solar energy in texas
TRANSCRIPT
Solar energy in Texas
July 20, 2010
This report describes the current
status of solar energy in Texas and in other states and outlines anticipated policy proposals for incorporating solar energy
into Texas’ energy future.
Number 81-13
2 Types of solar power
4Texas solarpolicy options
3 Solar energyin other states
Federal solarenergy policy
510 Texas solar
businesses
11 Municipal andutility initiatives
3 Current Texas solar policy
WhilesolarenergycurrentlymakesupasmallfractionofthemixofenergysourcesinTexas,thestateranksfirstinthenationinsolarresourcepotential,accordingtotheStateEnergyConservationOffice(SECO).Asolarenergycompanyisdevelopingplansfora60-megawattsolarplantnortheastofAustinthatwouldbethelargestsuchfacilityintheUnitedStates.
Solarenergyisproducedbycapturinglightandheatfromthesunthatcanbeusedtogenerateelectricpower.Texashashighlevelsofsolarradiationthatpassthroughtheatmosphereunobstructedbypollutants,clouds,watervapor,andothermatter,accordingtoSECO.Somehavecalledforstatepoliciestoencouragedevelopmentofthisresourceinordertoreducecarbonemissionsfromanddependenceonfossilfuels.Becausethesunshinesduringtheday,supportersofdevelopingsolarenergysay,itcouldbalanceenergyfromwind,whichblowsstrongestatnight.Otherssaysolarenergyshouldstandonitsownwithconventionalandotherrenewableenergysourcesandthatitisinappropriateforthestatetointervenebychoosingwinnersandlosersintheenergymarket.
FactorsthathavehelpedestablishaframeworkinTexasforpursuingsolarenergyincludeathrivingwindenergyindustryaidedbystateandfederaltaxincentives,anetworkofpeopleexperiencedintheenergybusiness,alargesemiconductorandmicroprocessorindustrythatcoulddesignandmanufacturesolarequipment,andgroundworkfortransmissionlines.AsthesolarenergyindustrymaturesinTexas,however,italsoisexpectedtofacechallenges.Theseincludethehigher
costofproducingelectricitywithsolarresources,concernsaboutaestheticsofsolarequipment,reliablyintegratingsolar
energyintotheelectricgrid,andintermittentgenerationsincewithoutaneffectivestoragesystemsolarenergyisavailableonlywhenthesunshines.
ThisreportdescribesthecurrentstatusofsolarenergyinTexasandinotherstatesandoutlines
anticipatedpolicyproposalsforincorporatingsolarenergyintoTexas’energyfuture.TheTexasLegislaturemayrevisitissues
involvingsolarenergyduringits2011regularsession.
Page 2 House Research Organization
Types of solar power Solarpowercanbecategorizedintothreebasicareas:solarhotwaterheating,concentratingsolarpower(CSP),andphotovoltaic(PV)solarenergysystems.Eachofthesesolarenergytechnologiesworksbycapturingenergyfromthesun’sheatorlight.
Solar hot water heating
Smallrooftopcollectorscancollecttheheatfromthesuninordertoheatwaterforlaundry,bathing,andotherpurposes.Whilesolarwaterheatersdonotgenerateelectricity,theycanreducetheamountofenergyusedforwaterheatinginahomeorbusinessby75percentormore.
Concentrating solar power plants
Solarthermalpowerplants,alsoknownasconcentratingsolarpower(CSP)plants,harnesstheheatfromthesuninordertoheatwatertohighlevelswithlargemirrorsthatfocussunlightonasmallarea.Thisheatedwaterisconvertedtosteam,whichisusedtorunsteamturbinestogenerateelectricityinamannersimilartoafossilfuel-firedpowerplant.
CSPrequiresahotclimateandareadilyavailablewatersupplytogenerateenoughsteamtoruntheelectricturbinesandkeepthemirrorsclean.TheUnitedStateshas431megawattsofCSPinoperation,accordingtoEnvironmentTexas,anenvironmentaladvocacygroup,butnoneinTexas.MostoperatingprojectsareinCalifornia,withotherinstalledcapacityinArizona,Nevada,andHawaii.
CPSEnergyinSanAntoniohasa20-yearagreementtopurchasepowerfroma27-megawattconcentratingsolardish-engineprojectinWestTexascalledWesternRanch.Itisexpectedtobeonlinein2011.
Photovoltaic solar systems
Photovoltaic(PV)systemsusepanelstoconvertsunlightdirectlyintoelectricity.PVsystemsaremadeofsemi-conductormaterialthatwhenhitwithsunlightfreeselectronsthatproduceanelectriccurrent.No
movingpartsarerequired,andwateruseislimitedtomaintainingacleansurfacearea.
PVsystemscanbeinstalledtoprovideelectricpowerdirectlytotheuserorforconnectiontotheelectricgrid.Thesystemsaremodularandcanbesizedtomeetelectricityneedsinconstrained,urbanareasoropen,ruralareas.Forexample,PVsystemscanbeusedforsmallresidentialrooftops,largeon-sitebusinessandgovernmentsystems,orpowerplant-sizedfacilities.
ThesmallestresidentialusewithPVsystemsisabout1kilowatt,oftenproducedbyrooftopsystemstooffsetanothersourceofelectricity.PVsystemusebyindividualpowerplant-sizedfacilitiesrangesfrom250to500megawatts.WhileTexascurrentlydoesnothaveanylargePVarraysoperating,municipalutilitiesinSanAntonioandAustinhavesignedcontractstopurchasepowerfromfacilitiesnowbeingbuilt,andaprivatefirmisdevelopingplansforaPVfacilitynearAustin.
Costs of solar power systems
BothCSPandPVsolarenergysystemscanproduceenergyatsignificantlylowercoststodaythaninthe1980s,butcostsremainhighcomparedtoconventionalenergysources.However,accordingtoarecentanalysisbyLazard,afinancialadvisoryandassetmanagementfirm,solarenergytechnologiesarebecomingincreasinglycost-competitivewithconventionalgenerationtechnologies,excludingcertainfactorssuchastransmission,back-upgeneration,construction,andfuelcosts.Forexample,producingenergyfromacoalplantcostsfrom7to15centsperkilowatthour,fromanuclearplantcostsfrom8to11centsperkilowatthour,andfromanintegratedgasificationcombinedcycleplantcostsfrom10to13centsperkilowatthour.ProducingenergyfromaCSPplantcostsfrom12to19centsperkilowatthourandfromaPVplantfrom9to19centsperkilowatthour,dependingonthePVtechnology.
