BILL ANALYSIS Ó
SB 1122
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Date of Hearing: August 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1122 (Rubio) - As Amended: June 28, 2012
Policy Committee: Utilities and
Commerce Vote: 13-0
Natural Resources 9-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill creates a procurement program for biomass and biogas.
Specifically, this bill requires California Public Utilities
Commission (CPUC) to:
1)By June 1, 2013, direct the state's investor owned utilities
(IOUs) to, together, procure at least 250 megawatts of
electrical generating capacity from startup developers of
biomass and biogas projects.
2)Require the IOUs to allocate the 250 megawatts of
biomass/biogas electrical generating capacity, as follows:
a) Dairy digester gas-85 megawatts.
b) Wastewater treatment biogas-50 megawatts.
c) Agricultural biomass and biogas-50 megawatts.
d) Forest byproduct biomass-30 megawatts.
e) Landfill gas-35 megawatts.
3)Encourage gas and electric utilities, by December 31, 2013, to
offer programs and services to facilitate the development of
in-state biogas and to facilitate the conditioning and
upgrading of biogas in order to enable biogas to be used for a
broad range of purposes, including injection into natural gas
pipelines, use for onsite power generation, and use at
compressed natural gas filling stations for alternative fuel
vehicles.
FISCAL EFFECT
One-time cost of approximately $300,000 during 2011-12 and
2012-13 to the CPUC to conduct a proceeding to modify the
SB 1122
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commission's feed-in-tariff (FIT) program, in keeping with the
requirements of the bill (special fund).
COMMENTS
1)Rationale . The author intends this bill to result in the
increased development of biogas and biomass projects, which
the author describes as providing considerable environmental
benefits, including reduction of air pollutants. The author
contends biomass and biogas currently are unable to compete
against other forms of renewable energy, some of which have
received years of public subsidy, and that it is in the public
interest to foster biogas and biomass electricity sources.
2)Background . Current law encourages the development of
electrical generation from small, distributed sources that
qualify as renewable energy resources. To achieve this
development, the CPUC recently approved a decision to
establish a FIT program of adjustable, market-driven prices
for each of three product types of renewable resources:
baseload, peaking as-available and nonpeaking as-available.
The CPUC intends the product categories to be technology
neutral and projects to compete for contracts with other
projects within each product category.
Despite this technology-neutral approach, many note the
technology that best matches the peaking as-available category
is solar energy, because the solar technologies, while
intermittent, produce energy when energy demand is at its
peak. Wind power best matches the non-peaking as-available
category, because the wind blows intermittently and, usually,
when energy demand is low. The baseload product category
includes a number of other energy sources that, potentially
produce electricity at all times, such as geothermal, small
dams, biomass and biogas.
Under the CPUC scheme, producers of biomass and biogas would
compete against other baseload renewable energy sources.
Biomass and biogas energy producers would successfully enter
into contracts with the IOUs to the extent they offer prices
at or below competitors within the baseload category. In this
way, the IOU FIT program uses market forces to control the
cost of renewable energy procurement within the baseload
product category. Bill proponents protest that, despite
segregation of generation technologies by product categories,
biomass and biogas likely will still be unable to compete on
price against other, more developed baseload generation
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technologies, such as small dams.
These proponents further contend that solar and wind
generation technologies have enjoyed decades of subsidies and
preferences, during which time the technologies have developed
and the prices of electricity produced by them have dropped
considerably. Proponents continue that biomass and biogas,
like wind and solar, have considerable societal benefits, such
as the reduction of criteria air pollutants and greenhouse
gases, and it is therefore just and desirable to create a
procurement program that prefers biomass and biogas so those
technologies, too, may develop and become more affordable.
3)A Procurement Program Is Not the Only Way. A procurement
program for biogas and biomass will necessarily result in the
generation of electricity from those energy sources. However,
a procurement program thwarts the market-based, competitive
approach chosen by the CPUC. This is because projects within
categories are nearly guaranteed a market for their product,
almost regardless of price. If it is in society's interest,
because of concerns over air pollution and climate change, to
encourage the production electricity from biomass and biogas,
it may make more sense to do so directly through a subsidy.
Such direct funding would lower the cost of electricity
production from the subsidized sources but leave in place the
FIT market-based system devised by the CPUC.
4)Support . This bill is supported by several producers of
biogas and biomass.
5)Opposition . There is no opposition formally registered to
this bill.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081