MEETING NOTICE AND AGENDA · MEETING NOTICE AND AGENDA ENERGY WORKING GROUP The Energy Working Group may take action on any item appearing on this agenda. Thursday, February 26, 2009

MEETING NOTICE AND AGENDA

ENERGY WORKING GROUP The Energy Working Group may take action on any item appearing on this agenda. Thursday, February 26, 2009 11:30 a.m. to 1:00 p.m. SANDAG, 7th Floor Conference Room 401 B Street, Suite 800 San Diego, CA 92101-4231

Staff Contact: Susan Freedman (619) 699-7387 [email protected]

AGENDA HIGHLIGHTS

• 2009 REGIONAL ENERGY STRATEGY DEVELOPMENT

• ASSEMBLY BILL 811 ENERGY EFFICIENCY AND SOLAR FINANCING PROGRAM

• REGIONAL CLIMATE ACTION PLAN GUIDING PRINCIPLES SANDAG offices are accessible by public transit. Phone 1-800-COMMUTE or see www.sdcommute.com for route information. In compliance with the Americans with Disabilities Act (ADA), SANDAG will accommodate persons who require assistance in order to participate in SANDAG meetings. If such assistance is required, please contact SANDAG at (619) 699-1900 at least 72 hours in advance of the meeting. To request this document or related reports in an alternative format, please call (619) 699-1900, (619) 699-1904 (TTY), or fax (619) 699-1905.

ENERGY WORKING GROUP Thursday, February 26, 2009

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ITEM # RECOMMENDATION

1. WELCOME AND INTRODUCTIONS

+2. SUMMARY OF JANUARY 22, 2009, ENERGY WORKING GROUP (EWG) MEETING

APPROVE

The January 22, 2009, meeting summary is attached for the EWG

review and approval.

3. PUBLIC COMMENT COMMENT

Members of the public who would like to address the EWG on a

topic not on the agenda should do so at this time. Speakers are limited to three minutes each.

+4. 2009 REGIONAL ENERGY STRATEGY (RES) UPDATE

GOALS: DISTRIBUTED GENERATION (DG)/RENEWABLE ENERGY

DISCUSSION

California Center for Sustainable Energy (CCSE) will present a

proposed RES Update on DG (renewable and non-renewable). The EWG is asked to review the attachment and discuss the goals, policies, and implementation strategies. The complimentary goal for increased renewable energy resources (large and small scale) will be discussed.

5. ASSEMBLY BILL (AB) 811 FINANCING PROGRAM DISCUSSION

SDG&E asked to present an overview of AB 811 energy efficiency

and solar financing law. Afterwards, Chair Downey will seek input from other EWG members and lead a discussion.

+6. 2009 RES DEVELOPMENT: GUIDING PRINCIPLES & GOALS DISCUSSION

The January EWG agenda included the adopted guiding principles

and goals from the RES 2030. Staff recommends adding principles and goals to address global climate change, transportation energy, and land use planning

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ITEM # RECOMMENDATION

+7. GUIDING PRINCIPLES FOR THE REGIONAL CLIMATE ACTION PLAN (RCAP)

DISCUSSION

Staff has developed a list of guiding principles describing the

priorities, behaviors, and other actions needed for the region to achieve required greenhouse gas reductions and adapt to a changing climate. The EWG is asked to review the draft guiding principles and make recommendations.

+8. CALIFORNIA ENERGY COMMISSION (CEC) PARTNERSHIP

PRODUCTS – UPDATED TIMELINE INFORMATION

Attached is a timeline of major milestones for CEC partnership

products. These include the RES, RCAP, regional alternative transportation assessment, and sustainable region program. The CEC contract expires March 31, 2010. Staff can elaborate on the products or timeline.

9. SCHEDULING AGENDA ITEMS FOR FUTURE MEETINGS DISCUSSION

EWG members are invited to suggest topics for the upcoming

meeting on March 26, 2009. The RES Update and RCAP development continue to be primary agenda items. In March, energy efficiency and transportation energy will be addressed. City of San Diego staff will present its Green Schools program.

10. ADJOURN

+ next to an item indicates an attachment

San Diego Association of Governments

ENGERY WORKING GROUP

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February 26, 2009 AGENDA ITEM NO.: 2

Action Requested: APPROVE

SUMMARY OF JANUARY 22, 2009, ENERGY WORKING GROUP (EWG) File Number 3003000 MEETING AGENDA ITEM #1: WELCOME AND INTRODUCTIONS Chair Carrie Downey, City of Coronado, called the meeting to order at 11:33 a.m. Ms. Downey asked members to arrive on time for future meetings due to the full agendas expected for future meetings. Her preference is to accommodate full agendas by starting promptly at 11:30 a.m. instead of extending the length of meetings. AGENDA ITEM #2: SUMMARY OF DECEMBER 18, 2008, MEETING The EWG unanimously approved the meeting summary for the December meeting. AGENDA ITEM #3: PUBLIC COMMENT AND COMMUNICATIONS Members of the public were given the opportunity to address the EWG on any topic not on the agenda. Gabriela Munoz-Melendez, El Colegio de la Frontera Norte (El COLEF), announced that El COLEF will host a conference on the State Climate Action Plan for Baja California (Plan Estatal de Cambio Climatico de Baja California) on February 18, 2009, beginning at 8:30 a.m. AGENDA ITEM #4: REGIONAL ENERGY STRATEGY (RES) 2030 GOALS: WHERE ARE WE NOW Susan Freedman, SANDAG, discussed goals 6 and 4 from the adopted RES 2030 and progress toward their achievement. The discussion was the first of a two-part discussion of RES goals which will continue in February. The EWG was asked to provide comments and recommendations on the regional energy goals for the RES Update. Discussion of Goals 2 and 3 was postponed to the next meeting. Staff presented the following findings and recommendations: • Goal 6: lowering per capita peak demand (kilowatts [kW]) and per capita electricity

consumption (kilowatt-hours [kWh]) to 1990 levels will not likely occur by 2010. However, the region has significantly reduced per capita peak demand and consumption and per capita consumption is significantly lower than the national and California averages. Staff

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recommended preserving the intent while revising the existing targets to an achievable level or timeframe consistent with aggressive state policies to reduce electricity demand such as California’s Global Warming Solutions Act and Energy Efficiency Strategic Plan.

• Goal 4: increasing the contribution of clean distributed generation (DG) resources (non-

renewable) to 12 percent of peak demand will not likely occur by 2010 (590 megawatts [MW]); to date, the region has not made progress on this goal. Staff recommended preserving the intent while revising the existing target to achievable level or timeframe consistent with aggressive state policies for increased DG such as the Assembly Bill (AB) 32 Scoping Plan and Integrated Energy Policy Reports (IEPR). Staff also recommended defining “clean distributed generation,” establishing a maximum system size (MW), and conducting studies on DG including users, program data, barriers, and recommendations.

Questions/Comments: Ms. Downey inquired why San Diego’s per capita energy consumption is significantly lower than the state and national averages. Mike Evans, Shell Energy, commented that this may be attributed to the lack of manufacturing in San Diego. He suggested measuring consumption by large sectors such as residential, commercial, manufacturing, and other large consumers to get a more objective evaluation of consumption and efficiency. Ms. Downey noted that such information is available on IEPR forms filed to the CEC. Ms. Freedman stressed the need to keep per capita consumption constant even as a large amount of development occurs in the relatively warmer inland area. In response to David Grubb, Sierra Club, asking how electric vehicles might affect energy consumption, Mr. Grier replied that off-peak electricity demand from electric vehicles would help reduce energy demand and consumption. Mr. Lloyd noted that energy resource technology must also be considered when looking at peak demand because it has the most significant affect. Mr. McAllister noted the distinction between goals for peak demand and climate change. He pointed out that policies to reduce carbon emissions from the electricity sector would not necessarily address demand and consumption. Ms. Downey suggested dividing targets into two categories: (1) individual electricity use, and (2) alternative fuel use and its impact on current energy resources. In response to a question about state energy efficiency mandates, Ms. Freedman explained that Investor-Owned Utilities, such as SDG&E and Pacific Gas & Electric (PG&E), are subject to mandatory energy efficiency goals determined by the California Public Utility Commission. In response to a question from Lisa Erb, SureGrid, on whether SANDAG intends to mandate demand-response for federal, municipal, or county buildings, Ms. Downey explained that neither SANDAG nor the EWG has the authority to mandate such measures, although the EWG could monitor their energy performance. Mr. McAllister added that federal agencies in the region have the same access to energy programs as the rest of the public sector.

