September 21, 2015

California Climate Law an $8.6 Billion Coup for Solar Utilities

Solar and wind-power entrepreneurs will get a bigger share of California’s energy market. Construction contractors will get more work tightening the energy efficiency of buildings. And environmentalists will tiptoe closer to their goal of weaning the most-populous U.S. state from fossil fuels.

California lawmakers on Friday passed a watered-down version of what state Senate PresidentKevin de Leon had billed as part of the “most far-reaching effort to fight climate change in the history of our nation.” 

Before lawmakers stripped out provisions including a 50 percent rollback in gasoline use, de Leon’s bill had drawn opposition from building owners, the oil industry, retailers and even fruit and vegetable growers.

The changes neutralized nearly all of the organized opposition, while maintaining the support, albeit more muted, of environmentalists.

 “I can’t even say that utility customers will be disadvantaged,” said Steve Chadima, director of California Initiatives at Advanced Energy Economy, an association of businesses in efficiency retrofits and solar and wind power. “If the whole thing had passed, I might say employees of fossil-fuel companies would be disadvantaged, but that didn’t happen here.”

The bill, which passed the state Assembly 51-26 and Senate 26-14 Friday night, requires that half of all electricity come from renewable sources by 2030 and that building owners double energy efficiency by that year. It goes to Governor Jerry Brown, a supporter, for his signature.

The clean energy mandate provides a potential $8.6 billion investment opportunity for utility-scale solar projects, according to GTM Research. That figure could vary depending on how much large-scale solar is used to meet the goal and other factors, including projected declines in panel prices and other renewable energy sources. The market could be as much as $10 billion based on an estimate provided by the California Solar Energy Industries Association.

The mandate for renewable power is a “huge win” for Californians and the state’s $11 billion solar industry, Sean Gallagher, the Solar Energy Industries Association’s vice president of state affairs, said in a statement. He said the future of small-scale rooftop solar will depend on a regulatory ruling on the ability of homeowners to sell power back to the grid.

Business groups including the California Chamber of Commerce, the California Manufacturers & Technology Association and the California Business Properties Association withdrew their opposition in the days before the vote after de Leon and other lawmakers deleted the fuel-reduction mandate and tweaked the efficiency rules for buildings.

The former version of the bill called for doubling the efficiency of all buildings, while the bill approved Friday seeks to “double the energy efficiency savings in electricity and natural gas end uses,” according to a legislative analysis.

The California Business Properties Association, representing commercial landlords, had opposed the previous version of the bill, warning that it could drive up rents and create complexity for building owners. The association dropped its objection after the language was changed.

Matthew Hargrove, the association’s senior vice president of governmental affairs, said the final bill took a broader approach to energy efficiency rather than placing all the burden on building owners.

“It is still a very aggressive goal, and it is still something that we are concerned about assuring that our members can meet as the program moves forward, but we look forward in working with the governor and regulatory agencies to do our part,” Hargrove said by e-mail Friday.

For every building owner who has to spend a dollar on new windows or ventilation systems, there’s a contractor who stands to make a buck doing the work.

“By calling for a doubling in energy efficiency, that means more jobs and more opportunities for consumers to participate in energy savings,” said Steven Schiller, a Berkeley-based consultant who founded the California Energy Efficiency Industry Council.

The big losers with the passage of de Leon’s bill are Californians, especially in hotter inland areas, who will have to pay higher electricity rates because of the mandate for renewable sources such as solar and wind, according to Republican lawmakers who voted against the legislation.

“This bill will increase the cost of living for residents who are already struggling to make ends meet,” said Assemblyman Matthew Harper, a Republican from Huntington Beach, as the body debated the bill late Friday. “Let’s not put more Californians into energy poverty by forcing them to pay more just to keep the lights on.”

California’s three investor-owned utilities publicly supported the bill. Gary Stern, senior director of energy policy for Edison International’s Southern California Edison, said the bill would assure “safe, reliable and affordable” power for the utility’s 5 million ratepayers. Eugene Mitchell, vice president of state governmental affairs for Sempra Energy, noted that electrical utilities could see a larger role in building facilities for electric cars. Pacific Gas & Electric Co. also backed the bill.

Even with the fuel mandate out of the bill, environmental groups cheered its passage. Sierra Club Executive Director Michael Brune called it a “moment for hope and celebration” in an e-mailed statement. Sarah Rose, chief executive of the California League of Conservation Voters, said in a statement that while she's “deeply disappointed” that the gasoline reduction was taken out of the bill, she nonetheless supported the bill.

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