Althoughthepriceofsolarpanelshasdeclineddramaticallyoverthelasttwodecades,theupfrontcostofarooftopsolarpowersystemcanbeabarrierifahomeownerplanstostayinahomeforonlyafewyears.Aportionoftheupfrontcostisretrofittingolderhomesbyupgradingtheelectricalsystem,reinforcingtheroof,andcreatingconnectionsbetweentheelectricalsystemandthepanelsinstalledontheroof.
House Research Organization Page 3
Current Texas solar energy policy
Inrecentyears,Texashasenactedlawstoencouragethedevelopmentanduseofrenewableenergysources,includingsolarenergy.TheLegislatureestablishedarenewableportfoliostandard(RPS)in1999andexpandeditin2005tosettargetsforuseofrenewableenergystatewide.
Renewable portfolio standard
Theelectricmarketrestructuringbillenactedbythe76thLegislaturein1999,SB7bySibley,hadagoalofpromotingretailcompetitionandconsumerchoiceinTexas.Toprovideachoiceofrenewableenergysourcesforconsumers,theLegislatureestablishedarenewableportfoliostandardunderUtilitiesCode,sec.39.904thatrequirescompaniessellingelectricitytoretailcustomerstosupportrenewableenergygeneration.TheRPSisamarket-drivenpolicyintendedtoensuretheavailabilityanduseofrenewableenergyaselectricitymarketsbecamemorecompetitive.RenewableenergytechnologiesthatqualifyfortheRPSarethosethatdonotrelyonenergyresourcesderivedfromfossilfuelsorwasteproductsfromfossilfuels.Thesesourcesincludesolar,wind,geothermal,hydroelectric,tidalenergy(wave),andbiomass,includinglandfillgas.
SB20byFraser,enactedduringthe79thLegislature’sfirstcalledsessionin2005,expandedtheRPSgoalstorequireanadditional5,000megawatts,incrementally,beyondthethen-required880megawattsofrenewablecapacity.Itsetatargetof10,000megawattsby2025.The2015goalof5,880megawattswassurpassedin2008byallrenewablesources,sevenyearsearly,withmorethan6,000megawattsjustfromwindpower.Inanefforttodiversifythestate’srenewableenergysources,whentherenewableportfoliostandardwasexpandedin2005statelawmakersrequiredthePublicUtilityCommission(PUC)tosetatargetofatleast500megawattsofcapacityfromarenewableenergytechnologyotherthanoneusingwindenergy.
Financial incentives
Texascurrentlyoffersvarioustaxdeductionsandexemptionstoencourageuseofrenewableenergysources,includingsolarenergy.
Incalculatingitsbusinessfranchisetax,acorporationorotherentitysubjecttothestatefranchisetaxmaydeductfromthetaxbasethecostofasolarenergydevice.Anentitymaydeduct10percentoftheamortizedcostofthesystem.
TexasalsooffersafranchisetaxexemptiontocompaniesinTexasengagedsolelyinthebusinessofmanufacturing,selling,orinstallingsolarenergydevices.Thisexemptionhasnoceiling,soitisasubstantialincentiveforsolarmanufacturers.
Texasvotersin1978adoptedaconstitutionalamendmentauthorizingtheLegislaturetoexemptsolarorwind-poweredenergydevicesfrompropertytaxes.TheTaxCodeallowsanexemptionfromtheappraisedvalueofthepropertyequaltotheamountthatarisesfromtheinstallationorconstructionofasolarenergydeviceprimarilyforon-siteuse.
In1975,theLegislatureexemptedsolarenergydevicesfromthesalesandusetax,buttheexemptionwasrepealedin1987.
Non-taxincentivesinTexasincludeaprogramofferedbytheTexasDepartmentofRuralAffairs,toprovidegrantstoqualifyingcitieswithfewerthan50,000residentsandcountieswithfewerthan200,000residentsforinstallingrenewableenergyprojects.Also,theLoanSTARProgram,arevolvingloanprogramthroughSECOundertheComptroller’sOffice,offerslow-interestloanstoallpublicentities,includingstate,publicschool,college,university,andnon-profithospitalfacilities,forenactingmeasurestoreduceenergycosts.On-siterenewableenergyoptions,suchassolarwaterheating,photovoltaicpanels,andsmallwindturbines,areencouragedintheanalysisofpotentialprojects.
Solar energy in other states
Texasranked13thamongthestatesforsolarenergyproductionin2009,with8.3megawattsofsolarelectricitycapacity.CaliforniawasthetopU.S.solar-energyproducingstatebyfarwith1,102megawattsofsolarelectricitycapacity.NewJerseywassecondwith128megawatts,followedbyNevadawith100megawattsandColoradowith59megawatts.One
Page 4 House Research Organization
megawattofsolarcapacityisenoughtopowerabout200homes,dependingonseveralfactors,includingsolartechnologyandtheaverageelectricityconsumptionofhouseholdsinthearea.
AccordingtotheSolarEnergyIndustriesAssociation,30statesandtheDistrictofColumbiahaverenewableportfoliostandards,and18ofthosehavecarvedoutaportionoftheirRPSspecificallyforeithersolaroralldistributedrenewablegeneration.Distributedrenewablegeneration(DRG)isenergycreatedfromarenewablesourceatorneartheplaceitisused,suchasresidentialsolarorwindsystems.Fivestatesprovideextrarenewableenergycreditsforsolarordistributedrenewablegeneration,whicharecreditsthatarepurchasedtosatisfytheRPSrequirements.MissouriandWashington,D.C.recentlyincreasedtheiroverallRPSstandards,whileIllinoisaddeda6percentsolarcarve-outandNevadaincreaseditscarve-outfrom5to
6percent.Atleastfourstatesnowincludesolarwaterheatingasaqualifyingenergysource.