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Ms. Frye inquired if local governments could serve as the unit of analysis for energy consumption. Mr. McAllister suggested tracking energy consumption data by climate zone. Mr. Grier confirmed that SDG&E already tracks energy consumption by climate zone. He added that air conditioning is a major load factor, in addition to the recent proliferation of large-screen televisions such as those with plasma and LCD technology. Mr. Lloyd commented that the parasitic (plug) load from consumer electronics like computers and cellular phones is a big driver of per capita consumption. Mr. McAllister concurred and pointed out that California has the most advance standby power regulation to address plug load in the nation. Ms. Hunter suggested annual monitoring of incidences and duration of peak demand as a potential measure of energy demand and consumption. She noted that last year the region was at peak demand for 20 hours. Ms. Hunter stressed the need to develop better battery capacity to store energy to meet peak demand instead of building large “peaker” plants. Mr. Grier explained that although a lot has been done to address peak demand, it is still an issue that needs attention. Ms. Hunter replied that peak demand should be addressed in the RES goals. Ms. Downey asked if improving the load factor should be a goal of the RES. Ms. Freedman stated that next month Staff would like the EWG to continue discussion of the existing RES goals and develop metrics to track and measure energy consumption based on comments received during this meeting. AGENDA ITEM #5: DG BRIEFING CONTINUED Jon Fortune, CCSE, continued the presentation on DG programs from the December 18 meeting. He discussed the Self-Generation Incentive Program (SGIP) impacts and the concerns over the development of wind power, fuel cells, and energy storage in the region, as well as the effects of current tariff impacts on DG development. Mr. Fortune identified permitting as a major barrier that confuses developers, delays DG development, and impedes incentives. He noted that improved permitting is needed to bring about increased DG in the region. Questions/Comments: Mr. McAllister reported that 49.4 MW of solar installations have been installed through the SGIP, California Solar Initiative (CSI), and other emerging solar programs. In response to a question from Ms. Hunter, Mr. Fortune affirmed that non-renewable fuel cells are eligible for the SGIP as a Level 3 technology. Mr. Evans asked about the typical fuel source for renewable microturbines or fuel cells. Mr. Fortune replied that methane and hydrogen can power fuel cells. Hydrogen can be extracted from methane generated from waste water treatment facilities or landfill gas. Mr. Lloyd wanted to know how solar tubes are accounted for in DG programs. Mr. McAllister stated that this technology would be categorized as an energy efficiency measure.

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Mr. Evans inquired about state actions to make feed-in tariffs more attractive. Mr. Fortune stated a number of organizations and municipalities are seeking feed-in tariff legislation and also the California Public Utilities Commission (CPUC) is working on this issue. Mr. Evans indicated that he would like to have a discussion on feed-in tariffs. Ms. Downey stated she would like to have a discussion in February on how SANDAG implements the RES by supporting DG legislation and programs, such as AB 811 implementation. AGENDA ITEM #6: REGIONAL CLIMATE ACTION PLAN (RCAP) DEVELOPMENT Andrew Martin, SANDAG, discussed the transportation chapter of the RCAP and presented a revised list of transportation-related greenhouse gas (GHG) reduction measures for input in the SANDAG transportation model. Staff prepared the condensed list after receiving input from the December 2008 EWG meeting. This list identified transportation-related GHG reduction measures capable of being tested in SANDAG’s model, as well as those that cannot be modeled at this time. Also, Staff presented a list of proposed performance measures to monitor the success of the reduction measures over time. Mr. Martin stated that the primary focus of the modeling exercise will be to quantify the potential for GHG emissions reductions from cars and light-duty trucks. Mr. Martin reported the next steps for the RCAP include modeling in February/early March 2009 (and reporting of the results to the EWG), developing guiding principles, and presenting to the Regional Planning Committee in April 2009. The EWG was asked to provide comments on these policies and performance measures, as well as recommend additional reduction and performance measures and relevant data sources or studies. Questions/Comments: Ms. Downey asked for clarification on what is meant by “state-level reduction measures,” such as Pay-As-You-Drive Insurance, and if these are measures that California Air Resources Board (CARB) is considering in the AB 32 Scoping Plan. Mr. Martin replied that the state-level measures are not necessarily being considered by CARB; they are measures that would benefit the region but would be implemented at the state-level. Dave Weils, UCSD, inquired if the EWG should provide recommendations for these measures to be implemented at the state-level, since many would require state approval. Mr. Martin responded that including these measures in the RCAP would demonstrate to the state that in some cases changes in state policy would help the region achieve GHG reductions. Ms. Freedman added that the SANDAG model will quantify the reductions from state-level measures, so it is worthwhile to test them and determine if they are worth advocating. Ms. Downey suggested that the EWG recommend policies for the RCAP that are within the authority of agencies outside of SANDAG. In response to a question from Laura Hunter, Environmental Health Coalition, Mr. Martin responded that there is ample literature available on the topic of carbon taxes.

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Emily Young, San Diego Foundation, asked how transportation funding relates to the RCAP because the success and failure of some of these proposed measures will be determined by transportation funding decisions. Ms. Freedman responded that voters approved the breakdown of the local TransNet funding. She added that Ms. Young’s point is well taken and deserving of further consideration. Mr. Anders inquired if state Senate Bill 375 contemplates a link between funding allocation and the Sustainable Community Strategy (SCS). Ms. Freedman said the SCS is a required element in the Regional Transportation Plan (RTP), with which transportation funding decisions must be consistent. Also, receiving state and federal dollars is contingent on having an approved RTP. Dave Grier, SDG&E, asked whether the alternative fuel analysis comes into play in these reduction measures and if SANDAG will take a position on fueling stations. Mr. Martin said that the alternative fuels analysis would come in at the state-level reduction measures, like the low carbon fuel standard. He indicated that SANDAG plans include a business-as-usual projection for emissions in the region and is focused on reducing Vehicle Miles Traveled (VMT), while the focus of the state measures is on reducing the carbon content of fuel and improving the efficiency of vehicles. Ms. Downey commented that alternative fueling stations can be implemented locally if legislation would allow these types of stations to be put in or remove the hindrance. Mr. Martin added that SANDAG has been concurrently tasked by the California Energy Commission (CEC) to develop an Alternative Vehicle and Fuel Program. The task involves identifying appropriate locations for the development of an alternative fuel infrastructure and removing citing barriers. He remarked that he is unsure how this program will fit in with the RCAP. Ms. Downey asked if any savings derived from the mentioned program will be included in EWG analysis of the RCAP. Ms. Freedman stated that the savings may be a double counting. Donna Frye, City of San Diego, questioned if SANDAG’s model is based on theory or evidence that smart growth reduces GHG emissions. Ms. Freedman replied that these models are absolutely grounded in reality and that the literature repeatedly demonstrates lower VMT in smart growth areas. She noted that a parking and smart growth study is currently underway in Mission Valley to acquire additional empirical data. Ms. Freedman added that the SANDAG model has been enhanced to better account for smart growth characteristics since the first model runs in June 2008. The upcoming model runs will account for these modeling enhancements. Ms. Frye suggested the elimination of transit from smart growth areas as a variable to model. She noted that public transit service is being reduced and eliminated in smart growth areas and would like to see this reflected in the model runs. Ms. Frye questioned the adequacy of the modeling assumptions because outdated assumptions may render flawed results. Ms. Downey inquired if the impact of removing transit could be captured in the model so that this can be considered by Metropolitan Transit System (MTS) or factored in the plan. Ms. Frye commented that there should be more information sharing by MTS.

