SB 715 Senate Bill - Bill Analysis

BILL ANALYSIS � 1

SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR

SB 715 - Lara Hearing Date: April 30, 2013
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As Amended: April 8, 2013 FISCAL B

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DESCRIPTION

Current law requires investor-owned utilities, publicly owned
utilities, community choice aggregators, and energy service
providers to increase purchases of renewable energy such that at
least 33% of total retail sales are procured from renewable energy
resources by December 31, 2020. This is known as the Renewables
Portfolio Standard (RPS). Also established in statute is the intent
of the RPS program to reduce air pollution, and meet the state's
climate change goals by reducing greenhouse gases (GHGs) associated
with electrical generation. (Public Utilities Code 399.11 et seq.)

Current law defines as RPS eligible, electric generation resources
from biomass, solar thermal, photovoltaic, wind, geothermal, fuel
cells using renewable fuels, small hydroelectric generation of 30
megawatts (MW) or less, digester gas, landfill gas, ocean wave,
ocean thermal, tidal current, and municipal solid waste conversion
that uses a non-combustion thermal process to convert solid waste
to a clean-burning fuel. Currently only one municipal solid waste
(MSW) combustion facility in Stanislaus County is eligible for RPS
credit. Any other MSW combustion facilities are expressly
prohibited. (Public Resource Code 25741)

Current law sets a limit for GHG emissions in 2020 to be equivalent
to emissions levels in 1990. (Health & Safety Code 38550)

This bill defines two additional MSW combustion facilities from Los
Angeles County as eligible for RPS credit.

This bill would also require the facilities to convert to
non-combustion facilities by 2045 or forfeit eligibility for RPS
credit.

BACKGROUND

LA County Waste-to-Energy Contracts - The Commerce and Long Beach
MSW combustion facilities currently have contracts with Southern
California Edison (SCE) to sell energy at no less than 9 cents per
kilowatt hour (kWh). These contracts will expire within five years.
Given the RPS and GHG reduction mandates, current energy demand is
for clean, RPS-eligible resource procurement. While the facilities
will still need to divert 585,000 tons of MSW, the market value of
the produced electricity will drop. Effectively, this will shift
costs of service to waste management subscribers. The two
facilities could bring in more revenue from a renewed electricity
procurement contract if they were considered renewable facilities.

Procurement contracts for non-RPS facilities are different from
those for RPS facilities. Typically, non-RPS facilities have
contracts that incorporate costs of the produced electricity and
also incorporate the value of capacity. Facilities that are RPS
eligible produce two commodities of value: the actual electricity
and renewable energy credits (RECs). The value of the REC is
determined by the portion of the procurement cost that is not
associated with the electricity generation.

The Stanislaus Provision - The RPS statute provides RPS-eligibility
for only one MSW combustion facility in Stanislaus County. The
inclusion of this facility at the time the bill passed in 2002 is
an anomaly. Other MSW combustion facilities are explicitly denied
RPS eligibility, because burning trash is not consistent with the
goals of reducing GHGs and air pollution. Since the adoption of the
RPS, there has been some further study on the emissions and
environmental impacts of MSW combustion facilities (see below).

Carbon Lifecycle: Biogenic vs. Fossil Origin - GHG emissions are
classified under two categories: biogenic and fossil origin. Fossil
fuels produce GHGs when burned that trap energy in the atmosphere
and contribute to global climate change. The carbon contained
within the fuel had been sequestered from the atmosphere for many
million years, so the reintroduction of that carbon to the
atmosphere causes the current balance to be disrupted. On the other
hand, the origin of biogenic carbon is the atmosphere itself. For
example, plants remove carbon from the atmosphere while growing.
When fuel derived from those plants is burned, the carbon returns
to the atmosphere, and the process has a net effect near zero.
Biomass operations are typically granted RPS eligibility based on
this distinction.

MSW has a combination of both biogenic and fossil carbon. Included
in the waste are plant materials that have grown recently, and
plastics which are formed from fossil petroleum. Even accounting
for the biogenic portion of MSW, the combustion of the fossil
portion provides a similar amount of GHGs as a natural gas plant
(about 1000 pounds of CO2 per megawatt-hour).<1>

MSW Combustion vs. Landfill Gas Capture - A research paper from
2009 compares combustion of MSW to landfill gas capture and
considers the amount of GHG emissions from the two processes.<2>
The research authors find that burning MSW is a less
carbon-intensive process than landfill gas combustion for the
production of electricity. One assumption of the study is that
landfill gas capture is inefficient and a significant portion of
the natural gas created by waste decomposition escapes to the
atmosphere. While true, this could be considered an argument for
better capture technologies than currently implemented. The article
shows that while MSW combustion may provide some advantages over
landfill gas, MSW combustion still has GHGs and other emissions
(including NOx, a source of acid rain; and CO, a toxin) similar or
worse than natural gas combustion.

