BILL ANALYSIS Ó
AB 1144
Page 1
Date of Hearing: April 20, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
AB 1144
(Rendon) - As Introduced February 27, 2015
SUBJECT: California Renewables Portfolio Standard Program:
unbundled renewable energy credits
SUMMARY: This bill provides that unbundled renewable energy
credits produced by newly established wastewater treatment
facilities may be used to meet the first category of the
Renewable Portfolio Standard (RPS) content requirements.
Specifically, this bill:
a)Permits public agencies that operate wastewater treatment
facilities to sell their Renewable Energy Credits produced by
AB 1144
Page 2
methane from wastewater treatment process in Category 1 under
the Renewable Portfolio Standards.
b)Clarifies that wastewater treatment facilities put into
service on or after January 2016 are the only facilities that
are eligible for this qualification.
EXISTING LAW:
1) Establishes the Renewable Portfolio Standard, which
requires retail sellers of electricity - investor-owned
utilities (IOU), community choice aggregators (CCAs),
energy service providers (ESPs), and publicly-owned
utilities (POU) - to increase purchases of renewable
energy, so that at least 33 percent of sales are procured
from renewable energy resources by December 31, 2020.
(Public Utilities Code §399.11 et seq.)
2)Requires all renewable sources to meet the requirements of a
"loading order" that mandates minimum and maximum quantities
of three product categories (or "buckets"). These categories
are:
a) Category 1: Renewable resources directly connected to a
California balancing authority (CBA) or provided in real
time without substitution from another energy source
AB 1144
Page 3
b) Category 2: Firmed and shaped energy scheduled in to a
California balancing authority, and
c) Category 3: Unbundled renewable energy credits (RECs).
(Public Utilities Code, Section 399.16.)
1)Defines the following energy sources as RPS eligible:
biomass, solar thermal, photovoltaic, wind, geothermal, fuel
cells using renewable fuels, small hydroelectric generation of
30 megawatts (MWs) 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. (Public
Resources Code, §25741).
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: "AB 1144 can help provide financing for
wastewater energy infrastructure that will reduce methane air
pollution by placing public wastewater agency Renewable Energy
Credits in Category 1 of the Renewable Portfolio Standard
AB 1144
Page 4
system. Sales of the more valuable Category 1 credits can
support critical private financing to build the infrastructure
to capture and use the methane to generate renewable
electricity. Public agencies suffer limits on their ability
to finance infrastructure, as shown during 2014 discussion of
the water bond.
"Financing use of wastewater methane helps improve air
quality, especially in the South Coast Basin. The alternative
to capture-and-use is flaring the methane, which reduces but
does not eliminate the air quality impacts. AB 1144 will help
public agencies use their methane, with the latest technology
to minimize any potential impacts from generating
electricity."
2)What is biogas? : Processes used by many agencies to treat
wastewater produce useful byproducts such as biosolids,
biogas, and methane that are and can increasingly be used as a
steady and reliable source of fuel for renewable energy
production. Wastewater agencies across the state are in the
process of developing and implementing renewable energy
projects, attempting to account for biogas in their planning
process. Still, significant potential exists for the
expansion of renewable generation at wastewater treatment
plants across California. A recent report from the CEC
estimated that there are about 90 MW of potential renewable
generation that is currently being flared, or coming from
smaller wastewater treatment plants that do not have the
technology in place to produce and capture biogas.
3)Ambiguity of Categories and Definition: SB 2 X1 (2011) set up
three different categories of renewable energy. Category 1,
the largest category with the most demand and highest prices,
includes renewable electricity produced in California. In
AB 1144
Page 5
contrast, Category 3, with the smallest demand and lowest
prices "unbundles renewable energy credits" from the
electricity and allows the REC to be sold separately from the
electricity. When the entity that creates the renewable
electricity uses its own electricity and wishes to sell the
REC, they are selling an "unbundled REC."
During a recent California Public Utilities Commission (CPUC)
rulemaking process, parties to the proceeding made comments
suggesting that unbundled RECs from generators that meet the
Category 1 criteria should qualify for Category 1. The CPUC
ruled in December 2011 that all unbundled RECs belong in
Category 3.
4)Air Quality and Methane Capture: Treating wastewater and
organic material from sewers creates biogas, including
methane, as a byproduct. The Air Resources Board and state
law treat methane as a short-lived air and climate pollutant.
Methane is known to be 25 times more potent than carbon
dioxide (CO2) in trapping heat on Earth. According to the
Global Methane Initiative, capturing methane will reduce GHG
pollution and provides a source of energy that is produced and
used locally.
Air quality regulators require wastewater agencies to minimize
methane emissions from their plants. Some agencies "flare"
their methane to reduce its harmful effects. Other wastewater
agencies capture methane for use as fuel to create
electricity, if they can afford the costs to build the
infrastructure to create that energy. These agencies
typically use the energy they create to operate their
treatment facility. AB 1144 attempts to create a financing
mechanism for future smaller facilities to capture and use the
methane they naturally produce.
AB 1144
Page 6
5)Part of a larger dialogue: Water-Energy Nexus: The state of
California has shown increasing interest in what is referred
to as the Water-Energy Nexus, the infrastructural, financial,
and environmental connection between water and energy.
Transportation and treatment of water, treatment and disposal
of wastewater, and the energy used to heat and consume water
account for nearly 20 percent of the total electricity and 30
percent of non-power plant related natural gas consumed in
California.
A recent rulemaking at the CPUC pushed for partnership between
energy utilities and agencies and the water sector to co-fund
programs that reduce energy consumption by the water sector
( R.13-12-011 ). Wastewater treatment plants that convert a
waste product into an energy and revenue source are a
cost-effective example of that type of partnership. Treating
wastewater naturally produces methane, and by capturing and
processing methane, the plant is able to produce power to
treat more water. Additionally, on-site production offsets
purchased electricity, which contributes to the closed-loop
cycle that AB 1144 attempts to support.
AB 1144 attempts to develop a more robust market that
incentivizes biogas power. Given Governor Brown's new energy
goals, this bill would allow California wastewater treatment
plants to tap into this unmet potential, expand biogas-powered
generation capacity, and potentially help California meet its
RPS goals, as well as its goal of 50% diversion of organic
waste from landfills by 2020.
AB 1144
Page 7
6)Concerns and Opposition: In their opposition letter, the
Utility Reform Network raised the concern that AB 1144 will
create an exception to the bundled product definition for
electricity that is used at a facility owned by a public
entity, and will potentially result in "double counting" of
generation, which will erode the overall RPS standard and
statewide benefits of the program.
In addition, the California Municipal Utilities Association
and the Northern California Power Agency both raised concerns
that this bill sets a precedent that legislative action is
required to make other unbundled RECs eligible for Bucket 1.
7)Double Referral: The bill has been double referred to the
Committee on Natural Resources.
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of Sanitation Districts (Sponsor)
West County Wastewater District
AB 1144
Page 8
Noble Americas Energy Solutions LLC
Leucadia Wastewater District
Victor Valley Wastewater Reclamation District
Delta Diablo Water District
Las Virgenes Municipal Water District
Ross Valley Sanitary District
Las Gallinas Valley Sanitary District
Orange County Sanitation District
Opposition
The Utility Reform Network
AB 1144
Page 9
Analysis Prepared by:Allegra Roth / U. & C. / (916) 319-2083