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Mr. Evans commented that reduction measures have complementary effects. For example, an increase in the retail fuel tax would be an incentive to purchase more efficient cars. He suggested focusing on increasing the fuel tax due to its complementary effect on vehicle purchase decisions. He suggested that the EWG consider advocating a federal tax structure for gasoline as an impetus for motivating and changing transportation behavior. David Lloyd, North County Economic Development Council, said raising the gas tax would negatively affect tourism in North County because most North County visitors drive to their destinations. Ms. Hunter asked for clarification on how the EWG will express its values and goals for the region and whether it will be a topic of discussion. Secondly, she suggested subsidizing fuel efficient cars as a measure to be analyzed. She noted that it would be cheaper to do it and might have a huge impact on reducing GHG emissions. Mr. Martin stated that next month staff will return with a discussion of guiding principles for the RCAP. AGENDA ITEM #7: RES 2030 GUIDING PRINCIPLES As a precursor to the February 26 EWG meeting, Ms. Freedman reminded the EWG of the existing the RES 2030 Guiding Principles to prepare members for the RES Update discussion at upcoming meetings. A table which consisted of the Guiding Principles in the adopted RES 2030, as well as recommended revisions by the EWG in September 2005 was provided as an agenda attachment for EWG review. The EWG was asked to consider developing new principles to guide new areas being addressed in the RES Update, such as climate change and transportation. An in-depth discussion of new guiding principles will occur at the February 26 EWG meeting. AGENDA ITEM #8: REBUILD AMERICA FINAL MARKETING STRATEGY PLAN For information only, a final copy of the Rebuild America Marketing Strategy Plan was provided to the EWG as an agenda attachment. AGENDA ITEM #9: SCHEDULING AGENDA ITEMS FOR FUTURE MEETINGS Ms. Downey said that Item 4, RES 2030 Goals, will be carried over to next month’s EWG meeting and ideas for future agenda items were noted. Mr. Lloyd announced that the Carlsbad Chamber of Commerce adopted a Green Sustainability Certification Program, where businesses can receive a Good Housing Keeping seal of approval for being green. Additional information on this program can be found at www.carlsbad.org. Mr. McAllister announced that new projects are available for bridge funding for tax-exempt users of electricity if installations can be completed by the end of the 2009. AGENDA ITEM #10: ADJORN The meeting was adjourned at 1:12 p.m. The next meeting will be held February 26, 2009.

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SANDAG ENERGY WORKING GROUP MEETING ATTENDANCE JANUARY 22, 2009

GEOGRAPHICAL AREA/

ORGANIZATION

JURISDICTION NAME MEMBER/

ALTERNATE ATTENDING

City of Coronado Carrie Downey, Chair Member Y South County

Alternate

City of Solana Beach Lesa Heebneer Member N North County Coastal

Alternate

City of San Marcos Rebecca Jones Member N North County Inland

City of Escondido Sam Abed Alternate N

Vacant Member East County

Alternate

---- Donna Frye Member Y City of San Diego

---- Alternate

---- Member County of San Diego

---- Peter Livingston Alternate N

Metropolitan Transit System

(MTS)

Sharon Cooney Member Y Regional Transit Agencies

North County Transit District

(NCTD)

Vacant Alternate

David Geier Member Y

JC Thomas Alternate Y

San Diego Gas & Electric ----

Ahmad Solomon Alternate N

Shell Energy Mike Evans Member Y San Diego Regional Chamber

of Commerce

---- Carmen Sandoval Alternate N

North County Economic

Development Council

David Lloyd Member Y Regional Economic

Development Councils

South County Economic

Development Council

Bill Clevenger Alternate N

Andrew McAllister Member Y California Center for

Sustainable Energy

___

Irene M. Stillings Alternate N

Laura Hunter Member Y Environmental Health

Coalition

_____

Leo Miras Alternate N

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GEOGRAPHICAL AREA/

ORGANIZATION

JURISDICTION NAME MEMBER/

ALTERNATE ATTENDING

Scott Anders,

Vice Chair

Member Y Energy Policy Initiative Center -------

Nilmini Silva-Send Alternate N

University of California,

San Diego (UCSD)

Dave Weil Member Y Regional Universities

San Diego State University

(SDSU)

Dr. Heather Honea Alternate N

Bill Hays Member N Port of San Diego ----

Cody Hooven Alternate Y

Border Power Plants Working

Group

Bill Powers Member N Sierra Club

---- David Grubb Alternate Y

San Diego Clean Cities

Coalition

Greg Newhouse Member N Regional Alternative Fuels

Groups

Regional Sustainability

Partnership, Clean

Transportation Committee

Derek Turbide Alternate N

OTHER ATTENDEES: Gabriela Munoz-Melendez, El Colegio de la Frontera Norte Alexandra Hart, IBEW Julie Gelfat, IBEW Emery McCaffery Cari Dale, City of Carlsbad Jim McCollum, Solar Turbines Brit Coupens, Invenergy Megan Jones Michelle Perez, UCSD Diane Rosenberg, San Diego Foundation Emily Young, San Diego Foundation Jennifer Green, CCSE Susan Freedman, SANDAG Andrew Martin, SANDAG


ENERGY WORKING GROUP

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Action Requested: DISCUSSION

2009 REGIONAL ENERGY STRATEGY (RES) UPDATE GOALS: File Number 3003000 DISTRIBUTED GENERATION (DG)/ RENEWABLE ENERGY

Introduction The EWG discussed regional DG and renewable energy issues at their December and January meetings. Based on these discussions, SANDAG asked the California Center for Sustainable Energy to prepare the attachment that recommends a DG goal and addresses DG potential, barriers, and recommendations for the region. An updated renewable energy goal will be discussed as complementary to the DG goal. At the March meeting, the EWG will continue discussion of the role of energy efficiency and overall energy consumption and peak demand goals. Background The EWG is asked to discuss the recommended goals and policies for possible inclusion in the 2009 RES Update. The adopted RES is being updated as part of a contract with the California Energy Commission (CEC). The EWG is asked to discuss and provide feedback on the update throughout its development. A timeline for the CEC partnership products is included as agenda Item 8. Key Staff Contact: Susan Freedman, (619) 699-7387; [email protected] Attachment: Regional Energy Strategy 2030 Distributed Generation Update

Prepared by the California Center for Sustainable Energy for SANDAG, February, 2009

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Regional Energy Strategy 2030(RES) Distributed Generation (DG) Update

Contents I. Definition of DG ............................................................................................................................................................ 14

II. San Diego DG Market.................................................................................................................................................... 14

III. Benefits and Costs of DG........................................................................................................................................... 15

A. Incentive Programs ................................................................................................................................................... 15

Self –Generation Incentive Program (SGIP) .................................................................................................................. 15

California Solar Initiative (CSI)....................................................................................................................................... 16

Federal Tax Credits........................................................................................................................................................ 16

B. Other Benefits ........................................................................................................................................................... 16

C. Barriers...................................................................................................................................................................... 18

Global Barriers .............................................................................................................................................................. 18

Small‐Scale DG Barriers................................................................................................................................................. 19

Large‐Scale DG Barriers................................................................................................................................................. 20

IV. DG Goals by Technology ........................................................................................................................................... 20

CHP.................................................................................................................................................................................... 21

Solar .................................................................................................................................................................................. 22

BioFuels ............................................................................................................................................................................. 22

V. Policies to Aid in Goal Implementation......................................................................................................................... 24

A. AB 32 Will Create an Emissions Reduction Market................................................................................................... 24

B. SB 1078, 107 and AB 1969 Mandate Increased Renewable DG ............................................................................... 25

C. CSI Incentivizes Small PV Installations ...................................................................................................................... 25

D. AB 1613 Will Spur CHP Installations ......................................................................................................................... 25

E. AB 811 Approves Renewables Financing Mechanism .............................................................................................. 26

F. Smart Grid Policies Can Stimulate DG Growth and Integration................................................................................ 26

G. AB 2466 Incentivizes Renewable Technologies for Governments............................................................................ 26

H. Federal Stimulus Bill.................................................................................................................................................. 26

VI. Actions: Leveraging Policies and Programs to Achieve Goals................................................................................... 26

A. Support Continuation of Incentives for DG............................................................................................................... 26

Attachment 1


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B. Emphasize DG in General Plan Updates ................................................................................................................... 27

C. Offer Property Tax‐Secured Low‐ or No‐Cost Financing Options for DG.................................................................. 27

D. Target Appropriate Audiences for Large‐Scale DG ................................................................................................... 27

E. Ensure Utility Rewards for DG Contracts .................................................................................................................. 27

F. Institute “RPS”‐Style System for Clean DG ............................................................................................................... 28

