OLR Bill Analysis
HB 6838 (as amended by House "A")*
AN ACT CONCERNING THE ENCOURAGEMENT OF LOCAL ECONOMIC DEVELOPMENT AND ACCESS TO RESIDENTIAL RENEWABLE ENERGY.
This bill expands the Connecticut Green Bank's residential solar investment program and standardizes certain steps in the municipal permitting process for installing residential solar systems.
Regarding the solar investment program, the bill:
1. allows the program to support up to 300 megawatts (MW) of new residential solar photovoltaic (PV) installations by the end of 2022, instead of requiring it to provide 30 MW of PV installations by that time;
2. requires the program to end on the earlier of December 31, 2022 or when it achieves 300 MW of installations;
3. creates solar home renewable energy credits (SHRECs) which are owned by the Green Bank and generated when certain residential PV systems produce electricity;
4. requires electric distribution companies (EDCs, i.e., Eversource and United Illuminating) to purchase SHRECs from the Green Bank under a master purchase agreement negotiated between each EDC and the Green Bank;
5. expands the program's funding sources to include proceeds from the Green Bank's sale of SHRECs to the EDCs; and
6. allows the EDCs to recover their costs for purchasing the SHRECs through a reconciling (adjustable) component of their electric rates, as determined by the Public Utilities Regulatory Authority (PURA).
Regarding the municipal permitting process, the bill requires each municipality, by January 1, 2016, to incorporate residential solar PV systems in their building permit application process or use a residential solar PV system permit application supplement. It also allows municipalities to (1) post applications online, (2) permit electronic filing, and (3) waive certain fees. Under the bill, municipalities must inform a permit applicant whether the application is approved or disapproved within 30 days of receiving an application.
The bill requires the Green Bank, in consultation with the state building inspector, to implement a residential solar PV system permit training seminar for municipal officials developing a permitting process.
It also makes minor, technical, and conforming changes.
*House Amendment “A”, among other things, (1) makes 300 MW a cap, instead of a goal, for the solar investment program; (2) terminates the program of when it reaches the cap or December 31, 2022, whichever is earlier; (3) requires the purchase price of SHRECs to decline over time; (4) prohibits customers who participate in the program from participating in the Z-REC program; (5) requires the Green Bank to transfer RECS to the EDCs after their obligation to purchase them expires; and (6) adds the provisions on residential solar PV permitting.
EFFECTIVE DATE: Upon passage, except the provisions on municipal permitting are effective October 1, 2015.
THE RESIDENTIAL SOLAR INVESTMENT PROGRAM
By law, the Green Bank's residential solar investment program offers financial incentives for purchasing or leasing certain residential solar PV systems. The incentives are either (1) performance-based incentives paid out on a per kilowatt-hour (kWh) basis for the electricity the system produces or (2) expected performance-based buy downs that are a one-time upfront payment based on the system's expected performance.
The law provides these incentives for “qualifying residential solar PV systems.” The bill specifies that these systems are solar PV projects that
1. receive funding from the Green Bank,
2. are certified by PURA as Class I renewable energy sources,
3. emit no pollutants,
4. generate less than 20 kilowatts,
5. are on the customer-side of a one- to-four-family home's revenue meter, and
6. serve an EDC's distribution system.
Current law requires the program to result in at least 30 MW of new residential PV systems by December 31, 2022. The bill instead (1) requires the program to support the deployment of up to 300 MW of systems by that date and (2) terminates the program on that date or when the program reaches the 300 MW cap, whichever occurs first. It also prohibits the bank from approving incentives for more than 100 MW of new systems between the date the bill passes and April 1, 2016.
The law allows the Green Bank to fund the program with up to one-third of the funds annually collected through the charge on electric bills that supports the Clean Energy Fund, plus any available federal funding. The bill requires the bank to also fund the program with all of the revenue it receives from the sale of SHRECs, which the bill creates.
Current law requires the renewable energy produced from a program's PV systems to be applied toward the EDCs' renewable portfolio standard requirements (RPS, a requirement to obtain a certain percentage of their energy from renewable energy sources) if it receives tariff payments or is included in utility rates. The bill eliminates this requirement once the master purchase agreement is approved and instead allows the EDCs to retire the SHRECS they must purchase under the bill to satisfy their RPS requirements.
Solar Home Renewable Energy Credits
The bill creates SHRECs, which are Class I renewable energy credits created for each megawatt hour of electricity produced by qualifying residential solar PV systems that receive approved incentives from the Green Bank on or after January 1, 2015. A SHREC has an effective life that covers the year it was produced and the next calendar year. It is owned by the Green Bank until transferred to an EDC under the master purchase agreement.
