BILL ANALYSIS Ó SB 771 Page 1 SENATE THIRD READING SB 771 (Kehoe) As Amended June 30, 2011 Majority vote SENATE VOTE :38-0 NATURAL RESOURCES 9-0 UTILITIES & COMMERCE 13-0 ----------------------------------------------------------------- |Ayes:|Chesbro, Knight, |Ayes:|Bradford, Fletcher, | | |Brownley, Dickinson, | |Buchanan, Fong, Fuentes, | | |Grove, Halderman, Hill, | |Furutani, Beth Gaines, | | |Monning, Skinner | |Roger Hernández, Huffman, | | | | |Knight, Nestande, | | | | |Skinner, Valadao | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Fuentes, Harkey, | | | | |Blumenfield, Bradford, | | | | |Charles Calderon, Campos, | | | | |Davis, Donnelly, Gatto, | | | | |Hall, Hill, Lara, | | | | |Mitchell, Nielsen, Norby, | | | | |Solorio, Wagner | | | | | | | | ----------------------------------------------------------------- SUMMARY : Specifies that natural gas engines, landfill gas engines, digester gas engines, landfill gas turbines, digester gas turbines, and microturbines are ultralow-emission energy 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. Specifically, this bill : 1)Distinguishes the term "ultralow-emission energy" from the term "renewable energy" for the purpose of accurately describing the different types of equipment, technology, and devices that are eligible under CAEATFA. 2)Includes within the meaning of "Ultralow-emission energy" the SB 771 Page 2 following equipment: natural gas engines, landfill gas engines, digester gas engines, landfill gas turbines, digester gas turbines, and microturbines. 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 State Controller, and the State 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. 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 SB 771 Page 3 thermal, photovoltaic, wind, or geothermal electrical generation technologies; or, b) Ultralow-emission equipment for energy generation based on thermal energy systems such as natural gas turbines and fuel cells. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)Minor, absorbable special fund costs to CAEATFA and the Air Resources Board. 2)Special fund cost pressure of an unknown amount, potentially in the millions of dollars, to fund ultralow-emission energy projects that, absent this bill, would not be eligible for CAEATFA financial assistance. COMMENTS : 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 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, et al.), Chapter 10, Statutes of 2010. 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. SB 771 Page 4 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 design, biogas is typically 55 to 75% pure methane. State-of-the-art systems report producing biogas that is more than 95% pure methane. According to the author, meeting our state's renewable energy portfolio standard goals will require additional solar, wind, and geothermal power generation. Some of these generation sources will be intermittent so meeting our goals will also require relying on clean technologies and equipment that can harness renewable power from gases that are byproducts from landfills, farms, and ranches. Ensuring that these technologies are eligible for state incentives (through programs like CAEATFA) is important to achieving our state energy goals. Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916) 319-2092 FN: 0002246 SB 771 Page 5