G. Provide and Market “Value‐Pricing” for Environmental Attributes ......................................................................... 28

H. Perform Detailed Market Penetration Analysis ........................................................................................................ 28

I. Marketing Support .................................................................................................................................................... 29

J. Create Manageable Avenue to Wholesale Market................................................................................................... 29

VII. ACRONYMS................................................................................................................................................................ 30

I. Definition of DG State and regional policy reports1define DG a number of ways, typically with variances in terms of size, fuel and technology type (renewable/non-renewable), ownership, interconnection type (customer- or utility- side), environmental attributes or some combination of these attributes. For the sake of this document, DG is defined as an onsite or near-load electricity generator, under 20 MW, serving either onsite load (or a portion thereof) or the regional2 utility grid. Within this definition, DG is further divided into small-scale DG (under 1MW) and large-scale (1-20MW). Customer segments for small-scale DG are residential, commercial, industrial, government, while large scale DG is owned by non-residential customer classes only. Technologies and fuels included in the definition of DG are solar, wind, biomass and biogas, fuel cells, clean and efficient3 combined heat and power (CHP) systems, efficient microturbines, and internal combustion engines (ICEs). Advanced energy storage (AES), while not generation per se, is also included here as an interesting and relatively new component of DG applications.

II. San Diego DG Market The San Diego market for DG technologies is unique based on its geography, climate, tariff structures and mix of commercial and industrial electricity users. Of the technologies commercially available in San Diego, PV has experienced the largest number of installations. Along with the successful marketing and policy emphasis on solar and its environmental benefits for the state, the climate in San Diego tends to be mild and sunny the majority of the year, making residential solar installations an attractive choice. In nonresidential installations, the overall cost of PV can be attractive provided that ample space is available.

In the eastern parts of the region, areas of high wind hold the potential for substantial additional wind generation capacity, though siting projects can be very challenging. Unattractive wind regimes in the population centers, and

1 CEC/CPUC Energy Action Plan, Smart Energy 2020, Renewables Potential in the San Diego Region, CEC DG Roadmap, SANDAG’s RES 2030 and others 2 Regional refers to the SDG&E territory 3 60 percent or higher efficiency


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difficulty of permitting, have prevented small-scale on-site wind generation for the most part. While currently the SGIP incentivizes mid-sized technologies (30kW-5MW), development costs for wind remain relatively high in San Diego.

Government entities and other institutions have taken advantage of biomass, small hydro from wastewater facilities and biogas technologies to serve onsite load and feed power to the distribution grid. Universities and lodging facilities fit the profile needed for a successful fuel cell installation. For some applications, fuel cells are used for cogeneration; however, onsite CHP and microturbine installations are not so prevalent in San Diego as in other regions due to its small industrial and manufacturing sectors. That is, the market for larger DG installations is smaller in San Diego than in LA or the Bay Area, limiting the presence of specialized financers, equipment specialists and other industry players.

According to the 2007 IEPR, system load factor in the San Diego and Valley/Desert areas will decrease (i.e. the demand curve will become slightly more “peaky”) compared to other California regions, particularly in the desert areas due to higher predicted air conditioning loads. This trend presents challenges in that it highlights the need for both dispatchable generation that may run only a few hundred hours per year4, and effective, targeted energy efficiency and demand response approaches that counterbalance the erosion of load factor.

IOUs including SDG&E will soon be subject to the state AB 32 mandates as part of the sectors that must comply with emission caps. To close the RPS gap, the utility will need to pursue several avenues in parallel: facilitate increased implementation of renewable resources—DG and otherwise—through the RPS procurement process; aggregate RECs from behind-the-meter renewables; and procure large-scale in-front-of –the-meter applications.

III. Benefits and Costs of DG DG facility costs depend on many factors, some that benefit the customer and others that impose barriers to them. Economic benefits and barriers include cost associated with installation, permitting, maintenance and repair, utility rates, incentives compliance reporting and staffing. Ratepayers, the utility and the state can also benefit in non-economic ways from DG as well, specifically their environmental and energy independence attributes.

A. Incentive Programs Several state and federal programs seek to promote specific technologies by reducing their associated investment burden.

Self –Generation Incentive Program (SGIP) The SGIP began in 2001and provides incentives to customers for the installation of clean DG technologies, and is often cited by customers as the foremost motivator for pursuing a small DG installation.5 At the outset, the program included renewable and non-renewable CHP technologies, solar, wind, microturbines and internal combustion systems. With the advent of the CSI and some legislative changes to the program in 2006, the SGIP is now limited to fuel cells and wind power, although several California bills have been introduced to reinstate clean non-renewable DG technologies. The SGIP recently approved the addition of AES to the list of incentivized technologies. AES will enable previously-non-dispatchable power to be coupled with the firm power of a storage component to make a more attractive power source for utility purchase. 4 Smart Energy 2020 5 “Market Characterization Report” Summit Blue for SGIP Working Group, August 2007


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California Solar Initiative (CSI) The CSI began in 2006 and provides $2.1billion in incentives for the installation of customer-side PV. The goal of the program is to facilitate the installation of 3000 MW of solar statewide by 2016, which translates to ~300 MW in the SDG&E territory. Size restrictions have prevented some installations at sites that can accommodate systems over the 1MW incentivized limit. 6

Federal Tax Credits Eligible DG systems can receive a federal tax credit of at various rates of the overall cost for installation of the project. Most incentives are currently valid until 2016. The following is a partial list of the clean DG technologies included in the package:

• Solar-30 percent • Wind-30 percent • Fuel cells-30 percent up to $3,000/kW for systems at least.5kW • Microturbines-10 percent up to $200/kW for systems 2MW or less • CHP-10 percent for first 15 MW

B. Other Benefits Another high-priority benefit for the end-user is increased electric supply reliability, which results whenever DG resources can be relied upon during planned or unplanned outages of the utility supply. Figure 1 shows the high capacity factor of natural gas-fired DG technologies installed through the SGIP.

Figure1: Capacity Factor of DG Technologies in California, 20077

6 The size limit for installations is 5MW; however CSI incentives are paid for the 1st MW only 7 “SGIP 7th Year Impact Evaluation,” Itron, 2007


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The utility can also benefit from peak demand reduction capabilities of DG. For example, dispatchable DG options can be coordinated and called during peak periods to offset the need for peaking facilities. Similarly, by using AES technologies, either on their own or (more likely) matched with appropriate DG systems, customers will be able to contribute power to the grid during critical times. Figure 3 illustrates the coincidence of various DG technologies and the 2007 SDG&E system peak.

Figure 2: 2007 SDG&E Peak Day Capacity Factors by

Technology8

Onsite and near-load DG reduces congestion on distribution lines, providing freedom of movement for other electricity supply. Efficient and clean DG systems produce fewer GHG per kWh than less efficient facilities, which can aid the utility and/or the local jurisdiction in meeting state emission reduction mandates.

In addition to the cost and reliability benefits, DG can have environmental advantages as well. Efficient and renewable DG reduces the regional carbon footprint, because the electricity output has a lower carbon content than existing resources. Figure 2 shows the average emissions rates for SDG&E territory DG facilities as compared to a central plant facility. Policymakers have realized that DG technologies, both renewable and non-renewable, will continue to play an important role in meeting regional and statewide emission reduction goals.

8 Ibid


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Figure 3: SDG&E Territory GHG Emissions Reductions Compared to Central Plant Average9

For the utility, installation of DG provides diversity in technology types, fuel sources and locations, creating needed redundancies on the grid for reliability and security reasons. Properly applied, DG can generate more efficiently than large central plant facilities, which reduces pressure on traditional energy supply markets.

C. Barriers While DG technologies do provide substantial benefits, barriers do exist for their application. Some barriers affect all applications, while others are limited to specific applications or system size ranges.

Global Barriers Price signals play a significant part in the decision-making process for ratepayers when considering the purchase of a DG system. DG rates to date in the San Diego region have been notably cost-ineffective for these technologies. Tariffs for non-renewable yet efficient and clean DG include noncoincident demand charges, which refers to a unit fee, based on the peak demand of a DG customer in a 12-month period. This charge is added to the monthly bill to account for utility-scale capacity needed to support a customer.