California’s initiatives
Californialeadsthenation’ssolarenergyproduction.InJanuary2006,California’sPublicUtilitiesCommission(PUC)approvedtheCaliforniaSolarInitiative,whichthroughanumberofregulatorydecisionsauthorizedthestatetoinvest$3.3billioninconsumerrebatesforsmall-scalesolarelectricpowersystemsover11years.Itestablishedastatewidegoalofbuildingamillionsolarelectricroofs,theequivalentof3,000megawattsofsolarelectricpower.TheinvestmentwasfundedfromasurchargeonelectricandgascustomerswithintheutilitiesregulatedbythePUC.
InAugust2006,Gov.ArnoldSchwarzeneggersignedintolawSB1,morecommonlyknownastheMillion
Federal solar energy policy TheUnitedStatesrankedfourthintheworldin2009forsolarenergycapacityinstalled,with2,108megawatts.Germanywastheworldleaderwith9,677megawatts,Spainsecondwith3,595megawatts,andJapanthirdwith2,628megawatts,accordingtotheSolarEnergyIndustriesAssociation.
Thefederalgovernmentofferstaxcreditstomanufactureandinstallsolarequipment.In2005,theinvestmenttaxcreditforsolarprojectsincreasedfrom10percentto30percent.Thecreditreducesoveralltaxliabilityforindividualsorbusinessesthatinvestinsolarenergygenerationtechnology.In2008,Congressextendedthecreditto2016andtoresidentialandutilitysystemowners. Whentherecentrecessiontightenedcreditmarkets,thefederalgovernment,aspartoftheAmericanRecoveryandReinvestmentActof2009,offereda30percentupfrontgrantinsteadofthesolartaxcredit,allowingthecommercialtaxcredittobetakenasacashgrantforalimitedtime.Thegrantprogramissettoexpireattheendof2010.TheRecoveryActalsoliftedthe$2,000capontheresidentialinvestmenttaxcreditforsolarthermalinstallations,allowingafull30percentinvestmenttaxcreditonsolarwaterheatingandothersolarthermaltechnologiesforthehomeowner.
TheRecoveryActeliminatedfederaltaxesonsubsidizedenergyfinancingprovidedunderfederal,state,orlocalprogramsforprojectsdesignedtoconserveorproduceenergy.Italsoprovidedanewtaxcreditforrenewableenergymanufacturingfacilitiesandbillionsofdollarsmoreforsolarresearchanddeploymentfinancing.
TheU.S.DepartmentofEnergyispartneringwiththeWesternGovernors’Associationtoencouragecertainsolarinstallationsinstateswiththebestsolarpotential,includingArizona,California,Colorado,NewMexico,Nevada,Utah,andTexas.Thegoaloftheinitiativeistoinstall1,000megawattsofnewconcentratingsolarpowersystemsinthesouthwesternUnitedStates,includingTexas,by2010.
House Research Organization Page 5
SolarRoofsBill.SB1expandsCalifornia’splantocustomersofmunicipal-ownedutilitiesoverwhichthePUCdoesnothavejurisdiction,allowsabout500,000newsolarenergysystemsintotheprogram,andrequiresdevelopersbuildingsubdivisionswithmorethan50newsingle-familyhomestooffertheoptionofasolarenergysystemtoallcustomersbeginningJanuary1,2011.ThegoaloftheplanistohaveonemillionsolarroofsinCaliforniaby2018.InFebruary,Californiaincreasedthenumberofcustomersforwhomnetmeteringwouldbeavailable.Netmeteringisusedatahomeorbusinessthathasitsownrenewableenergygenerator,suchasrooftopsolarpanels,tomeasurethedifferencebetweenenergyproducedandconsumedon-site.
InJanuary2007,aspartoftheCaliforniaSolarInitiative,theCaliforniaEnergyCommissionlaunchedapartnershipwithhomebuildersanddeveloperswiththegoalofcreatingaself-sustainingmarketforsolarhomesandgainingbuildercommitmenttoinstallingsolarenergysystemsasastandardfeaturefornewhomes.Theoverallgoalistoachieve400megawattsofnewsolar-producedelectricitybytheendof2016.
In2009,theCalifornialegislaturedirectedtheCaliforniaPUCtoapprovefeed-intariffs,whichrequireenergysupplycompaniestogiveprioritytoelectricitygeneratedusingrenewableenergysources,feeditintothegrid,andpayproducersafixedprice.Bycontrast,underaquotasystem,suchasarenewableportfoliostandard,theregulatoryauthorityspecifiesthatafixedproportionofelectricityonthemarketmustbeproducedbyrenewableenergysources.BothGermanyandOntario,Canadausefeed-intariffs,ratherthanaquotasystem,toregulatetheirrenewableenergyindustry.
Supportersoffeed-intariffssaytheyofferequalopportunitytoallwillingparticipantsinthemarketandfreedomforthemtoproduceandselltheirownenergy,stimulatingrapidgrowth.Theysayaquotasystemfailstoprovidelong-termcertaintybecauseonceagoalisreached,powerproducershavenoincentivetocontinuesupportingrenewablesources.Theysayquotasystemsfavorlarge,verticallyintegratedgeneratorsandaremoredifficulttodesignandimplementthanfeed-intariffs.
New Jersey’s initiatives
NewJerseycommittedtopromotingsolarinitiativeswhenitsCleanEnergyProgramwasenactedin2001.
Sincethen,NewJerseyhasbecomeoneofthenation’slargestPVmarkets,secondonlytoCalifornia,whichhasfourtimesthepopulationandenergyuse,accordingtotheIC2InstituteattheUniversityofTexas.In2006,theNewJerseyBoardofPublicUtilitiesissuedregulationsrequiringthestatetoproduce22.5percentofitsenergyfromrenewablesourcesby2021,including2.12percentfromsolarresources.Thissolarelectricpercentagewouldresultinabout1,500megawattsofsolar-electricpower.
RobustdevelopmentofthesolarenergymarketinNewJerseyhasbeenattributedtocertainmajorfactors.Asolarelectricrequirementinthestate’sRPShashelpedtocreatedemandforsolarenergyandcontributedtoinvestorconfidenceinthemarket.Reliableinterconnectionofsolarelectricityontothegridandnetmetering,whichmeasuresthedifferencebetweenenergyproducedandconsumedon-site,makeiteasierforsystemstoconnecttothedistributionsystemandbecompensatedfortheircontribution.Inaddition,arebateprogramhashelpedfinancemorethan50percentofthecostofinstallation,andasolarrenewableenergycreditfinancingmodelprovidesenergycreditsandadditionallong-termfinancingforthosewhoinvestinsolar.
