California Solar Initiative Now Includes Solar Pool Heating and Other Proposed CSI Program Changes

by Wilson Sonsini Goodrich & Rosati
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The California Public Utilities Commission (CPUC or Commission) has expanded the California Solar Initiative (CSI) Thermal Program to include solar pool heating systems. Decision 13-08-004 (Decision), issued on August 19, 2013, provides that solar pool heating systems at multifamily residential, governmental, educational, and non-profit gas customers of California's three large investor-owned utilities (IOUs) are eligible to receive CSI incentives, beginning at $7.00 per therm displaced. As with other CSI incentives, the amount of the incentive will decline over the life of the program as installation goals are reached. Solar pool heating systems at single-family residences are not eligible for the incentives.

A separate Proposed Decision issued by CPUC President Michael Peevey on September 3, 2013, would remove the requirement that two-thirds of the CSI MW target be reserved for non-residential projects. Under the Proposed Decision, the remaining capacity budget could be divided equally between the residential and non-residential sectors. Comments on the Proposed Decision are due on September 23, 2013. In addition, President Peevey also has proposed changes to the Net Energy Metering interconnection application to include additional data currently collected as part of the CSI program, as well as additional data. Interested parties may comment on this proposal as well.

CSI Background

The CSI was launched in 2007 to provide over $2 billion in incentives and other support for solar photovoltaic (PV) systems in California. The goal of the CSI is to incentivize the installation of 1,940 MW of solar capacity by 2016. The CSI has been hugely successful thus far, with over 1,300 MW already installed under the program.1 The overall CSI targets are allocated among the service territories of the state's large investor-owned utilities. As part of the CSI Thermal Program, the California Legislature and the Commission authorized over $350 million in incentives for electric and gas-displacing solar water heating systems. On September 27, 2012, AB 2249 was signed into law, expanding the definition of "solar water heating systems" to include solar pool heating systems.2 AB 2249 removed a requirement that the CPUC evaluate data available from pilot programs before implementing solar water heating incentives. The bill also explicitly excluded single-family residential solar pool heating systems from the CSI program. The Decision implements AB 2249.

Eligibility Rules for Solar Pool Systems

The CSI Thermal Program is available to multifamily residential, commercial, government, educational, and nonprofit natural gas customers of Pacific Gas & Electric Company (PG&E), Southern California Gas Company (SoCalGas), and San Diego Gas & Electric Company (SDG&E). The customer may install the solar pool heating system on a new or existing facility. Applicants must have received a permit from the appropriate local agency on or after January 1, 2013, to be eligible for participation in the CSI Thermal Program.

There is no size cap for solar pool projects in the CSI Thermal Program. The CPUC found that existing codes, standards, and regulations provide sufficient sizing and installation requirements on solar pool heating systems. In addition, there is no cap on the total incentive amount (e.g., as a percentage of project cost). Metering requirements apply to systems over 30 kWth, however, with metering costs borne by system owners.

Incentives for Solar Pools

To streamline implementation and ease the administrative cost and burden, the solar pool heating incentives will be incorporated into the existing CSI Thermal Program, with incentives paid out to projects on a first-come, first-served basis. The solar pool projects will compete for these incentive funds with the multifamily and commercial hot-water projects that were already eligible under the existing CSI Thermal Program.

The solar pool incentive of $7.00 per estimated annual therm displaced is designed to match the current incentive savings for multifamily and commercial projects, and takes into account that solar pool heating systems do not qualify for the investment tax credit (ITC). The solar pool incentives will be maintained at $7.00 for the second step of the incentive program, then lower to $5.00 and ultimately $3.00 for the final step of the CSI Thermal Program. The new incentive structure for the CSI Thermal Program is described in Table 1 of the Decision provided below, based on the assumption that in Step 1, 25 percent of applications will relate to solar pool heating and 75 percent will relate to multifamily and commercial hot-water projects. Steps 2-4 assume an even split between pool heating and multifamily and commercial projects. With the addition of solar pools to the CSI Thermal Program, it is estimated that an additional 1.8 million therms will be saved annually.

Table 1
Solar Pool Heating System Incentive Steps3

Step Incentive per Annual Therm Displaced for Multifamily/ Commercial Incentive per Annual Therm Displaced for Solar Pools Maximum Incentive for Multifamily/ Commercial SWH Projects Budget Allocation (in Millions) Annual Therms Displaced for Multifamily/ Commercial (1,000) Annual Therms Displaced for Solar Pools (1,000) Annual Therms Displaced Total (1,000)
1 $14.53 $7.00 $500,000 $34 1,755 1,214 2,969
2 $9.88 $7.00 $500,000 $26 1,316 1,857 3,173
3 $6.55 $5.00 $500,000 $23 1,756 2,300 4,056
4 $3.13 $3.00 $500,000 $16 2,556 2,667 5,223

Solar pool incentive payments will be made on an expected annual-therms-displaced basis using a modified version of the existing online CSI Thermal Program Calculator. The calculator will include an assumption that pools are heated to a maximum temperature of 82 degrees and that they are covered 12 hours per day between November and April for energy-efficiency purposes, except in local jurisdictions where pool covers are not permitted. The Decision directs the CSI program administrators to work with the solar thermal industry and the CPUC's Energy Division to update the calculator.

Changes to the CSI Thermal Handbook

The CSI Thermal Program Administrators (PG&E, SoCalGas, and CCSE4) are required to file a Tier 2 Advice Letter to modify the CSI Thermal Handbook by September 30, 2013, and the changes to the handbook will become effective 45 days after approval of the Advice Letter.

Proposed Decision on the CSI Incentive Budget

On September 3, 2013, CPUC President Peevey issued a separate Proposed Decision that would grant in part a petition filed by CCSE to make certain changes to its CSI budget. Among other changes, the Proposed Decision would remove the requirement that two-thirds of the total MW budget for each CSI Program Administrator be allocated to non-residential projects. Fifty percent of CCSE's remaining MW allocation will be allocated to residential customers, and 50 percent will be allocated to non-residential customers. PG&E and Southern California Edison will have the option to raise the MW allocation for residential customers to 50 percent of their remaining MW allocations. If approved by the full Commission, this change will allow for greater allocation of CSI incentives to residential projects in California. The CPUC is accepting written comments on the Proposed Decision by September 23, 2013.

Proposed Changes to Net Energy Metering Interconnection Application

CPUC President Peevey also has proposed a change to the Net Energy Metering (NEM) interconnection application via a recent Ruling. Currently, valuable information regarding solar installations in California is collected via the CSI application, including system cost, size, whether the system is owned by the customer or a third party, and the equipment used. This information is made public via California Solar Statistics.5 As CSI MW goals are reached, however, this data may cease to be collected and made public. The Ruling proposes a means of preserving this dataset by transferring the reporting requirements to the NEM interconnection application and seeks comments on the data fields to be collected. The Ruling also proposes to add new data fields to the NEM interconnection application not currently collected as part of the CSI application that should be reviewed by interested parties. Opening comments on this proposal were filed on September 9, 2013, and reply comments are due on September 16, 2013. A Proposed Decision and subsequent public comment opportunity will follow.

1 See California Solar Statistics data as of 9-11-13, available at: http://www.californiasolarstatistics.ca.gov/#.

2 Stats. 2012, ch. 607; Pub. Util. Code § 2861.

3 Decision 13-08-004 at 9 (Table 1).

4 CCSE administers the CSI program in SDG&E's service territory.

5 See http://www.californiasolarstatistics.ca.gov/.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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