In addition to demand charges, the utility charges most DG customers a monthly “standby” charge. This fee accounts for contingencies that necessitate utility-backup power, e.g. in the event of a customer-generator outage and calculated using the DG facility nameplate capacity or peak demand. Although this electricity is not always used by the DG facility owner, by law utilities must have the capacity to meet the load of each utility customer at peak demand. In addition to standby charges, systems that are not net metered are subject to an additional departing load charge, referring to the cost for the utility to account for the electricity load although the customer is partially or wholly off-grid.

According to SDG&E, the other state IOUs and the CPUC, the most prevalent barrier specific to increased RPS-compliant renewable DG penetration for our region is our location in relation resources large enough to make a 9 Ibid


19

significant impact on the portfolio. This necessitates development of an adequate transmission grid to bring the electricity to load centers. The CPUC states, “Renewable resources are often located far from the grid and load centers, requiring permitting and construction of extensive and expensive transmission lines. Large transmission projects are needed, however, to access distant geographic areas that have economic renewable resources.”10 Figure 4 illustrates the impact that lack of transmission has on meeting California RPS goals, according to the CPUC.

Figure 4: Barriers to CA RPS Compliance11

Another barrier for both small- and large-scale renewable DG applications is their limited dispatchability, referring to the ability for a facility to produce electricity as needed in the region. Renewable technologies generally should be supported by AES before being considered a “firm” resource.

SmallScale DG Barriers Current electric rates for small DG do not reflect the full package of benefits that DG brings provides; these DG customers do not get compensated for some of the locational, temporal and environmental benefits of DG and cogeneration. This means that the reduction of GHG emissions, decreased strain on the distribution system and the coincident peak demand reduction that some DG installations provide are not accounted for in the current DG rates. While this barrier is present with large-scale installations as well, it is more acute for small installations in which the owner has less capital to invest and requires a faster payback through cost-effective rates. There is debate between

10 “RPS Quarterly Report to the Legislature”, CPUC, October 2008 11 Ibid


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utilities and other stakeholders about these benefits; they are likely to be studied in detail for each technology as CPUC activities, either in support of a feed-in tariff (FIT) or in revamping the MPR12.

Another barrier that particularly impacts smaller DG installations is the upfront capital cost for a DG system installation. Although incentives are available for small-scale wind, solar and fuel cell installations, the nature of these installations is that they are generally self-financed. With limited funds for energy projects, potential DG customers are often not able to provide the initial capital needed to begin a project without a financing mechanism.

LargeScale DG Barriers Large-scale DG comes with a unique set of obstacles that inhibit their potential in the San Diego region, including emissions reduction mandates, technical expertise, staff time and heavy financial implications.

With the passage of AB 32 in 2006, GHG emission reductions have become a high priority for California. According to some San Diego DG customers, the new emissions mandates have made the permitting process at the APCD more arduous and expensive for non-renewable technologies. Without adequate funding or incentives to offset costs of compliance equipment, developers sometimes resort to slowing down or halting (where possible) large-scale DG installations. An example is the mandate for installation and maintenance of pollution controls systems and monitoring systems known as CEMS, which require 15-minute interval data logging as opposed to older systems that required annual monitoring. Increasingly complex regulations require highly specialized staff and a level of resources that, at present, only few industry sectors are willing to commit. Additionally, when pursuing a large-scale DG, installers typically cannot anticipate the need for expensive and complex emission mitigation equipment, e.g. scrubbers and filters, which can significantly raise the project overall installation costs. By the time the customer knows the extent of the added expense, it is often too late to cancel the higher-cost-than-anticipated project.

Fuel procurement and associated costs can also add complexity to a DG project. Utilities do not procure natural gas on behalf of their DG non-core13 customers, so any project fired by natural gas must be supported by a natural gas market liaison. Should the customer not have the requisite expertise on staff—and many potential DG customers do not—a third party must be contracted to interface with the natural gas open market.

Another potential barrier to large-scale cost- and labor-intensive DG facilities is their inability to export excess power when it is not needed to meet onsite load. This barrier will be address by the CPUC in its recently-opened proceeding to implement AB 1613 (see “Policies to Aid in Implementation of Goals”). Current interconnection contracts available to DG users do not include a “must-take” provision for excess generation. According to EPRI, “The difficulty in selling excess electricity from a CHP generator… is that the market requires scheduling hour-by-hour exports with the CAISO and finding an electricity buyer.”14 This prevents large DG users from exporting their excess power while maintaining an optimum heat rate when onsite demand is low (e.g. at a university at night.) This relegates the customer to sizing systems down which affects their ability to generate enough load at their peak periods. This interconnection complication coupled with high costs and application requirements often deter large-scale installations at sites where the staff cannot or does not wish to comply.

IV. DG Goals by Technology 12 The market price referent is the rate paid for non‐utility owned facilities. The rate is indexed to cost for a combined‐cycle natural gas power plant 13 Non‐core customers are typically commercial and industrial size and usage, and do not purchase their fuel gas from the utility 14 “Assessment of California CHP Market and Policy Options for Increased Penetration”, EPRI 2005, xiv


21

To realize the environmental, economic, security and reliability benefits of DG as discussed above, the region should support quantified goals for DG technology penetration. The goal presented here builds on several California policymaker-enacted mandates and recommendations. Based on the Fisher-Pry model for each relevant technology application and a forecasted peak demand calculated at 6218MW, DG will constitute 11 percent of peak demand. The following figures illustrate market model projections.

Figure 5: CEC Market Penetration Indicators

Technology 2008 (MW)

actual 2020 Goal (MW) = 8% of State Goals

2030 Goal

Market Limit (in MW)

% of Market

at 2020

CEC Time to

Saturation (in years)

CEC Start Year

CEC Midpoint

DG MW at

2020 Years Year Year

Hydro 3.8 3.8 3.8 3.8 100% NA NA NA Bio 6.4 24 26.55 27.04 89% 20.9 2000 2010

Steam 6.6 6.6 6.6 6.60 100% NA NA NA PV 49.4 210 249.29 1258 17% 17.6 2017 2026

CHP 341.0 264 397.79 416.40 63% 34.8 1999 2016 Total DG 407.2 508.4 684.03 1711.84 30% Net Peak Demand 4568.0 5411 6218

Penetration of DG 8.9% 9.4% 11.0%

CHP By extrapolating a market limit for CHP from the CEC DG Roadmap, it was determined that the San Diego region has

approached the limit more quickly than the CEC predicts for the rest of CA. This indicates:

• The adoption of DG began before the CEC model period • The market limit for San Diego may be greater than the market limit extrapolated from the CEC model

Figure 6: CHP Market Penetration Trend, Actual and CEC‐Recommended


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Solar San Diego has not met the market projection for solar penetration and continues to fall behind the statewide projections for market penetration.

Figure 7: PV Market Penetration Trend, Actual and CEC Recommended

BioFuels Although gradually increasing, San Diego is behind the expected market penetration projection as of ~1993. The actual data also does not improve the rate of market penetration in parallel with the CEC penetration projections.

Figure 8: BioFuels Market Penetration Trend, Actual and CEC Recommended


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The following figures represent the projected and actual capacities for each technology application.

Figure 9: Stacked CEC‐Based Market Penetration (in MW by Year) for SDG&E Territory

Figure 10: Stacked Actual DG Installation Trend (in MW by Year) for SDG&E Territory15

15 Hydro, wind and steam technologies have reached market saturation; their future impact is negligible compared with the other technologies examined


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V. Policies to Aid in Goal Implementation To reach the DG goal developed here, local governments (LGs) need to establish regional benchmarks that match state mandates. Local stakeholders should also encourage state policymakers address the barriers to increased DG penetration first through adoption of policy changes and then through actions that support those policy recommendations and directives. Recent policy amendments are listed here followed by actions the region can take to accomplish them.

A. AB 32 Will Create an Emissions Reduction Market According to the IEPR, “California’s aging power plants are extremely inefficient compared to current technologies that are 20-30 percent more efficient; these plants must be either re-powered or retired and replaced with cleaner technologies that operate at higher efficiency to contribute to AB 32 goals”. 16

AB 32, the Global Warming Solutions Act of 2006, sets the emissions baseline levels from which the majority of California policy goals are being developed. The state must achieve a 1990 GHG level by 2020, with much of the emission reduction efforts originating in the electricity sector. Through California Executive Order S-3-05, Governor Schwarzenegger has expanded and extended that goal to a level 80 percent below 1990 by 2050. To reach the AB 32

16 IEPR, 2007


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mandate in San Diego, one option is to reduce electricity sector GHG emission levels 4MMTCO2 by 2030.17 Clean DG can and should play an important role in the San Diego regional efforts to meet its share of the statewide AB32 goals.