Highdemandforsolarrebateshasforcedtheprogramtobeshutdownseveraltimesovertheyearswhenapplicationsoutpacedrebatemoney.ThisspurredNewJerseyregulatorstoconsiderweaningsolarenergyoffofstatesubsidiesbyreplacingrebateswithrenewableenergycreditsthatcouldbeboughtandsoldontheopenmarket.
Texas solar policy options
Duringthe2009regularsessionofthe81stLegislature,morethan60billsrelatingtosolarenergywerefiled,manyseekingtocreatemarketincentivesfordevelopmentofsolarenergyinTexas.Manyofthesemayberevisitedin2011.
Theproposedbills,mostofwhichwerenotenacted,wouldhaveincreasedgoalsforsolarenergyinstallationandprovidedfinancialincentives,includingtaxbreaks,tohelpmaketheindustrymorecost-competitivewithotherenergysources.Aproposed“homeowner’sbillofrights”wouldhaveaddressedbuybackratesforenergy
Page 6 House Research Organization
producedwithsolarresourcesaswellascontractandinterconnectionstandards.Itwouldhaveestablishedmorestringentconsumerprotectionsforownersofsolarenergysystemsandremovedrestrictionsbyhomeownersassociationsoninstallingresidentialsolarenergysystems.Onebillthatwasenacted,HB1937byVillarreal,allowshomeownersandbusinessestofinanceon-siterenewableenergysystemsorenergy-efficientimprovementsthroughmunicipalloanswithamulti-yearassessmentontheirproperty.
PACE financing
Property-assessedcleanenergy(PACE)financingallowshomeownersandbusinessownerstofinanceon-siterenewableenergysystems,suchasrooftopsolarpanels,andenergyefficiencyprojectsbywayofaspecialmulti-yearassessmentontheirproperty.HB1937byVillarreal,nowLocalGovernmentCode,ch.376,enactedin2009,allowsmunicipalitiestoofferPACEfinancinginTexas,althoughimplementationofthisformoffinancinghasbeenhinderedbylegalquestions.
UnderaPACEprogram,acityor,insomecases,acountywillmakefundingavailablefortheupfrontcostsofon-siterenewableenergyandenergyefficiencyprojectsandwillrecoupthecoststhroughamulti-yearassessmentaspartofthepropertytaxbilloftheimprovedproperty.
Propertyownersmayborrowmoneyfortheimprovementsandrepaythemoneythroughavoluntaryspecialassessmentsecuredbyalienagainsttheproperty.AnyassessmentimposedunderPACEfinancingisconsideredalienagainstthepropertyuntiltheassessmentandanyrelatedinterestorpenaltyispaid,evenifthepropertyissoldtoanotherparty.FundingforPACEprogramsoftenismadeavailablethroughmunicipalorothergovernment-backedbonds.
ThecityofBerkeley,Calif.,wasthefirsttoadoptthisfinancingmechanismin2008.Sincethen,21states,includingTexas,haveenactedPACE-enablinglegislation.
SanAntonioandAustin,eachofwhichreceived$10millionincompetitiveenergyefficiencyblockgrantfundingfromtheU.S.DepartmentofEnergy,have
beenthefirsttosetupmunicipalprograms.ElPasoandHoustonareactivelypursuingPACEfinancingaswell,butwerenotrecipientsoffederalblockgrantfunding.
Supporters ofPACEfinancingsayitallowshomeownerstofinanceacleanenergycapitalexpenditure,suchasrooftopsolarpanels,whichcanrangefrom$5,000to$25,000perproject,withoutrelyingontraditionalconsumerfinancingmethodsorpersonalcredit.Highupfrontcostsandthefactthatpeoplemayselltheirhomesbeforethepaybackperiodoftheimprovementsisreachedarebarriersforretrofittingahome.UnderPACE,homeownerspayonlyfortheyearstheyareinthehome,thentransferpaymenttothenextowner.Forexample,ifasolarprojecthasa12-yearpaybackperiodand20-yearusefullife,ahomeownerwhoisgoingtohavetopay$20,000upfrontandplanstoliveinthehomeforonly5-7yearsmightnotwanttodoit.PACEwouldallowhomeownerstopayonlyapro-ratedshareofthecostsfortheperiodtheyownthehouse.
Legal questions.CertainlegalquestionshavehinderedimplementationofPACEfinancinginTexas.
SomehaveexpressedconcernsabouttheconstitutionalityofPACEfunding.TheTexasConstitution,inArt.3,secs.50,51,and55,andinArt.16,sec.6,prohibitsgovernmentalentitiesfromdonatingorlendingpublicfundstoanyprivatepersonandfromlendingcreditinsupportofthedebtsofprivatepersons.However,caselawholdsthatanincidentalprivatebenefitfromtheuseofpublicfundsisnotunlawfulaslongasuseofthefundshasapredominantpublicpurpose,thecityretainssufficientcontroloverthetransactiontoensurethatthepublicpurposeisaccomplishedandtoprotectthepublic’sinvestment,andthepublicreceivesareturnbenefit.
IfpublicfundswereusedinaPACEprogram,projectsfinancedwouldneedtohaveavalidpublicpurpose.Economicdevelopment,emissionreduction,andenergyconservationhavebeenfoundtobevalidpublicpurposesinotherstateswherePACEprogramshavebeenimplemented.SimilarfindingsinTexaslawonwhatconstitutesapublicpurposehaveneverbeenapplieddirectlytoaPACEprogram.ThisincludesArt.3,sec.52-a,oftheTexasConstitution,whichstatesthateconomicdevelopmentisavalidpublicpurpose.Some
House Research Organization Page 7
TexasmunicipalitieshavehesitatedtomoveforwardwithoutguidancefromtheAttorneyGeneral’sOffice.AsofJuly,noonehasrequestedanattorneygeneral’sopiniononthisissue.
