Generator account does not have a true-up 44
VNEM: PG&E Costs & Set Up Site Assessment: VNEM usually modifying an existing service panel that was not designed for a generator interconnection. No charge, but costs are being recorded by utility. Service Disconnect /Reconnect charge normal fees Benefitting Account (BA) Allocation: Setup $12/BA, max $500 Modification (1 change/true-up free; $3 per BA) Default account Metering NGOM Generating Account - TOU, interval, combined CSI/NGOM Benefiting Account- Normal load account meter 45