B. SB 1078, 107 and AB 1969 Mandate Increased Renewable DG The California RPS was signed into law in 2002 under SB 1078 and mandated a shift in utility-procurement requiring a one percent increase in renewable purchases by each IOU to meet a 20 percent target by 2017. In 2006, SB 107 accelerated the 20 percent goal from 2017 to 2010. Although the CPUC- and CEC-approved IEPR recommends the addition of a 33-percent-by-2020 mandate, that goal has not yet been codified in statute. 18 Nonetheless, several planning and policy documents use the IEPR renewables recommendation as a goal for long-term resource and policy planning purposes.

In attaining the RPS mandates, the San Diego region can also reduce emissions by approximately 3MMTCO2 by 2030, equivalent to 75 percent of the regional AB 32 goal, as recommended in the San Diego Greenhouse Gas Inventory. Currently, technologies eligible for participation in the RPS program include: biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 MW or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current and any additions or enhancements to the facility using one of these technologies. Technologies must also be located in California or be directly connected with the California transmission system to be eligible for participation.

AB 1969 was signed into law in 2006 and added small water and wastewater facilities to the list of RPS-eligible technologies. It also mandated a tariff for these technologies that offers a reasonable rate of return on their electricity-generating facilities. By using this legislation as a template, LGs can jump-start legislation that incentivizes other DG technologies at their full market value, e.g. though a FIT (See “Actions” section)

C. CSI Incentivizes Small PV Installations With the strong support of Governor Schwarzenegger, SB 1 became law in 2006 and began a program to incentivize 3,000 MW of solar in California by 2016. In the San Diego region, we are expected to meet a goal of 300 MW of customer-side small PV installations through the CCSE-administered program. Meeting the SB 1 goals will also move San Diego toward .2 MMTCO2 reduction19 recommended through AB 32 by 2020.

D. AB 1613 Will Spur CHP Installations The so-called “Waste Heat and Carbon Reductions Act”, signed into law in 2007 established a mandate for utilities to purchase excess CHP-generated electricity and to include CHP technologies in their procurement plans to the “maximum degree that is cost effective.” 20 It also mandated the CPUC to establish a program for CHP financing. These mandates will allow large-scale DG installations to function at optimum heat rates and associated efficiencies and lower emissions. CHP customers can use firm contracts with SDG&E to sell excess power to the grid at pre-designated times, offsetting the need for larger central plant generation.

17 “San Diego Greenhouse Gas Inventory: An Analysis of Regional Emisssions and Strategies to Achieve AB 32 Targets”, p. 7, September 2008 18 D.08-10-037 recommends an accelerated goal of 33 percent by 2020 19 .2 MMTCO2 can be achieved with 400MW of solar PV installations 20 AB 1613, Blakeslee. Energy: Waste Heat and Carbon Emissions Reduction Act, Statutes of 2007


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E. AB 811 Approves Renewables Financing Mechanism AB 811 allows LG entities to offer sustainable energy project loans to property owners. Through the creation of sustainable energy financing districts, property owners can finance solar installations and energy efficiency improvements through a voluntary assessment on their individual property tax bills. This bill combined with the incentives available for PV installations in California can overcome the first-cost barrier many potential DG customers cite as an inhibitor to investment in alternative energy sources.

F. Smart Grid Policies Can Stimulate DG Growth and Integration In December 2008, the CPUC initiated a smart grid proceeding to develop and implement policies that can enable GHG reduction and expand the use of DG and AES, among other goals. It will allow utilities to communicate with DG owners and users via customer-side AMI, ensuring that they are aware of their electricity usage and the potential for cost-effective demand management. Smart grid technology will also enable remote load monitoring options for utilities, which will allow them to better work with DG customers to buy and sell clean electricity when appropriate.

G. AB 2466 Incentivizes Renewable Technologies for Governments AB 2466 was passed in 2008 and will assist in development of renewable DG by allowing governments to aggregate their bills and offset heavy load at one site with high capacity systems at another site. In the past, governments with space sufficient for large electricity generation facilities but small onsite electrical load were not able to take advantage of that land to develop renewable generation facilities. With this bill, regional government s can benefit from DG generation produced on their land, which will lower emissions, increase DG penetration and potentially save money.

H. Federal Stimulus Bill The newly-enacted federal stimulus bill may expand DG technology penetration in the near term by supporting green jobs and RD&D for DG applications, and by ensuring the availability of tax credits for DG customers who participate in a variety of locally available financing programs.

VI. Actions: Leveraging Policies and Programs to Achieve Goals The goal established for increased DG can be met through a combination of policy, technology and market strategies that focus on the wide array of DG stakeholders. Using the preceding policies, LGs and constituents can ensure the success of the DG market in the short- to long-term.

A. Support Continuation of Incentives for DG DG technology penetration in the San Diego market has relied on monetary incentives to offset much of their upfront installation cost. The typical small-scale prospective DG customer does not have the requisite upfront capital to finance an entire project and relies on incentives to make up any financial shortcomings. The current SGIP program, which incentivizes wind, fuel cell and AES technologies, is set to sunset at the end of 2011. Continuation of the SGIP past its current sunset date and the reinstatement of CHP technologies and incentives based on efficiencies rather than fuel type, and/or the introduction of a separate program for CHP, into the program could continue to offset the high price tag enough to interest reticent applicants to install DG.

Along with an extension and expansion of the SGIP program, current incentives for wind- and fuel cell-connected AES technologies should be expanded to include other DG technologies. This program offering can bolster DG


27

penetration by ensuring that power from all DG technologies is dispatchable for both customer-side and utility-side needs. Because AES systems technology is still developing, California policy documents recommend increased funding for AES RD&D and penetration. 21

B. Emphasize DG in General Plan Updates California has been aggressive in meeting GHG reduction targets. Over 30 California cities and counties have committed to developing and implementing Climate Action Plans. SANDAG is adopting a regional climate plan in 2009. LGs can include DG targets in their general plan (GP) updates or within their land use and conservation or other infrastructure elements. Based on the goals presented in this document, when updating plans, s should recommend the following actions:

• Develop Fisher-Pry market penetration models for San Diego region • Calculate and adopt city-specific DG goals • Adopt permitting/code changes to ensure successful adoption of DG goals • Develop outreach programs to educate targeted audiences about DG benefits • Coordinate efforts between DG/GHG/sustainability strategy teams

C. Offer Property TaxSecured Low or NoCost Financing Options for DG Clean DG customers can overcome the barrier of high initial cost by using LG financing options. AB 811 passed the California legislature in 2008, granting LGs the authority to offer low-interest loans for renewable DG installations to be paid back by the DG customer through his/her property tax bill. The economic benefit of this structure comes from its security and financing freedom for the customer. When a property is sold, the loan stays with the property, freeing the initial purchaser from the burden of paying for a DG installation from which s/he can no longer benefit. The CEC “Distributed Generation and Cogeneration Policy Roadmap for California” calls financing out as a strategy for the success of these technologies.22This option has proven attractive in its pilot phase for the cities of Palm Desert and Berkeley, and is currently being explored by several area municipal governments, including City of San Diego and Solana Beach.

D. Target Appropriate Audiences for LargeScale DG Market studies, policy documents and utility reports support greater DG success in specific market sectors. For larger installations, high upfront costs, requisite technology expertise, and necessary staff time to realize the benefits of an installation have created a niche market. Targeting the education, hospitality, healthcare, technology and manufacturing sectors has been effective in San Diego. However, research indicates that wholesale trade, grocery stores and national security sectors should be targeted for a potential benefit from a DG installation. The RPS and other DG procurement exercises have highlighted the difficulty in utility ability to execute large-scale DG contracts in the San Diego region. Realizing these difficulties shapes goals that are achievable, and is part of this document. To achieve the goals set forth here, however, the utility, regulators and program implementers should market the programs to successful programs where opportunities exist.