ThepriorityandenforceabilityofthestatutoryliencreatedbyPACEfinancingalsohasbeenasubjectofconcern.UnderHB1937,theassessmentwouldbesecuredthroughalienontheproperty,butthebilldoesnotexplicitlyprovidethatthecity’slienonthepropertybeaprioritylien.SomeexpressconcernthatbondbuyersthatwouldfinancePACEprogramswouldshowlittleinterestinsubordinatedPACEliens,makingitlesslikelythataPACEbondmarketwoulddevelop.Anotherconcernisthatinterestrateswouldbeprohibitivelyhighonbondsforsubordinatedliens.SomebelievetheseniorityofthePACEloanlientothatofafirstmortgagelenderwouldbecrucialtostructuringfinancingacceptabletoboththeratingagenciesandtoinvestors.
TheU.S.DepartmentofEnergyisdevoting$150millioninstimulusmoneytohelpcommunitiescoverset-upandadministrativecostsforPACEprograms.However,FannieMaeandFreddieMac,thegovernmententitiesthatguaranteemorethanhalfoftheresidentialmortgagesintheUnitedStates,saidinletterstomortgagelendersonMay5thattheenergy-efficiencylienscouldnottakepriorityoveramortgage.Thismayresultinmortgagelenders,whodependonFannieMaeandFreddieMactobuytheirhomeloans,demandingthattheentirePACElienbepaidoffbeforeissuinganewloan.AslowdownininterestinPACEprogramsacrossthecountryisanticipatedduetotheuncertainty.SeveralPACEprogramadministratorshavesuspendedapplicationspendingaresolution.
Third-party ownership of PV systems
Anotherfinancingalternativeforon-siterenewableenergysystems,suchasrooftopsolarpanels,wouldbeallowingathirdpartytoownthesystems.Forexample,inNorthTexas,SolarCity,abusinessentity,hasteamedwithTXUtoleasepanelstohomeowners.SolarCitybuilds,owns,operates,andmaintainsthesystem,andthehomeownersignsa15-yearleaseforit,eliminatingtheupfrontcosts.
ThedealisexclusivelybetweenSolarCityandthehomeowner.Thisoptioncurrentlyisavailableonlyfor
ratepayersintheOncorservicearea,andonlyTXUandGreenMountainwillbuybackexcesssolar-generatedpower.Oncorisprovidingsolarrebatesforparticipants,withtherebatespaiddirectlytoSolarCitytokeeptheleasepaymentlower.Morethan300peoplehavesignedcontractswithSolarCity,andthelargeamountofinterestintheprogramhasmadeitdifficultforOncortokeepupwithdemand.
Mandatory non-wind RPS and solar carve-out
SB541byWatson,whichpassedtheSenateduringthe2009regularsession,butdiedontheMajorStateCalendarintheHousewhennofurtheractionwastaken,wouldhaveamendedtheexistingrenewableportfoliostandard(RPS)byestablishingnewrenewableenergygoalstobemetwithtwotiers.Tier1renewableenergywouldhaveincludedsolar,wind,geothermal,hydroelectric,tidalenergy(wave),andbiomass,includinglandfillgas.Tier2wouldhaveincludedtier1renewableenergytechnology,excludingenergyderivedfromwindwithacapacityofmorethan150kilowatts.SB541alsowouldhavereplacedthetargetof500megawattsofnon-windrenewablecapacitywithagoalof1,500megawattsoftier2renewableenergy,tobeinstalledbyJanuary1,2020.
ThePublicUtilityCommission(PUC)currentlyisworkingonaproposalforthe500-megawatt“non-wind”RPSinTexas.ThePUCissuedaproposedruleonApril16that,ifadopted,wouldprovideatieredapproach,includingasolar-specifictier,withinthe500-megawattnon-windrequirement.
Theproposalalsowouldmakethe500-megawattnon-windgoalmandatory,seekingtoclarifysec.39.904(a)oftheUtilitiesCode,whichstatesthatthePUC“shallestablishatarget ofatleast500megawattsofcapacityfromarenewableenergytechnologyotherthanasourceusingwindenergy.”Somehaveinterpreted“target”asnotbeingmandatorybecauseotherlanguageinthesameprovisionestablishesspecificbenchmarksanddirectivesforwhenrenewablecapacitymustbeinstalledandformeetingcertainthresholdsbyspecifieddates.AfinaldecisiononthePUCruleisexpectedbytheendoftheyear.ThePUCalsoisconsideringtheroleofdistributedrenewablegenerationaspartoftwoseparaterulemakingsonthe500-megawattnon-windRPSgoalandenergyefficiencyimplementation.
Page 8 House Research Organization
Supporters of a mandatory non-wind RPSsayatieredbutflexibleapproachwouldencouragedevelopmentofavarietyofrenewabletechnologiesneededforabalancedenergyprogram.Theysaythistieredframework,whichwouldallowenergyproviderstomeetgoalsbyprocuringrenewableenergycreditsorsubmittingalternativecompliancepayments,isdesignedtoensurethattheRPSresultsinadiverseportfolioofresources.Itsetsagoalforbusinessesandallowsthemtofigureoutthemostcost-effectivewaytogetthere,creatingamarketandallowingthemarkettosetthepricethroughsupplyanddemand.
WhileTexashasinstalledmorerenewableenergythananyotherstatethankstolarge-scalewinddevelopmentinWestTexas,thestatehasfallenbehindindevelopingotheremergingrenewableenergytechnologies,suchassolar,geothermal,andbiomasspower.Asecond-tierRPSwouldhelpjumpstarttheseindustriesinTexasanddiversifythestate’senergysources,continuingTexas’leadershipinclean,renewableenergywithamarket-basedapproach.ThiswouldencouragerenewableenergyequipmentmanufacturingplantstolocateinTexasandprovidepriceprotectionsforbusinessesandconsumerswithagradual,stagedincreaseofmegawatttargets.Italsowouldbeanimportantsteptowardpreparingforthepossibilityoffederalcarbonregulation.Thisapproachwouldoffsetmorethan7milliontonsofCO2by2020andhaveasignificantimpactonNOxandparticulatematteremissions,accordingtoEnvironmentTexas.
Anon-windRPSshouldcontainasolarcarve-outlargeenoughtocreatearobustsolarmarketinTexas,solarsupporterssay.AcommitmenttosolarenergywouldprovidesignificantpaybackforTexaswithjobcreation,economicbenefits,theabilitytomeetenergydemand,reducedpollution,andultimately,lowerenergycosts.ItalsowouldmaximizetheinvestmentsmadeintheCompetitiveRenewableEnergyZone(CREZ)transmissionlines,whicharetransmissionlinesinareasofthestatethathavebeendesignatedbythePUCtobemostsuitableforgeneratingcapacityfromrenewableenergytechnologies.
