6. Technology Eligibility

Pub. Util. Code § 2864 requires that the Commission, in consultation with the California Energy Commission (CEC), shall establish eligibility criteria for SWH systems receiving gas customer funded incentives. According to the code, eligibility criteria should include:

· Energy output or displacement standards. Residential SWH systems shall have Solar Rating and Certification Corporation (SRCC) OG-300 SWH System Certification. Solar collectors used in multifamily residential, commercial, or industrial water heating shall have SRCC OG-100 SWH System Certification;

· Components must be new and unused;

· SWH collectors must have a warranty of not less than 10 years;

· SWH systems must be in buildings connected to a natural gas utility's distribution system;

· SWH systems must have meters or other kilowatt thermal (kWth) measuring devices to monitor and measure system performance and the quantity of energy generated or displaced by the system. Meters are required for systems displacing over 30 kWth; and

· Systems must be installed in conformity with manufacturer's specifications and all applicable codes and standards.

In addition, Pub. Util. Code § 2865 requires the Commission to establish conditions for gas customer funded incentives, including:

· Appropriate siting and installation to maximize performance of the system;

· Appropriate energy efficiency improvements in the home or commercial structure where the SWH system is installed; and

· Rating standards for equipment components and systems.

The Staff Proposal notes these requirements in AB 1470 for systems displacing natural gas, recommends a program that includes all of these requirements, and incorporates these eligibility criteria and conditions into the Program Handbook. Staff recommends that some of these items be further developed by the Program Administrators in the Program Handbook development process, namely siting and installation conditions and energy efficiency improvements. With regard to rating standards for systems and components, staff recommends that systems meet the OG-100 and OG-300 certifications.

For SWH systems that displace electric usage, the Staff Proposal recommends the same requirements apply, except where requirements specific to electric-displacing systems are explicitly discussed.

In addition to these requirements in AB 1470, the Staff Proposal recommends that the CSI Thermal Program provide incentives to other, i.e., non-SWH, solar thermal technologies, such as solar assisted space heating and cooling and solar thermal used for commercial and industrial processes, as long as the customer would otherwise have consumed gas or electricity from the utility to serve that application. Solar pool heating and passive solar technologies would not be eligible under this program.

Finally, staff notes that if SWH becomes mandatory for new home construction, new homes should not be eligible for incentives under the program.

6.1. Comments

The bulk of the comments did not take issue with the detailed eligibility requirements and conditions in AB 1470. Instead, the comments focused on staff's suggestion to expand the program beyond SWH systems to include non-SWH solar thermal technologies.

CALSEIA recommends the Commission focus its current efforts on implementing incentives for SWH systems for residential and commercial customers that displace natural gas or electricity usage. They note that combination, or "hybrid," systems that provide both SWH and space conditioning or electric generation, would require the Commission to establish criteria for rating system performance and to further examine rebate levels. CALSEIA suggests this is more appropriate for a later phase of this rulemaking, so that incentives for SWH systems can begin immediately.

Similar to CALSEIA, PG&E agrees that the initial program should be limited to SWH systems that displace natural gas and electricity. While PG&E generally agrees that non-SWH gas displacing technologies should be eligible for incentives, it notes that Itron's cost-effectiveness analysis did not include these technologies. On that basis, PG&E recommends these technologies be given incentives only on a pilot basis, subject to an incentive cap. PG&E and ASHRAE both suggest that non-SWH systems should only receive incentives based on actual system performance. SDG&E/SoCalGas note that a cost-sharing mechanism, such as a co-funding agreements between SoCalGas and SCE, will need to be developed for combination systems that displace both gas and electric usage and are installed by customers in the territories of SoCalGas and SCE.

A letter from ASHRAE confirms that criteria need to be established for defining the non-SWH equipment that might qualify for this program, since OG-100 and OG-300 do not apply to thermal heating or cooling. A letter from SRCC notes that it is in the process of developing a certification standard for concentrating solar collectors. This new certification, SRCC OG-600, should be available by January 2010.

Conversely, CCSE and Sopogy urge the Commission to move forward with providing incentives to non-SWH solar thermal systems. CCSE supports incentives to non-SWH solar thermal technologies, although it notes these technologies do not have SRCC standards, and the SRCC currently has a two-year certification backlog. Therefore, CCSE suggests the Commission establish a Technical Advisory Committee (TAC) to define eligibility standards for these technologies and approve substitution of components such as storage tanks and solar collectors. Sopogy cautions against using OG-100 and OG-300 as eligibility criteria since these standards exclude technologies outside a narrow temperature band suitable for domestic hot water and lower temperature applications. Sopogy suggests other technologies not covered by these criteria have met other performance thresholds and are in use in other countries.