E. Ensure Utility Rewards for DG Contracts The current rate of return for a SDG&E to contract for customer-owned clean DG technologies is lower than that to procure or build utility-owned infrastructure, e.g. transmission lines and central power plants. The region should

21 CPUC IEPR Update 2008, p. 28 22 “Distributed Generation and Cogeneration Policy Roadmap for California Staff Report to the CEC” March 2007, p. 22


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recommend that the CPUC encourage a tariff structure “to make CHP project cost and revenue neutral while granting owners credit for system benefits such as reduced congestion.”23In 2007 within the EE proceeding, the CPUC established a risk/reward mechanism that rewards utilities for their efforts to reduce consumption and overall demand through EE programs. Per the risk/reward mechanism, if a utility does not meet CPUC-determined EE goals, the utility is penalized monetarily. Alternatively, if a utility meets or exceeds EE goals, they are rewarded. This eliminates utility conflict of interest concerns between earning a rate of return and reducing customer consumption. Establishing incentives for utilities akin to the risk/reward mechanism would encourage utility purchase of customer-owned clean DG energy output.

F. Institute “RPS”Style System for Clean DG Using market mechanisms like a risk/reward mechanism can emphasize to SDG&E and other utilities the importance the state places on DG installations. Another strategy is to impose a mandate for DG penetration that matches the recommendations for increased DG penetration detailed in CA policy documents like the Energy Action Plans I, II and the 2008 update as well as the IEPR and each of its annual updates. The state RPS goals have brought the urgent need to increase utility purchase of viable renewable facilities to the forefront of utility planning. By instituting a similar mandate for the other top priorities in the state preferred “loading order”, the region can benefit from increased interest in the purchase of clean DG. The region can recommend and support appropriate mandates for the region based on the RPS model.

G. Provide and Market “ValuePricing” for Environmental Attributes In the SDG&E feed-in tariffs will provide customers with the fair market value for DG output. FITs apply to systems placed on the utility-side of the meter, and provide a payment for the entire output of a customer-owned DG system. “Behind-the-meter” installations currently do not receive compensation for any net excess generation sent to the grid; payment for this excess is sometimes referred to as a FIT, but this is inaccurate. In any case, to be attractive to DG owners, either of these incentives must value the environmental attributes of the electricity being fed to the power grid, which would necessitate a divergence from the current practice of paying the customer a rate equivalent to the payment for the commodity portion of a combined cycle natural gas plant, or MPR. Recently-passed legislation like AB 1613 will require an appropriately high feed-in rate for owners of CHP projects under 20 MW to realize a benefit. FITs have been successful in 16 European countries, Ontario, Canada and several U.S. cities24. FIT implementation has stimulated rapid increases in the proportion of total electricity generation supplied by renewable generation technologies in these regions.

The CPUC has instituted FITs for specific technology subsets, based on the MPR. The legislature is currently developing legislation that will further incentivize DG capacity through a FIT tied to a more attractive MPR. The CPUC can then shepherd the discussion and finally determine what the payments will be for each DG technology--either based on technology cost or avoided cost. The region should support the CPUC process to establish a fair and reasonable FIT.

H. Perform Detailed Market Penetration Analysis The region will benefit from further analysis of market penetration potential, particularly for CHP and biofuel applications. The following is a partial list of issues for further analysis:

23 “Climate Change Scoping Plan Appendices: Volume I: Supporting Document and Measure Detail” A Framework for Change, October 2008, C‐124 24 CARB AB 32 Scoping Plan, Appendix 1, p. C-94


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• Available bio market by determining the actual limit to penetration in the area through a study of the availability of landfill, dairy and waste water treatment facility bio-methane

• Is the market limit for CHP higher or lower than the CEC-established limit? • Should more effort be spent encouraging technologies with a lower penetration than CHP?

I. Marketing Support Proactive marketing can also help to expand DG penetration. Emphasizing the environmental savings attached to DG installation has been an effective marketing approach in the SDG&E territory through the SGIP. CCSE emphasizes the value of DG installation on its website and program collateral, which has proven effective to date in attracting more non-residential customers than other PAs in California.25

J. Create Manageable Avenue to Wholesale Market A policy that encourages electric utilities to purchase electricity from CHP as delivered at a reasonable wholesale price will incentivize large-scale CHP owners to size their systems to meet their load. Universities, hospitals, the biotech industry and other stakeholders in San Diego should support changes to wholesale contracting that will enable more transparent application and approval progression. This tariff would also include a reasonable price that does not include non-bypassable charges that currently financially hamstring DA customers. The effect of a more ratepayer-friendly approach can be to offset some of the off-peak system load with clean technologies, allowing for less central plant generation, which is less efficient that DG applications.

25 “Self‐Generation Incentive Program Localized Briefing” Summit Blue, p. 9, January 21, 2008


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VII. ACRONYMS AB Assembly Bill AES Advanced Energy Storage AMI Advanced Metering Infrastructure APCD Air Pollution Control District CAISO California Independent System Operator CARB California Air Resource Board CCAR California Climate Action Registry CCSE California Center for Sustainable Energy CEC California Energy Commission CHP Combined Heat and Power CPUC California Public Utilities Commission CSI California Solar Initiative DG Distributed Generation EAP Energy Action Plan EE Energy Efficiency EPRI Electric Power Research Institute GHG Greenhouse Gas ICE Internal Combustion Engine IEPR Integrated Energy Policy Report IOU Investor-Owned Utility KW Kilowatt MMTCO2 Million Metric Tons CO2 equivalent MPR Market Price Referent MW Megawatt PA Program Administrator PV Photovoltaic RD&D Research, Development and Demonstration RES Regional Energy Strategy RPS Renewables Portfolio Standard SB Senate Bill SDG&E San Diego Gas and Electric SGIP Self-Generation Incentive Program



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2009 REGIONAL ENERGY STRATEGY (RES) DEVELOPMENT: File Number 3003000 GUIDING PRINCIPLES AND GOALS

Introduction In January, the EWG was asked to review the guiding principles from the existing RES 2030 and provide any recommendations for inclusion in the RES Update. The RES Update will expand on the existing RES to address global climate change, energy implications of transportation and land use planning, and transportation fuels. An overview of these components, potential guiding principles, goals, and performance metrics are provided below for discussion. Energy and Climate Change Connection Energy is responsible for more than 90 percent of greenhouse gas (GHG) emissions in the San Diego Region. The largest contributors are on-road transportation, electricity use, and natural gas use. The way local governments plan—ranging from General Plans to council goals and municipal operations—all have significant impacts on a municipality’s energy consumption and related GHG emissions. Additional guiding principles, goals, and performance metrics will be part of the Regional Climate Action Plan (RCAP). Guiding Principle Climate change is an urgent global problem requiring all levels of government, including SANDAG and its member agencies, to engage in immediate and sustained actions to mitigate GHG emissions and prepare for the impacts. Goal The region will reduce GHG emissions from passenger vehicles to 1990 levels by 2020 and by 80 percent below 1990 levels by 2050. Energy Considerations of Land Use and Transportation Planning Community design is strongly related to energy consumption and GHG emissions. The energy intensity and climate impacts of a community are in large part determined by the design and layout of individual buildings and their spatial relation to each other and supporting transportation infrastructure. Local governments influence community design through their land use planning authority and local infrastructure decisions. Local governments provide the blueprint for future land use development and community design in their communities through the General Plan. SANDAG conducts transportation planning for the region and provides land use planning guidance to local

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governments through the Regional Comprehensive Plan (RCP). In the San Diego Region, a major objective of local land use and regional transportation planning is to identify the land and infrastructure needed to accommodate projected population and job growth while maintaining and enhancing quality of life. The San Diego Region is forecast to grow by another million residents by 2030, about 30 percent more people than today. Over the long term, the land use and transportation planning decisions made to accommodate future growth will have a large impact on the spatial distribution of buildings and places and how people travel among them. As a result, energy and climate change must be primary considerations in land use and transportation planning if regional climate protection objectives are to be achieved. Guiding Principles

Reducing VMT is a priority in regional planning efforts. General plans and development codes will incorporate policies and standards emphasizing

pedestrians, bicycles, and public transit. Demand for single occupancy vehicle travel is significantly reduced by making walking,

bicycling, and public transportation practical choices for travel. For trips where walking, bicycling, and public transportation are not practical choices,

programs to manage transportation demand are in place to reduce overall vehicle travel such as carpools, vanpools, telecommuting, and alternative work schedules.