A subsequent study also compared MSW combustion with landfill gas
capture and found that neither processes is carbon neutral.<3> The
author of this study suggested that MSW combustion is particularly
carbon intensive, because it burns plastics that could be used to
offset manufacturing of new materials if recycled.

Mandated Alternatives to Landfilling - AB 341 (2011, Chesbro)
established the state-wide goal of 75% diversion of solid waste
from landfills by 2020. Statute requires that this is achieved
through source reduction, recycling, or composting. Recycling
metals and plastics reduces the amount of waste in the landfill,
whereas burning plastics contributes to atmospheric GHGs from
fossil sources. Compostable material is biogenic in origin, and
methane from decomposing material can be captured to provide fuel
through landfill gas capture technology or a dedicated anaerobic
digester facility. Facilities that use MSW combustion technically
divert waste from landfills, but the combustion of MSW releases
GHGs and other toxins found in the plastics and other materials
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<1> http://www.epa.gov/osw/nonhaz/municipal/wte/airem.htm#7
<2> Kaplan, DeCarolis, and Thorneloe, 2009, Environ. Sci. &
Technol., 43, 1711-1717
<3> Morris, J, 2010, Environ. Sci. & Technol., 44, 7944-7949

that could alternatively be recycled.

COMMENTS

1. Author's Intent . This bill provides an exception within the
RPS statute for two MSW combustion facilities in LA County
that would grant those two facilities RPS eligibility. The
facilities currently have contracts that will expire within 5
years. The author argues that without the RPS eligibility, the
facilities will not be able to obtain revenue from its future
energy contract. As a result, costs of waste disposal
currently sustained by electric purchase will shift to refuse
rates. The author's intent is to provide RPS eligibility to
the facilities so that they may renew contracts at a premium
market value and offset waste disposal costs for the cities.

2. Clean Energy ? Are these facilities consistent with the
goals of the RPS to reduce GHGs and other air pollutants? By
comparison, even accounting for the biogenic portion of MSW,
the facilities in question still produce GHG emissions similar
to a natural gas plant. MSW combustion releases more
particulate matter than natural gas, and approximately
equivalent amounts of carbon monoxide and NOx.

3. Trash Solution ? An analysis comparing MSW combustion to
landfill gas capture showed that MSW combustion has some
advantages over landfill gas. This is in part based on an
assumption made in the analysis that 60-85% of methane leaks
out of the landfill gas capture process. The author argues
that MSW combustion deserves RPS eligibility based on the
results of this study. However, the fact that there is
significant leakage from landfill gas capture argues for
better efficiencies in gas capture technologies, not for RPS
eligibility for MSW combustion. Granting RPS eligibility to
MSW combustion would also undermine state goals to divert 75%
of waste from landfills by providing the excuse that waste can
just be burned.

4. Economics of RPS . By incentivizing renewable technologies
through the RPS program, demand for non-renewable energy
decreases. The problem that the author has highlighted (i.e.
the decreased market value of energy from MSW combustion) has
been designed from the RPS program, and the fact that the
problem exists indicates the RPS program is working. Giving
RPS eligibility to waste incineration displaces other

technologies that have far fewer emissions than waste
incineration (e.g., wind, solar, geothermal). Granting RPS
eligibility for any facilities that emit GHGs with fossil
origins undermines the intent of the RPS and GHG reduction
programs.

5. The Parity Argument. Proponents of the bill argue that
because the facility in Stanislaus County is eligible, then
the two facilities in LA County should also be eligible. The
Stanislaus exception was not made based on environmental or
technology considerations. Furthermore, by including the
specific language as proposed, the bill only allows for waste
combustion facilities in LA to be eligible. Any future MSW
combustion facilities would still not receive RPS eligibility,
and that also would "not be fair" under the same reasoning.
The author recognizes this as a contentious issue and is
pursuing a limited proposal.

6. The Sunset Date . It is not clear why a sunset date was
chosen for this bill. If the technology is clean and great,
then there would be no reason to disqualify the facilities at
some future date. The author recognizes that new technologies
may emerge that are superior to MSW combustion. The sunset
date is not necessary to permit LA County to consider such new
technologies in the future, and it appears to be included in
the bill as a compromise.

7. Ratepayer Impact . The author reports that current contracts
for these two facilities expire within 5 years, after which
new contracts will have to be drafted. The procurement value
of the energy from these facilities will decrease unless they
are allowed RPS eligibility. With decreased revenue from
energy sales, costs of waste management will be transferred to
residents and businesses that pay the municipal refuse fees.

POSITIONS

Sponsor:

City of Long Beach

Support:

City of Commerce
Independent Energy Producers Association

Los Angeles County Board of Supervisors
Los Angeles County Division of the League of California Cities
Los Angeles County Solid Waste Management Committee/Integrated
Waste Management Task Force
Sanitation Districts of Los Angeles County

Oppose:

Kyle Hiner
SB 715 Analysis
Hearing Date: April 30, 2013