Opponents of a mandatory non-wind RPSsayelectricitygenerationshouldbebasedonthemarket,asrenewableenergyismoreexpensiveandnotascost-effectiveawaytoproduceenergy.
Electricityconsumerscananticipatepayingmillionsmoreperyearonelectricityunderamandatorynon-windRPS.Retailelectricprovidersthatdidnotmeetthestandardsundertheregulatorymandatemayhavetobuycreditsinatradingprogramormakealternativecompliancepaymentstomeettheirobligations.Thisessentiallywouldbeacap-and-tradesystem,forwhichthecostsultimatelywouldbepassedontoconsumers.Alongwiththeaddedadministrativeburdensimposedonretailentities,requiringutilitiestousemoreexpensiveenergysourceswouldincreaseelectricrates.Subsidizingthesecostlyrenewableresourcesinthecompetitiveretailmarketandpassingthecostsontoconsumerswouldbeinefficient,uneconomical,andburdensome.
Solarplantsandotherrenewablesourcescannotproducethesameamountofenergyasmoretraditionalgeneratingplants.Manyoftherenewableenergygeneratingfacilities,suchasthoseforsolarenergy,requireatraditionalback-upenergysource.Thisduplicatesgenerationandfurtherincreasescosts.
Other opponentssaythatrequiringelectricproviderstouseaminimumamountofsolarenergymayhavetheunintendedconsequenceofdiscouragingdevelopmentofothertypesofresources.Anyamendmenttotherenewableportfoliostandardshouldbetechnology-neutralsothattherenewabletechnologiesmostpreparedtomeetthegoalswithintheshortesttimeframeandwiththegreatesteconomicdevelopmentimpactareallowedtocompete.Ifaparticulartechnologyorresourcedominatesinthesamewayaswind,thenoncethe500-megawattgoalhasbeenachieved,theLegislaturecandetermineifmorediversityisrequired.Ifacarve-outisnecessary,itwouldbebettertohaveoneforalldistributedrenewablegenerationsourcesthatcouldincludesolar,wind,andgeothermal.
Governmentmandatesforusingnon-windrenewableresources,includingsolarenergy,shouldnotbetooaggressive.Thiscouldleadtoscarcityoftheseresources,drivingupthepriceandencouragingretailentitiestochoosetomakealternativecompliancepaymentsinsteadofusingmorecostlyrenewables.Thesemandatedalternativecompliancepaymentswouldbecome,ineffect,ahiddentax,opponentssay.
House Research Organization Page 9
Solar-ready homes
TheLegislaturealsomayconsiderestablishinggoalsandcreatingincentivesformakingnewbuildings“solarready”byintegratingsolarenergysystemsintobuildingsatthetimeofconstructionorpreparingbuildingstomakesolarimprovementseasytoinstall.
SB545byFraser,whichpassedtheSenateduringthe2009regularsessionbutdiedontheMajorStateCalendarintheHouse,wouldhaverequiredabuilderofnewhomesinasubdivisionthatcontainedmorethan50lotstoofferthehomebuyeratleastoneplanunderwhichthehomebuyercouldpurchaseanoptiontoinstallasolarenergydeviceonthehomeforheatingorcoolingorfortheproductionofpower.
Supportersofcreating“solar-ready”homessaythatensuringthatnewhousesarebuiltwithproperwiring,south-facingroofsthattakeadvantageofsunlight,andlandscapingthatavoidsshadeonroofscouldsignificantlyreducethecostofinstallingsolarpowersystems.Creating“solar-ready”homesandbusinesses,alongwithusingotherrenewablesandimplementingenergyefficiencymeasures,couldcontributetoanincreaseinnet-zeroenergyperformance,whichisthecapacitytoproduceenoughenergyon-sitewithrenewableenergysourcestoequaltheamountofenergyused.HavingallnewhomesinTexasbuiltfornet-zeroperformancecouldreducetheneedfornewlargepowerplants,reduceannualglobalwarmingpollution,andreducehomeowners’energybills.
Tax exemptions and incentives
Exemptingsolarenergysystemsandinstallationsfromcertainstateandlocaltaxes,providingafranchisetaxcreditforinvestmentsinsolarenergy,andcreatingasolargenerationincentiveprogramhavebeenconsideredinotherstatestoencourageexpansionofsolarenergygeneration.The81stTexasLegislaturein2009considered,butdidnotenact,severalbillsthatwouldhaveprovidedfinancialincentivestothesolarindustryinanefforttojumpstartthesolarmarket.
SB619byShapleighandHB2226byParkerwouldhaveexemptedcertainsolarenergydevicesfromthestatesalestax.HB1328byMcClendonandSB832byWentworthwouldhavemadetheexistingadvaloremtaxexemptionforsolar-orwind-poweredenergydevicesautomaticafteraone-timefiling,similartoahomesteadexemption.HB4639byLuciowouldhaveofferedafranchisetaxcreditforinvestmentsinsolarenergyinadditiontothecurrentlyavailabledeductionfromthetaxbase.
SB545byFraser,whichpassedtheSenatebutdiedontheMajorStateCalendarintheHousewhen
nofurtheractionwastaken,wouldhaverequiredthePUCtoestablishasolarincentiveprogramtobeimplementedbyelectricutilitiesforresidentialandcommercialcustomers.ThePUCalsowouldhavehadtoestablishprocedurestoachievethegoalofinstallingatleast3,000megawattsofsolargeneration
capacityinTexasby2020,atleast1,000megawattsofwhichwouldhavebeendistributedrenewablegeneration,whichisenergycreatedatorneartheplaceitisused.ThePUCwouldhavehadtosetrebateamounts,paidforbyasurchargeonelectricitybills,forinstallingsolargenerationandperiodicallyadjusttherebateamounttomaximizethesolargenerationinstalled.Therebateamountswouldhavebeenreducedbyatleast5percenteachyear.SolargenerationmanufacturedinTexaswouldhavehaduptoa20percenthigherrebateamountthanothersolargeneration.TheprovisionsofSB545wereaddedasaSenateamendmenttoHB1243byGallego,butHB1243diedintheHousewhentheend-of-sessiondeadlinepassedforconsiderationofSenateamendments.