Alternative fuel infrastructure is sited to support vehicles powered by fuels with lower lifecycle emissions than conventional gasoline and diesel.

Goal Maximize the use of mass transit, encourage smart growth and land use planning to help reduce vehicles miles traveled, and encourage improvements in vehicle fuel efficiency to improve fuel economy. Performance Metrics

VMT levels Total on-road fuel consumption Transportation mode share (percentage of trips by driving alone, carpool, public transit,

walking, and bicycling) Total number of registrants in SANDAG’s iCommute system (subtotals by mode) Number of employers with networks in iCommute Number of schools with networks in iCommute Number of vanpools in the San Diego Regional Vanpool Program Number of users in the Bicycle Locker Program Increased transit and carpool ridership in I-15 corridor

Transportation Fuels In recent years, the state has enacted several laws to reduce our reliance on the petroleum-based transportation fuels. Increasing the use of alternative fuels will help the region reduce GHG emissions from fossil fuels, mitigate energy security concerns, and provide a buffer from oil price volatility. Improved vehicle fuel efficiency and better integrated transportation and land use planning also will help the region in these areas.

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The region and state face constraints, including the limited availability of alternative fuel infrastructure such as fueling stations, processing facilities, and distribution facilities. Vehicle costs and availability are constraints too. The state is addressing these issues through an alternative fuel vehicle program. Carbon intensity of each fuel is the main determinant for receiving state funding based on a full fuel cycle analysis (“well to wheels”). Alternative fuels, and associated vehicles and infrastructure, with lower carbon intensities than conventional gasoline and diesel are eligible for state aid to increase their deployment. Guiding Principle Regional reliance on petroleum will be reduced by diversifying fuel options, encouraging increased use of alternative fuel vehicles and infrastructure, and decreasing demand for transportation energy. Goal Through public and private partnerships, increase the availability of alternative fuel vehicles and infrastructure in the San Diego Region. Policy: Assist local and regional government fleets to purchase alternative fuel vehicles and use alternative fuels. Performance Metrics

Number of alternative fueling stations, privately and publicly accessible and by fuel type Share of passenger cars, light-duty trucks, and low-emission/clean/alternative fuel vehicles in

the passenger vehicle fleet Share of low emission/clean/alternative fuel vehicles for transit agency fleets Share of low emission/clean/alternative fuel vehicles for each local government’s fleet

Key Staff Contact: Susan Freedman, (619) 699-7387; [email protected]



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GUIDING PRINCIPLES FOR THE REGIONAL CLIMATE ACTION PLAN (RCAP) File Number 3003000 Introduction Staff has developed a list of guiding principles or “images of the future” describing the priorities, behaviors, and other actions needed for the region to achieve required greenhouse gas reductions and adapt to a changing climate. The purpose of the guiding principles is to clearly define a vision of a sustainable, climate-friendly San Diego region. The guiding principles will inform the development of the RCAP. Discussion Staff is seeking input and recommendations on the attached guiding principles for inclusion in the RCAP. Staff will present an overview of the proposed guiding principles and describe the relationship of the RCAP with other regional climate protection actions including those of local governments, academia, and non-profits. Key Staff Contact: Andrew Martin, (619) 699-7319; [email protected] Attachment: Draft Guiding Principles for the Regional Climate Action Plan

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Draft Guiding Principles for the Regional Climate Action Plan

Overall

Climate change is treated as an urgent global problem requiring all levels of government, including SANDAG and its member agencies, to engage in immediate and sustained actions to mitigate greenhouse gas (GHG) emissions and prepare for the impacts of a changing climate

Transportation and Land Use

The Regional Transportation Plan (RTP) prioritizes investments that achieve or exceed state requirements for greenhouse gas reductions from passenger vehicles in 2020 and 2035 and contribute to the long-term state goal of reducing emissions to 80 percent below the 1990 level by 2050

The regional land use pattern promotes shorter trip distances by placing a variety of opportunities for housing, work, shopping, recreation, and other activities in compact, walkable communities

Reducing the total amount of vehicle miles traveled (VMT) is a major objective of the RTP and related regional planning efforts

Demand for vehicle travel is significantly reduced by making walking, bicycling, and public transportation practical and common choices for travel

For trips where walking, bicycling, and public transportation are not practical choices, programs to manage transportation demand are in place to reduce overall vehicle travel such as carpools, vanpools, telecommuting, and alternative work schedules

Climate protection is an important factor in the transportation decisions of individuals, government, and the private sector

Support, such as alternative fuel infrastructure, is provided for vehicles powered by fuels with lower lifecycle emissions than conventional gasoline and diesel

Price signals lead to travel behavior and land use decisions consistent with the region’s climate protection objectives

Climate change criteria is included in the ranking of priority areas for allocation of funding

Developing funding mechanisms for the region’s climate protection actions is a high-priority

Regional strategies to reduce GHG emissions within the transportation sector will go beyond passenger vehicles to include all sources such as rail, maritime, and civil aviation

New and Existing Buildings

Local building code requirements and incentives are adjusted over time to achieve the state goal of zero net energy usage by new residential and commercial construction by 2020 and 2030, respectively

Aggressive strategies, including regulations and incentives, are employed to convert existing residential and commercial buildings to the equivalent of zero net energy through deployment of energy efficiency and clean distributed generation

Adaptation

The region is proactively preparing for the projected impacts of climate change to San Diego, including but not limited to a higher sea-level, warmer average temperature, more frequent, intense, and longer heat waves, increased peak demand for electricity, a more vulnerable water supply, more frequent and intense wildfires, increased threats to public health from poor air quality, heat, wildfires, and infectious disease, and permanent loss of native plant and animal species

Electricity and Natural Gas End-Use

RES Guiding Principles will be inserted here

Local and Regional Government

SANDAG provides support for local government actions to mitigate GHG emissions and adapt to projected climate change impacts through the development of model codes and other tools for emissions reduction and adaptation

Local general plans, zoning codes, and related policies, programs, and regulations within the purview of local government are designed to further regional climate protection objectives

Attachment 1

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SANDAG and its member agencies lead by example: their actions to reduce the GHG emissions from their internal operations encourage residents and the private sector to follow their lead

Programs are in place to reward and publicize actions by residents, government, and the private sector that support regional climate protection objectives

Social Equity and Environmental Justice

Actions to mitigate GHG emissions and adapt to the impacts of climate change do not disproportionately impact any disadvantaged community based on race, ethnicity, gender, income, or geography or otherwise conflict with SANDAG policies promoting social equity and environmental justice

Agenda Item #8 Energy Working Group

February 26, 2009

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Updated Timeline for the

California Energy Commission Partnership Agreement February 19, 2009

Task or Document Due No Later Than Draft Regional Assessment Report of Alternative Transportation Fuels, Vehicles, and Infrastructure

April 30, 2009

Draft Regional Energy Strategy (RES) Update June 1, 2009 Draft Regional Climate Action Plan (RCAP) July 1, 2009 RES Public Workshop July 1, 2009 RCAP Public Workshop August 1, 2009 Alternative Transportation Report Public Workshop August 15, 2009 Final Alternative Transportation Report September 15, 2009 SANDAG Board Approval Process for Final RES September 18, 2009 Sustainable Region Pilot Program (SRPP) Updated Action Plan & Toolkit September 30, 2009 RCAP “How to Guide” October 5, 2009 SANDAG Board Approval Process for Final RCAP October 5, 2009 Research the Need for an ATFVP Toolkit and Deliver Either: a) Updated ATFVP Report Including Toolkit Links, or b) A New ATFVP Toolkit

November 16, 2009

SRPP Implementation Plan Progress Report January 15, 2010 Draft Final Report on the Partnership Agreement January 15, 2010 Final Report on the Partnership Agreement February 15, 2010

Documents

MEETING NOTICE AND AGENDA · MEETING NOTICE AND AGENDA ENERGY WORKING GROUP The Energy Working Group may take action on any item appearing on this agenda. Thursday, February 26, 2009