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Comment 82 for Public Input on Cap-and-Trade Auction Proceeds Second Investment Plan (investplan2-ws) - 1st Workshop.


First Name: Brad
Last Name: Heavner
Email Address: brad@calseia.org
Affiliation: California Solar Energy Industries Assoc

Subject: Investments Needed to Compete with Low Natural Gas Prices
Comment:
The draft “Cap-and-Trade Allowance Proceeds Second Investment Plan”
(Investment Plan) rightly acknowledges that, “Reducing
energy-sector emissions to near-zero by 2050 will require wholesale
changes to the State’s current electricity and natural gas
systems.”  The Plan highlights the need for targeted investments to
achieve that goal, including investments to develop biomass energy
sources, to reduce green waste burning, to develop carbon capture
and storage technology, and to convert to preferred refrigerant
systems. With respect to refrigerants, the Plan states that
although alternative technology exists in the marketplace,
“financial barriers inhibit widespread adoption.” 

This is precisely the type of problem that the Cap-and-Trade
Program is well suited to address, and it is necessary also to
apply the reasoning to technologies that compete with natural gas.
Shale gas drilling has dramatically reduced the price of natural
gas in California and the U.S. Technologies that are effective at
reducing greenhouse gas emissions from natural gas combustion may
not be cost effective from a customer adoption standpoint even if
they are cost effective from a statewide carbon reduction
standpoint. 

Solar water heating is a prime example. Heating water in homes and
businesses accounts for 3.5%-4% of total statewide greenhouse gas
emissions. Solar technologies are effective at reducing emissions
from residential, commercial and industrial water heating. However,
the return on a customer-driven investment has not been sufficient
to lead to adoption anywhere near the technical potential or the
level needed to substantially address this sector of emissions. 

The Investment Plan should specifically address this as a problem
and an opportunity. Technologies that reduce the carbon intensity
of non-utility activities where heat is typically supplied by the
combustion of natural gas may be hindered by the low price of
natural gas. Providing support for those technologies may be an
effective investment in greenhouse gas reduction.

A recent decision at the California Public Utilities Commission
failed to capitalize on the opportunity of allowance revenue from
natural gas utilities as a meaningful price signal or funding
source. The decision ordered that utilities only consign to auction
the minimum percentages in the Cap-and-Trade Regulation – 30% in
2016, increasing 5% per year – and that utilities return all of the
proceeds to customers as bill credits. 

The CPUC decision thwarts the entire objective of the Cap-and-Trade
Program. The carbon price signal is estimated to be $11.97 to
$14.89 per year. At that level, it will do nothing to reduce
greenhouse gas emissions. The CPUC is effectively delaying any
action on addressing climate change through natural gas utilities
and the Cap-and-Trade Program until years from now when carbon
pricing has risen to a meaningful level. This is time that we do
not have to spare.

In implementing the Cap-and-Trade Program, ARB is careful not to
interfere with the decision making processes of other state
agencies. However, other agencies do not have the same mandate to
reduce greenhouse gas emissions and give the issue much less
attention. ARB gave final say on the consignment percentage to
CPUC, but then the CPUC deferred to the previous guidance from ARB.


The Board must also be willing to fund programs that were
previously created by other agencies. The Cap-and-Trade Program has
a prohibition on funding programs that are already funded by other
sources. This is an important protection to make sure that
Cap-and-Trade funds are not used in a “shell game,” in which
previous or ongoing allocations to an emission reduction program
are diverted elsewhere. However, this should not be applied to
programs that have received a specified amount of funding that is
determined to be insufficient to address the need. As long as that
previous allocation is not removed and is unlikely to be renewed,
supplementing it with funding from allowance revenues can be
appropriate. The goal is emission reduction, and if an investment
is able to genuinely achieve that goal it should not be taken off
the table.

Thank you for the opportunity to comment. We look forward to
working with the Board to help develop policies that lead to a low
carbon future and a strong economy.

Attachment: www.arb.ca.gov/lists/com-attach/90-investplan2-ws-UzACZQBtVHQDYAFo.pdf

Original File Name: CALSEIA Comments on Investment Plan 11-13-15.pdf

Date and Time Comment Was Submitted: 2015-11-13 16:10:20



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