Environment California takes a measured approach, contending the CSI Thermal Program should encourage emerging SWH technologies while at the same time ensuring the majority of funds are spent on technologies that have the greatest potential to be brought to scale and transform the SWH market. To achieve this, Environment California suggests a cap on new technologies, but does not provide details on how such a cap might work.

6.2. Discussion

There is no dispute that we must incorporate the requirements of Sections 2864 and 2865 into our CSI Thermal Program. Although these requirements pertain to systems displacing gas usage, for ease of implementing our program quickly we will require all systems, both gas-and electric-displacing, to meet the conditions and eligibility criteria in Sections 2864 and 2865. The CSI Thermal program administrators (PAs)¹⁰ shall ensure these requirements are incorporated into the Program Handbook.

We clarify that in order to be eligible for gas-displacing SWH incentives, an applicant must be a gas customer of PG&E, SDG&E or SoCalGas and installing SWH on a new or existing home or business to replace gas water heating.¹¹ To be eligible for electric-displacing SWH incentives, an applicant must be an electric customer of PG&E, SCE, or SDG&E and installing SWH on an existing home or business to replace electric water heating.¹²

We also specify that the PAs must develop appropriate siting, and installation guidelines for Commission approval and inclusion in the CSI Thermal Program Handbook. System type, sizing, and freeze protection standards are critical installation issues that can ensure systems maximize performance. SRCC suggests the Commission adopt procedures for system type selection based on climate, sizing procedures, and inspection protocol. We agree and will direct the Energy Division to hold a workshop on this topic to assist the PAs in developing these guidelines for incorporation into the CSI Thermal handbook. The PAs should develop procedures specifying that systems be sized with consideration to the solar fraction applicable to the system's climate zone to prevent oversizing and overheating of systems. Freeze protection standards should be climate-zone specific. Single-family residential system tank size should be based on the number of persons in the household, while commercial and multifamily systems should follow ASHRAE guidelines on sizing. System sizing requirements should also consider the impact of appropriate energy efficiency improvements, as discussed in Section 11 below. Moreover, we direct that guidance on system sizing requirements be included in installer training funded through this program.

In comments on the proposed decision, DRA urges the Commission to adopt increased warranty requirements for SWH installations beyond the 10-year warranty on solar collectors required by § 2864. In developing the program handbook, Energy Division may consider applying increased warranty requirements beyond those required by the statute, with consideration given to balancing increased warranty costs with adequate consumer and ratepayer protection for SWH investments.

To ensure that all eligibility criteria and conditions are enforced, we will require the PAs to inspect the first three installations performed by every installer, and random inspections thereafter. The percentage of systems inspected randomly should be determined in consultation with Energy Division as part of the CSI Thermal Program Handbook process.

Another key issue parties raise is whether we should offer incentives to non-SWH solar thermal systems, or combination systems that are not currently SRCC certified, and whether we should consider paying these systems on a performance basis based on actual system output over a longer time period. We agree with CALSEIA and PG&E that our initial focus should be providing incentives for SWH systems that have SRCC OG-100 and OG-300 certification. Indeed, for the portion of the program funded by AB 1470, the statute explicitly requires residential systems to have SRCC OG-300 certification and multifamily residential, commercial, and industrial systems to have SRCC OG-100 certification. Therefore, we will authorize SWH incentives only for electric-and gas-displacing SWH systems that have SRCC certification.

Although CCSE and Sopogy urge us to relax this certification requirement, the statute requires certification for gas-displacing systems, and we will use the same requirements for electric-and gas-displacing systems, at least at the outset. To the extent SRCC adopts certifications for concentrating solar collectors, as its comments suggest, the PAs may request Handbook modifications to include these systems in the program. The Staff Proposal recommendation to provide rebates for non-SWH solar thermal projects will be addressed later in this rulemaking, as will the concept of paying incentives on a performance basis rather than in an up-front lump sum. We will direct our Energy Division to hold a workshop on the issue of eligibility of non-SWH solar thermal technologies that displace gas usage and meet other program requirements such as SRCC certification. A key question for the workshop to address is how to estimate these technologies' thermal displacement for incentive calculation purposes and whether incentives should be paid on a performance basis. Electric-displacing non-PV solar thermal projects may currently apply for incentives through our general market CSI program. Staff should consider whether lessons learned through CSI can apply to gas-displacing non-SWH solar thermal projects to speed their ability to take part in this program.

¹⁰ Program Administration is discussed in detail in Section 9 below.

¹¹ We agree with staff that if SWH becomes mandatory for new home construction, new homes shall not be eligible for gas-displacing incentives.

¹² We will not allow new homes or businesses to be eligible for electric-displacing incentives at this time. The CEC administers electric-displacing solar incentives for new homes.