4281
Piedmont Ave. Oakland, CA 94611 510 451 1727
May
1, 2001
California
Energy Commission
Re:
Docket No. 00-REN-1194
Docket
Unit, MS-4
1516
Ninth Street
Sacramento,
CA 95814-5504
Members
of the Commission:
I
am writing as an advisor to a number of local governments in California to
submit comments relative to the Commission’s Draft Investment Plan report
P500-00-022, “Investing in Renewable Electricity Generation in CA.” We realize
this arrives late but ask that you consider our comments in light of
developments at both the state and local level which occurred after the
comments deadline of January 9, 2001.
In
particular, these developments are: (1) sponsorship of an opt-out municipal
aggregation (“Community Choice”) bill, AB48x, by Assemblymember and
Appropriations Committee Chair Carole Migden (D-SF), and (2) development of
municipally-funded, large-scale
renewable “local power” plans by a number of cities, led by the city and
county of San Francisco under leadership of San Francisco Board of Supervisors
President Tom Ammiano. While connected,
these initiatives are not interdependent.
The
principal request of this letter is that the Commission re-evaluate its
Investment Plan to remove policies that inadvertently discriminate against
municipally-sponsored renewable energy development programs. We wish to keep
the Commission appraised of some structural changes that are in fact occurring
at both the state and local levels, and to ask that the Commission’s policies
take these changes into consideration. In particular, we are concerned that the
Commission’s programs be tailored to municipally-sponsored large scale solar,
wind, and other renewable distributed generation projects currently being
planned by local governments on behalf of their residents and businesses,
throughout the state.
To
date, the Commission’s programs are implicitly structured for projects designed
for individual customers. In particular, we are thinking of set asides for
small renewable resource projects which are designed to benefit small customers
but which in the context of community-wide initiatives (which are of particular
benefit to small consumers) are discriminatory, because the cost-effectiveness
of our projects depends on large scale installations. We ask that the
Commission remove barriers to community-wide initiatives, and that it introduce
new test criteria for proposed projects that include consideration of a
proposed project’s benefits to the electricity system (such as grid efficiency),
not merely to an individual customer.
We
ask that any program designs take into consideration new developments which
involve municipal, inter-municipal and county initiatives seeking to develop
very large scale distributed generation projects in the service territories of
Pacific Gas and Electric, Southern California Edison, and San Diego Gas and
Electric.
In
these cases, we are preparing community-wide initiatives sponsored and financed
by local governments but which will be built on privately owned commercial and
residential properties, and whose end-use customers are not necessarily the
property owner, but the residents and businesses of the surrounding community.
The
Community Choice bill (AB48x)– which is already in effect in Massachusetts and
Ohio - will give municipalities and groups of municipalities “opt-out”
aggregation authority, meaning they will negotiate bulk wholesale power supply
contracts on behalf of their residents and businesses in much the same way as
they already negotiate for garbage collection, recycling and cable television
franchises. As stewards of their community’s energy service, these municipal
bodies will be poised to develop new generation as a bundled component of that
power supply. This legislation is
widely supported by consumer and environmental advocates, as well as by the
independent power lobby, and is not actively opposed by the state’s DISCOs.
AB48x was recently passed by the Assembly Energy Cost and Availability
Committee with a 19-1 “aye” vote. There are currently 30 municipalities and
counties that have requested this law, and many are now leading the movement
for municipally-sponsored distributed renewable generation projects.
The
local power plans being developed by cities in both northern and southern
California are inspired by the campaign for Community Choice, but are not
dependent on its passage. These are unprecedented in scale (SF will seek 50MW
of photovoltaics in 7 years, six times larger than SMUD, currently the world’s
largest), revenue-bond funded “design, build, operate and maintain”
solicitations for renewable distributed generation in which competing master
developers will bid to sell renewable energy to a municipality from their
installed infrastructure both on a price schedule and on the “cash cow period”
of the infrastructure, meaning the eventual date (beyond a projected cost
recovery and risk capital recovery period) of title transfer of that installed
infrastructure to a municipality.