Supporters of providing financial incentives forsolarenergysystemsandinstallationssaythehealthofTexas’solarenergyindustrydependsonhavingasizabledemandforthesolarindustry’sproductsandservicesandonthecostsassociatedwithmeetingthatdemand.Meagerstateincentivesdolittle toovercomeexistingmarketbarriers,suchascost,foralltypesofsolarenergydevelopment.
The Legislature also may consider establishing goals and creating incentives for making new buildings “solar ready.”
Page 10 House Research Organization
Astatewidesolarprogramsimilartothosethatjump-startedtheCaliforniaandNewJerseymarketswouldmakeTexasoneofthepremiersolarstates.Experiencesinotherstatesandcountries,especiallyGermany,haveshownthatgovernmentincentivescanleadtoincreaseddemandandlowerprices,thefirststepstoarobust,self-sufficientsolarmarket.Manystateprogramsreduceincentivesasmorecapacityisbroughtonline,basedontheideathatastheindustrymatures,thepriceofmaterials,constructionandfinancingshouldcomedown.
Supportersoffinancialincentivesforsolarenergysystemssaygovernmentincentivesforprivateindustriesarenothingnew.Forexample,in1917,thefederalgovernmentofferedataxcredittoayoungoilindustrytoencourageexplorationanddrilling,openingupanindustrythattransformedtheeconomyandcreatingthousandsofnewcompaniesandmanymorejobs.Today’ssolarpowerproponentshopethesolarenergyindustrywillseethesameresultsfromgenerousfederalandstateincentivesandfromcreativebusinessmodels
likepowerpurchaseagreements,whicharecontractsbetweenanelectricitygeneratorandapowerpurchaser,suchasautility,tobuyelectricity.Underapowerpurchaseagreement,thegeneratorwouldsecurefundingforaproject,maintainandmonitorenergyproduction,andselltheelectricityatasetpriceforthetermofthecontract.
Opponents of providing financial incentivesforsolarenergysystemsandinstallationsbyexemptingthemfromcertaintaxessaythatwhileitmayjump-startthesolarindustry,itisquestionablepublicpolicyforthegovernmenttomakedecisionsthatwouldaffectamarketinthatmanner,essentiallypickingwinnersandlosers.
Requiringelectricitycustomerstopayforsuchaprogramthroughasurchargeonelectricitybills,anamountthatcouldhavebeenasmuchas$100millionayearforfiveyearsunderSB545,wouldaddcostsforconsumers.Whileeveryonewouldhavetopaythesurcharge,onlythosecustomersthatparticipatedintheprogramwouldreceiveanybenefit.
SeveralbusinessesidentifiedbyEnvironmentTexas,anenvironmentaladvocacygroup,spanthesolarsupplychainandcanbefoundinseveralpartsofthestate.Forexample,TesseraSolar,headquarteredinHouston,develops,ownsandoperateslarge-scalesolarplants,includingtheWesternRanchSolarProjectinWestTexas,nowunderdevelopment.HelioVoltCorporation,foundedinAustinin2001,manufacturesadvancedthin-filmsolarcellsthatcanbeusedforroofingtilesandglazing.MeridianSolarisasolarelectricdesignandinstallationcompanywithofficesinAustin,Dallas-FortWorthandSanAntonio.EntechSolar,headquarteredinFortWorth,designsandmanufacturesproprietarysolarmodulesandhasworkedwithfederalagenciestobuildsolarpowersystemsforterrestrialandspaceapplications.
OtherbusinessesinTexaswhoseactivitiesarenotlimitedtothesolarindustrycontributekeycomponents.Forexample,PPGIndustries,aglassmanufacturerwithafacilityinWichitaFalls,producesglassforsolarmodules.USAWireandCableisanAustin-basedwireandcabledistributorservingthesolarindustry.BarrFabricationinBrownwood,whichmanufacturerscomponentsforthewind,solar,andotherenergyindustries,providedsteelsupportstructuresforNevadaSolarOne,oneofthelargestconcentratingsolarplantsintheworld.ExelTech,basedinFortWorth,engineersandmanufacturesinvertersusedinthesolarindustrytoconvertelectricityproducedbysolarpowerintoelectricitythatcanbeusedinastandardwalloutlet.AppliedMaterials,whichisheadquarteredinSantaClara,Calif.buthasanAustinlocation,providesequipment,service,andsoftwareproductsforthefabricationofsemiconductorchips,flatpaneldisplays,solarphotovoltaiccells,flexibleelectronicsandenergyefficientglass.MonsantoElectronicMaterialsCompany(MEMC)hasafacilityinPasadenathatisoneoftheworld’slargestproducersofpolysilicon,usedtocreatephotovoltaiccells.
Texas businesses contributing to solar industry
House Research Organization Page 11
Buyback rates
Texas’currentpoliciesonnetmeteringtechnologyprovidenoguaranteethatcustomerswhowanttoinstallsolarpanelsandgeneratesurpluselectricitywillbepaidafairpricebytheirelectricproviderfortheelectricitytheysupplybacktotheelectricgrid. Someproposalsthatmaybeseenduringthe82ndLegislatureincludeestablishingbuybackratesforenergyproducedbysolarresources,improvingstandardsforcontractsforconnectiontotheelectricgrid,andconsumerprotectionsforownersofsolarenergysystems.Proposalsmayincluderequiringallutilitiestooffernetmeteringandusemeteringprogramsthatprovidetime-of-usebillingandbuyback,bothofwhichcompensateownersofPVsystemsforproducinglower-costsolarpowerduringperiodsofhighestdemand.
Duringthe2009regularsession,HB1243byGallegowouldhaverequiredelectricutilities,electriccooperatives,orretailelectricproviderstocontractwithownersofdistributedrenewablegeneration(DRG)sothatsurpluselectricitytheownersgeneratedwasavailableforsaletothetransmissionanddistributionsystematfairmarketvalue.DRGisenergyfromsmall,renewableenergysourceslocatedwheretheenergyisused,ratherthanenergyoriginatingfromlarge,centralizedfacilities.HB1243passedbothhouses,butdiedintheHousewhenapointoforderwassustainedthatthedeadlineforconsideringSenateamendmentstothebillhadexpired.
