BILL ANALYSIS Ó SB 771 Page 1 Date of Hearing: June 27, 2011 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Wesley Chesbro, Chair SB 771 (Kehoe) - As Amended: June 20, 2011 SENATE VOTE : 38-0 SUBJECT : California Alternative Energy and Advanced Transportation Financing Authority SUMMARY : Specifies that natural gas engines, landfill gas engines, digester gas engines, landfill gas turbines, digester gas turbines, and microturbines are ultralow-emission equipment for energy generation based on thermal energy systems and thus eligible for financial assistance under the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) Act. EXISTING LAW: 1)Creates CAEATFA for the purpose of promoting the development and utilization of alternative energy sources and the development and commercialization of advanced transportation technologies. CAEATFA consists of five members: the Director of Finance, the chairperson on the California Energy Commission, the president of the Public Utilities Commission, the Controller, and the Treasurer, who serves as the chairperson of CAEATFA. 2)Permits CAEATFA to provide bond financing to lend assistance to a participating party to enter into loan agreements to finance projects that use an alternative energy source or advanced transportation technologies. 3)Permits CAEATFA to approve a sales and use tax exemption on tangible personal property utilized for the design, manufacture, production, or assembly of advanced transportation technologies or alternative energy source products, components or system. This sales and use tax exemption will sunset on January 1, 2021. SB 771 Page 2 4)Requires CAEATFA to establish a renewable energy program to provide financial assistance to public power entities, independent generators, utilities, or businesses manufacturing components or systems, or both, to generate new and renewable energy sources, develop clean and efficient distributed generation, and demonstrate the economic feasibility of new technologies, such as solar, photovoltaic, wind, and ultralow-emission equipment. 5)Defines "renewable energy" as either of the following: a) A device or technology that conserves or produces heat, processes heat, space heating, water heating, steam, space cooling, refrigeration, mechanical energy, electricity, or energy in any form convertible to these uses, that does not expend or use conventional energy fuels (e.g. oil, gasoline, natural gas), and that uses biomass, solar thermal, photovoltaic, wind, or geothermal electrical generation technologies. b) Ultralow-emission equipment for energy generation based on thermal energy systems such as natural gas turbines and fuel cells. THIS BILL adds natural gas engines, landfill gas engines, digester gas engines, landfill gas turbines, digester gas turbines, and microturbines to the list of energy generation equipment that CAEATFA must consider "renewable energy" eligible for financial assistance. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS : 1)CAEATFA. CAEATFA was created in 1980 with an authorization of $200 million in revenue bonds to finance projects utilizing alternative sources of energy, such as cogeneration, wind and geothermal power. It was renamed in 1994 as currently titled and its charge expanded to include the financing of "advanced SB 771 Page 3 transportation" technologies. During the energy crisis of 2001, its authority was again expanded, this time to provide financial assistance to public power entities, independent generators, and others for new and renewable energy sources, and to develop clean distributed generation. CAEATFA's authority is broad but in practice it has not been utilized until recently. The State Treasurer has tried to reinvigorate the authority and has launched a sales and use tax exemption program to stimulate green manufacturing as authorized by SB 71 (Padilla, 2010). 2)Landfill gas and anaerobic digestion. Landfilling is the main method for disposal of municipal and household solid wastes or refuses in the United States. Although maintained in an oxygen-free environment and relatively dry conditions, landfill waste produces significant amounts of landfill gas (mostly methane). With Californians dumping more than 42 million tons of waste per year, the total amount of landfill gases produced in California is tremendous. Landfill gas is generated by the natural degradation of municipal solid waste by anaerobic (without oxygen) micro-organisms. Once the gas is produced, the gas can be collected by a collection system, which typically consists of a series of wells drilled into the landfill and connected by a plastic piping system. Anaerobic digestion is a biological process that produces a gas principally composed of methane (CH4) and carbon dioxide (CO2) otherwise known as biogas. These gases are produced from organic wastes such as livestock manure, food processing waste, etc. Anaerobic processes could either occur naturally or in a controlled environment such as a biogas plant. Organic waste such as livestock manure and various types of bacteria are put in an airtight container called digester so the process could occur. Depending on the waste feedstock and the system SB 771 Page 4 design, biogas is typically 55 to 75% pure methane. State-of-the-art systems report producing biogas that is more than 95 percent pure methane. 3)Square peg, round hole? Landfill gas and digester gas are considered renewable energy sources for purposes of the Renewables Portfolio Standard and other state programs. They are not included in the definition of "renewable energy" for CAEATFA's purposes, but it appears appropriate and consistent with other statutes to add them. Conventional natural gas is not considered a renewable energy source in any other context. It is unclear that it would be necessary or consistent with CAEATFA's purpose to provide financial assistance to natural gas technologies. However, if the author's intent is to make engines fueled by conventional natural gas specifically eligible for financial assistance from CAEATFA, the author and the committee may wish to consider amending the bill to make them eligible, without calling them renewable. 4)Double referral. This bill has been double-referred to the Utilities and Commerce Committee. REGISTERED SUPPORT / OPPOSITION : Support Clean Power Campaign Marin Sanitary Service Opposition None on file Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916) 319-2092 SB 771 Page 5