Every
parameter of these solicitations is designed to optimize engineering and to
reduce financial risks to the municipality. (1) The emphasis is on large-scale
(above 300kw) photovoltaic installations, which have significantly lower
O&M costs than smaller systems. (2) It is critical that the locations
selected for these installations be optimal in terms of solar conditions, grid
congestion conditions, and proximity to peak load conditions, so (3) we do not
wish to restrict installations either to municipal properties (4) nor to
properties owned by the end user of the resulting capacity. A critical
innovation of Local Power solicitations is to separate the infrastructure from
the end user. Rooftops will be selected for acquisition according to their
efficiency from a strictly engineering perspective. Accordingly, we are seeking
a Distribution-Only Wheeling Tariff for renewable distributed generation from
the legislature in order to improve the future economic climate for load
shaving and shifting.
We
wish to impress upon the Commission that the economies of scale created by
these initiatives will greatly facilitate the RESIA’s three main objectives;
1.
The
economies of scale and revenue benefits introduced through volume purchasing
and Sacramento’s basic “Sustainable and Orderly Development and
Commercialization” model by cities still operating in DISCO service territories
will raise the bar on the “vigorous pursuit of the mist cost-effective and
efficient investments in renewable resources,”
2.
Because
these municipally-sponsored projects both add local public moneys (municipal
revenue bonds) to the equation and propose larger scale projects for benefits
to the whole community (rather than individual customers), they also offer a
more promising model for “increase(ing), in the near term, the quantity of
California’s electricity generated by in-state renewable energy resources,
while protecting system reliability, fostering resource diversity, and
obtaining the greatest environmental benefits for California residents”;
3.
Because
of the distributed nature of municipally-sponsored projects (to date they are
all photovoltaics-oriented), municipally-sponsored programs are the most
promising method of “identify(ing) and
support(ing) emerging renewable energy technologies that have the greatest
near-term commercial promise and that merit targeted assistance.”
We
support the principle conveyed in the Commission’s December 2000 investment
plan that it should “remain as flexible as possible to ensure that the extended
funds are used to support the most cost-effective and efficient investments in
renewable resources,” and that “there is greater uncertainty today about the
market structure within which the investment plan must operate.” We are very
supportive of the Committee’s recommendation that “the Energy Commission be
given the flexibility to make appropriate adjustments in the investment plan
allocations,” because we believe that coming events will turn the market on its
head and render current policies inappropriate if it remains the goal of this
commission to use these funds “to support the most cost-effective and efficient
investments in renewable resources.”
Before
addressing the Committee’s Draft Report of December 2000, we want to observe
that in light of the failure of California’s market for electricity (which
includes renewable energy resource development), that the -Report’s continued
emphasis on “markets” needs revision. Clearly, the market needs some help from
government in order to prove sustainable. On page 12 the Committee maintains
“the following three objectives…remain important in maximizing the
effectiveness of the funds provided by the RESIA:
“1. To assist in developing a consumer-driven renewables market in California that facilitates consumers choice of renewable power.
“2.
To encourage market-based development of new and emerging renewable resources.
“3.
To maintain the benefits and diversity of the renewables industry and move
towards market competitiveness with the broader electricity industry.”
We
believe that the idea of a “consumer-driven” market was the essential error of
Assembly Bill AB1890 (Chapter 854), and that the essential solution to
California’s energy crisis lies in local government. While we are not convinced
that municipalizations, or wires takeovers, are essential to solve the problem,
we do believe that (1) Community Choice is critical to diversifying
California’s market and introducing real competition at the wholesale level,
and (2) municipally-sponsored “Local Power” solicitations are critical both to
lower the price of renewable technologies for the consumer, and to facilitate a
“big business” rather than niche market approach to their deployment. Given the
demonstrated limits of consumer buying power in the electricity market, we
recommend that the Commission aspire to a “demand-driven” rather than a
“consumer-driven” market for renewables.
Our
specific recommendations are as follows:
1.
Exempt community-sponsored projects from Emerging Renewable Resource
Fund size quotas. We urge the Commission to
modify the allocation structure within the Emerging Renewables Fund, which
inadvertently discriminates against community-wide programs sponsored by
municipalities by requiring that 60% of funding go to 10kw or smaller systems,
15% to 10-99kw systems, and only 25% to 100kw or larger systems. Again,
community-sponsored projects depend on large (300kw and larger) systems to
lower O%M costs and are essential to both efficiency and cost-effectiveness. We
ask that community-sponsored initiatives be made exempt from this allocation
structure, which was clearly designed from within AB1890’s individual consumer
economic model. Given that small consumers benefit from community-sponsored
programs, the size quotas are not relevant.