HB1866bySolomonswouldhaveamendedthecustomerprotectionchapteroftheUtilitiesCodetoprovideallbuyersofretailelectricservicetheopportunitytoconnectDRGtotheelectricgrid.ThePUCwouldhavebeenrequiredtoestablishsafety,technical,andperformancestandardsforDRGthatcouldbeconnected.HB1866passedtheHouse,butdiedintheSenateBusinessandCommerceCommittee.
BothbillswouldhaveestablishedthatDRGsarenottobedefinedaselectricutilities,whichhavecertainregistrationrequirements. Supporters ofrequiringacertainbuybackrateforDRGsayitwouldencouragetheproductionofclean,renewableenergy.DRGreducestheneedfornew
conventionalgeneration,transmission,anddistributionsystemsthataredamagingtotheenvironment.DespiteagreatdealofinterestinDRG,barriersinhibititsgrowth.Forexample,aDRGownercurrentlyissubjecttothesameregistrationrequirementsasabiggenerationcompany.Also,notallelectricprovidersareallowingconnectiontotheelectricgridorofferingtobuysurpluselectricity.
Requiringelectricproviderstobuybacksurpluselectricityultimatelycouldbeanetbenefittothembyreducingtheirownpeakdemand.ThiswouldoffsetanyinitialburdenthatmaybeplacedonthembyrequiringthemtoputsystemsinplacetobuybacksurpluselectricityproducedfromDRG,supporterssay.
OpponentsofrequiringacertainbuybackratesaysucharequirementwouldburdenelectricprovidersbyrequiringthemtoputtechnicalandadministrativesystemsinplaceinordertobuybacksurpluselectricityproducedfromDRG.WhileconnectingDRGproducedbyelectriccustomerstothegridshouldbeencouraged,anylegislationshouldspecifythestandardsforinterconnectioninordertoensurethegrid’stechnicalintegrity,theysay.
HOA restrictions on solar panels SomehomeownerswhowishtoinstallPVpanelsarefacingresistancefromhomeownersassociations(HOAs).HOAshaveexpressedconcernsabouttheaestheticsofthepanelsandabouthealthandsafetyrisksifthepanelsareimproperlyinstalled.
Severalbillsconsideredduringthe2009regularsession,includingSB545byFraser,SB236byWest,andHB25byLeibowitz,wouldhaveprohibitedapropertyowners’associationfromrestrictingapropertyownerfrominstallingasolarenergydevice,exceptincertaininstances.Theseprovisionswouldhaveappliedtoadeedrestrictionadoptedon,before,oraftertheeffectivedateofthebill.
Municipal and utility initiatives
Regardlessofhowstatelawmakerschoosetoproceed,someutilitiesandmunicipalitiesareofferingrebateprogramstotheircustomerstopromotetheuseofsolarenergy.Rebateamountsrangefrom$2.25to$4
Page 12 House Research Organization
HOUSE RESEARCH ORGANIZATION
Steering Committee:
David Farabee, Chairman Bill Callegari, Vice Chairman Drew Darby Harold Dutton Dan Gattis Yvonne Gonzalez Toureilles Carl Isett Susan King Jim McReynolds Jose Menendez Geanie Morrison Elliott Naishtat Rob Orr Joe Pickett Todd Smith
John H. Reagan BuildingRoom 420P.O. Box 2910Austin, Texas 78768-2910
(512) 463-0752
www.hro.house.state.tx.us
Staff:Tom Whatley, Director; Laura Hendrickson, Editor; Rita Barr, Office Manager/Analyst; Catherine Dilger, Kellie Dworaczyk, Tom Howe, Andrei Lubomudrov, Carisa Magee, Blaire Parker, Research Analysts
awattforaPVsystemandfrom$1,000to$3,000forsolarwaterheaters.AmongthosetakingthisapproachareAustinEnergy,CPSEnergyofSanAntonio,Oncor,Entergy,andotherutilitiesandmunicipalities.
Rebatesfromindividualelectricprovidersandfederalstimulusfundinghaveincreasedinstallationofsmall-scalerooftopsolarpanelsonhomes,businesses,andschoolsinthelasttwoyears.Noutility-scalesolarenergysystemsarecurrentlyoperationalinTexas,althoughthefirstisexpectedtocomeonlineattheendofthisyear.
AustinEnergyhassignedacontractforapowerpurchaseagreement(PPA)for30megawattsofPVsolargenerationfromaplantbeingbuiltinWebberville,about15mileseastofAustin.TheWebbervillePlantwillbebuiltandownedbyaseparatecompany,andAustinEnergywillenterintoaPPAwithafixedpricefor25years.TheWebbervilleplantisexpectedtocomeonlineattheendof2011.
CPSEnergyofSanAntoniosignedcontractsfortwoPPAsin2009foratotalof41megawattsofsolargeneration.WesternRanch,a27-megawattCSPsystemtobelocatedjusteastofMarfa,isexpectedtogoonlineinMarch2011witha20-yearcontract.BlueWing,a
14-megawattPVsolarenergysystemlocatedsoutheastofSanAntonio,willbeginoperatinginDecember2010witha30-yearcontract.
TheWesternRanchprojectrecentlyhasfacedoppositionfromsomeresidentsofMarfaandthesurroundingareaduetoaconcernthatthenoiseandlightpollutionfromtheprojectcouldmarthetranquilityandlandscapethatmaketheareasoappealing.
RREAustinSolar,astart-upsolarcompanywithcorporatebackingfromIndia,recentlywontaxbreaksfromthecityofPflugervilletobuilda$230million,60-megawattsolarPVplantonabout600acresnearPflugerville,northeastofAustin.ThisplantwouldbethelargestPVplantintheUnitedStates.
Underthetaxbreakagreement,RREAustinSolarwillinstallforPflugervilleandthePflugervilleschooldistrictupto$750,000insolarpanelsandsmallwindturbinesandprovideeducationaltrainingtotheschooldistrict.Asimilaragreement,alsolikelytolimittaxes,hasbeennegotiatedbutnotfinalizedwiththeElginschooldistrict.ThecompanyalsoisseekingpropertytaxbreaksfromTravisCounty.IfTravisCountyagrees,thecompanywillconsiderheadquarteringinAustin.
— by Blaire D. Parker