Under the bill, the Green Bank sets the purchase price for SHRECs, which must decline over time commensurate with the schedule of declining performance-based incentives and expected performance-based buy-downs. The price cannot exceed the lesser of (1) the preceding year's price for small Z-RECs (a similar renewable energy credit produced by certain zero-emission facilities) or (2) $5 less per credit than the RPS alternative compliance payment (a 5.5 cents/kWh penalty for failing to meet RPS requirements). The bill prohibits EDC customers who are eligible for the SHREC program from also being eligible for the Z-REC program.
Master Purchase Agreement
The bill requires the Green Bank, within 180 days after July 1, 2015, to negotiate and develop a 15-year master purchase agreement with each EDC requiring the EDC to purchase the bank's SHRECs. Each EDC's obligation to purchase SHRECs must (1) begin once PURA approves the agreement; (2) expire on December 31, 2022; and (3) be apportioned based on its distribution system's demand for electricity, as determined by PURA, when the agreement begins.
The bill requires the Green Bank and EDCs to negotiate in good faith to develop the agreement. If there are any outstanding issues 30 days after the negotiations start, either party may initiate a docket with PURA to resolve the issues. Once the negotiations are complete, the Green Bank and EDCs must, by January 1, 2016, jointly file the agreement for PURA's approval. PURA must hold a contested case under the Uniform Administrative Procedure Act to approve, reject, or modify the agreement, which cannot become effective without PURA's approval. (The bill does not specify what criteria PURA must use to approve, reject, or modify an agreement.)
EDC Cost Recovery
The bill requires that EDCs timely recover their costs associated with complying with the bill's requirements through a fully reconciling (adjustable), non-bypassable rate component. Each EDC must annually file with PURA an accounting of all costs and fees it incurred while complying with the master purchase agreement.
The EDCs can resell or dispose of the energy or credits they purchased under the agreement, but the proceeds from the sale must be netted against their costs for complying with the agreement. The difference must be credited or charged to the EDC's customers through a PURA-determined reconciling component of their electric rates that cannot be bypassed by switching electric suppliers.
Once the EDCs' obligation to purchase SHRECs expires, any Class I renewable energy credits (RECs) produced by a qualifying residential PV system must be transferred from the Green Bank to the PV system's EDC. The EDC must either (1) resell the credits into the New England Power Pool Generation Information System REC market for electric suppliers and EDCs to meet their RPS requirements or (2) keep the credits to meet its own RPS requirements. In deciding whether to resell or keep the RECs, the EDC must select the option that is in its ratepayers' best interests.
The bill eliminates a provision in current law that prohibits customers who receive the program's performance-based buy down from receiving net metering credits (i.e. billing credits that allow a customer to “run their meter backwards” based on how much excess electricity their PV system generates).
The bill requires the Green Bank to publish on its website, instead of in its biannual comprehensive plan a proposed schedule for offering program incentives. Among other things, current law requires the incentives to meet a consumer's reasonable payback expectations. The bill requires them to also provide the consumer with a competitive electricity price and adds the cost of financing the system to various other factors the bank must consider when setting the incentives (e.g., the value of energy offset by the system and the availability and value of other incentives).
Current law allows the Green Bank to modify an incentive schedule if changes in federal or state law or developments in the solar market would affect a typical residential PV system's expected return on investment by 20% or more. The bill lowers this threshold to 10% and subjects the modification to review and approval by the Department of Energy and Environmental Protection.
The bill also extends, from January 1, 2016 to January 1, 2017, the deadline for the Green Bank's next biannually required report to the Energy Committee on the program's progress.
RESIDENTIAL SOLAR PERMITTING
The bill requires each municipality, by January 1, 2016, to incorporate residential solar PV systems in their building permit application process or use a residential solar PV system permit application supplement. Under the bill's permitting provisions, a residential solar PV system is equipment and devices that:
1. collect solar energy and generate electricity by photovoltaic effect,
2. have a nameplate capacity rating of 12 kilowatts or less,
3. are installed on the roof of a single-family home, and
4. conform to the State Building code.
The bill allows a municipality, when developing a permitting process, to:
1. develop and post on its website a permit application for installing residential solar PV systems;
2. allow applicants to submit applications electronically; and
3. exempt the systems from municipal permit fees assessed on building permit applications to construct or alter a building or structure.
The bill requires municipalities to inform an applicant for a residential solar PV system whether the permit is approved or disapproved within 30 days after receiving the permit application. It allows local building officials, when inspecting the work completed under a permit, to use additional resources described in the International Residential Code portion of the State Building Code. Inspections must be performed according to this portion of the code.
The bill specifies that its provisions do not authorize anyone to alter homes or structures in historic districts.
By December 1, 2015, the bill requires the Green Bank to plan, implement, and host at least five residential solar PV system permit training seminars in different municipalities to provide guidance and information to municipalities seeking to develop a permitting process. In planning and implementing the seminars, the Green Bank may consult with (1) the Connecticut Conference of Municipalities, (2) the Connecticut Council of Small Towns, (3) the Renewable Energy and Efficiency Business Association, and (4) other organizations.
Energy and Technology Committee