2.
Expand Funding for Emerging Technologies Fund. We believe that the
allocation for Emerging Technologies Fund should be increased from 10% to 40%.
San Francisco’s plan alone will result in an application for approximately $150
million, more than half of the entire Emerging Technologies Fund. Similar plans
currently under development in the East Bay, the (Edison) Los Angeles area and
San Diego County oversubscribe current allocation levels, so that a dramatic
increase is in order.
3.
Defund the Consumer Education and Customer Credit Funds. The Consumer Education Fund
(5%) and the Customer Credit Fund (25%) should be eliminated to focus the
state’s resources on immediately viable projects. Consumer education is a waste
of money in a market without consumer choice in effect now or in the
foreseeable future. The Customer Credit Fund was designed for the AB1890
market, and should also be eliminated to make funds available for large scale distributed
Emerging Technologies projects.
4.
Fully Fund the Emerging Technologies Fund. We urge the Commission to
give the Emerging Technologies Fund its full allocation in addition to rollover
funds despite its under-enrollment during the functional years of AB1890.
Again, this under-enrollment was caused by a market entirely based on
consumer-driven investment decisions. With very large scale,
photovoltaic-centered Local Power plans already in place and a Community Choice
law approaching, the Commission should anticipate a dramatic increase in
applications for the Emerging Technologies Fund moneys, and should see to it
that all funds are made available. For example, the San Francisco Local Power
plan alone will seek more than half of the funds in the Emerging Technologies
account.
5.
Reserve Emerging Renewables Funds. We oppose automatic rollovers of unused
Emerging Renewables funds to the New Renewables Fund on an annual basis. Given
the scale and level of commitment to put municipally-sponsored proposals in place,
funds should be kept available for projects on the drawing board.
6.
Eliminate “On Premises” Eligibility Requirement for Emerging Renewable
Resource Fund. We ask that eligibility of systems for the Emerging Renewable Resources
Fund not be limited to facilities “located on the premises of the end-user and
be primarily designed to offset the customers own load.” (p.21). This is
another instance of the AB1890 individual consumer-based approach inadvertently
discriminating against community-wide programs sponsored by municipalities. As
mentioned above, economies of scale (which vastly increase the
cost-effectiveness and efficiency of the renewable resources) depend on
engineering distributed resources to offer a maximum benefit to a whole
community in the form of grid efficiency, a benefit which reach DISCO-connected
end-users without necessarily being physically built on their property. Any
requirement that infrastructure must be built on the end-user’s premises is
counter-productive and runs contrary to the principle of cost-effectiveness and
efficiency. We urgently request that the Commission reconsider this policy in
light of both Community Choice and the Local Power initiatives.
7.
Make “On Site” generation eligible for New Renewable Resource Funds. We support the Committee’s
recommendation that on-site generation be allowed eligibility for funding for
the New Renewable Resources Account in SB90, for all the reasons sited on page
22.
8.
Protect Photovoltaics. We support expansion of emerging renewable resource technologies,
but only on condition that the fund is expanded or photovoltaics are made
eligible for New Renewable Resources Funds.
9.
Continue Prohibition on Utility Ownership of Generation. Finally, we are vehemently
opposed to the Committee’s recommendation that utility ownership of facilities
be allowed. It is critical that the market for distributed generation be kept
separate from the wires business to avoid further gaming of the market. Given
the dismal performance of the Energy Efficiency funds under utility
administration, we see no reason to allow wires companies which are supposed to
remain market-neutral to be allowed to compete as generators, as this would
threaten to further undermine the competitive climate of California’s
electricity market. Finally, there is no shortage of entities, whether
commercial or public, which are eager to develop renewable resources using SB90
funds. We are alarmed at the Committee’s recommendation and urge
reconsideration.
In
closing, we hope the Commission will accept our comments despite their
lateness, and ask that we be added to the mailing list for this Docket. If you
have any questions, please call Paul Fenn at 510 451 1727 at any time.
Thanks
for your consideration,
Paul
Fenn
Local
Power