BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
SB 1368 - Perata Hearing Date:
April 4, 2006 S
As Introduced: February 21, 2006 FISCAL B
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DESCRIPTION
This bill prohibits "load-serving entities" (public or private
electric utilities and other providers of electric service) from
building or contracting (>3 years) base-load generation unless
the generation meets a GHG emission standard established by the
California Energy Commission (CEC).
This bill requires the CEC, in consultation with the Air
Resources Board, to establish a GHG emission standard which does
not exceed the GHG emissions of a combined-cycle natural gas
power plant.
BACKGROUND
The terms "global warming" and "global climate change" refer to
the rise in the average temperature of the earth's climate due
to an accumulation of "greenhouse gases" in the atmosphere.
GHGs include carbon dioxide (CO2), methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride.
While the political debate over the existence, cause, and
effects of global warming, and what to do about it, continues,
the prevailing wisdom among climate scientists is that global
warming is occurring and that measures should be taken to
address its effects.
SB 1771 (Sher), Chapter 1018, Statutes of 2000, required the
CEC, in consultation with other state agencies, to update
California's inventory of GHG emissions in January 2002 and
every five years thereafter. The inventory is to include all
emission sources in the state that were identified in the CEC's
1998 report, "Historical and Forecasted Greenhouse Gas Emissions
Inventories for California," including power plants.
According to the CEC's 2002 report, "Inventory of California
Greenhouse Gas Emissions and Sinks: 1990-1999," current research
has largely supported earlier scientific findings that GHG
emissions from human activities have been steadily increasing
since the industrial revolution. In addition, the United
Nations-sanctioned technical body, the Intergovernmental Panel
on Climate Change, reported in 1999: "There is new and stronger
evidence that most of the warming observed over the last 50
years is attributable to human activities."
California has seen a modest increase in GHG emissions over the
last decade. This increase is the consequence of several
divergent forces within California, some leading to increases in
GHG emissions, and others negating those increases.
Several key California industries emit only moderate amounts of
CO2. With a relatively temperate climate, California uses
relatively less heating and cooling energy than other states.
As a leader in implementing aggressive efficiency and
environmental programs, California has been able to reduce CO2
emission rates in all sectors, as well as reducing energy demand
and air pollution emissions. However, California leads the
nation in vehicle miles traveled. As a result, CO2 emissions
from the transportation sector are increasing.
California uses fossil fuels differently than the United States
as a whole. Compared to most other states, California uses less
fossil energy to generate electricity. This lower reliance on
fossil fuels is due to the availability of hydroelectric and
nuclear power, and the continuing and growing use of renewable
energy. The predominant fossil fuel for electricity generation
in California is natural gas, which emits relatively less GHG
than oil or coal, the predominant fuel in many other parts of
the country. As a fraction of its total fossil fuel use,
California uses more fossil fuels (primarily gasoline) in the
transportation sector.
The Governor announced ambitious goals and schedules for
reducing GHG emissions in an Executive Order last year. The
strategy for achieving these goals is expected to rely heavily
on achieving reductions in the utility sector, primarily
electric generation. In its 2005 Integrated Energy Policy
Report, the CEC recommended setting a GHG standard for utility
procurement at level no higher than emission levels from new
combined-cycle natural gas turbines. The CPUC has also
indicated its intention to introduce GHG factors into utility
procurement and place a cap on utility GHG emissions. The
purpose of this bill is to prevent long-term investments in
power plants with GHG emissions in excess of those produced by a
combined-cycle natural gas power plant.
COMMENTS
1. Vague standard, unpredictable results. Unlike the CEC's
recommendation, this bill does not specify that the GHG
standard should be based on new plants. This gives wide
discretion to the CEC to choose a standard that could be
fairly easy, or very difficult to achieve. For example,
emissions of CO2 from existing combined-cycle natural gas
power plants in California range from 651 lbs/MWh
(impossible for any older gas plant or commercially-proven
coal plant to meet) to 2,338 lbs/MWh (dirtier than many
coal plants). If a stringent standard is desired, the
author and the committee may wish to consider specifying
that GHG emissions cannot exceed those of a new
combined-cycle natural gas power plant, following the CEC's
recommendation. If a less stringent standard is desired,
LSEs could be given an allowance to exceed the emissions of
a new plant by a certain percentage. Or an initial
emissions level could be specified in the bill, and
ratcheted down as technology improves.
2. Contracts present verification problem, potential
loophole. It is common for LSEs to contract for energy
that isn't tied to any particular power plant, but instead
is delivered from a generator or marketer's portfolio of
generation resources. It is unclear how a plant-specific
emission standard could be enforced under these
circumstances. The author and the committee may wish to
consider directing the CPUC and CEC to address this issue
when they develop enforcement protocols.
3. Standard will determine which existing power plants
become ineligible for long-term contracts. Depending on
the level of allowable GHG emissions and how existing
plants GHG emissions are calculated, this bill could render
many existing conventional natural gas, co-generation,
biogas, and biomass plants, as well as coal plants,
ineligible for contracts longer than three years unless
they improve their emission performance by rebuilding or
adding pollution controls. It may be unreasonable to try
to force that kind of investment based on a contract as
short as three years. If this is a concern, the author and
the committee may wish to consider a longer contract
threshold to support the investment necessary to reduce GHG
emissions. For biogas and biomass plants, and perhaps
cogeneration, GHG emissions performance could be improved
by allowing GHG benefits associated with their production
cycles to offset the plants direct GHG emissions.
POSITIONS
Sponsor:
Author
Support:
E2 (Environmental Entrepreneurs)
Natural Resources Defense Council
Pacific Gas and Electric Company, if amended
Sacramento Metropolitan Air Quality Management District
Sempra Energy, if amended
Sierra Club California
The Utility Reform Network
Union of Concerned Scientists
Oppose:
California Municipal Utilities Association
Center for Energy and Economic Development
Southern California Edison
Sustainable Environment and Economy for California
Western States Petroleum Association
Lawrence Lingbloom
SB 1368 Analysis
Hearing Date: April 4, 2006